Dramatically expanding its efforts to unearth unreported offshore income, federal authorities Thursday asked a court for permission to force HSBC India to cough up the names of 9,000 U.S. taxpayers of Indian descent.
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The U.S. Department of Justice, which represents the Internal Revenue Service, filled a lawsuit in San Francisco federal court to allow the serving of a so-called "John Doe" summons on HSBC India.
HSBC India is a unit of London-based HSBC Holdings, an international banking giant on the Forbes 2000. HSBC operates 470 branches in the U.S. through HSBC Bank USA. Until last year, HSBC India operated "representative offices" in Fremont, Calif., a San Francisco suburb, and New York City catering to what was called the "non-resident Indian" market, or Indians living outside India.
In a 47-page statement and attachments appended to the lawsuit, IRS agent Daniel Reeves said there were 9,000 U.S. residents who had $100,000-minimum-balance accounts at HSBC India but that fewer than 1,400 taxpayers had disclosed existence of their accounts. U.S. law require disclosure in a special annual filing of any foreign account containing $10,000 or more. "This indicates that thousands of United States taxpayers of Indian origin who maintain more than $100,000 in accounts with HSBC, may have failed to disclose," Reeves wrote.
The IRS seeks names of account holders from 2002 to 2010.
A statement issued by the New York headquarters of HSBC Bank USA said, "HSBC does not condone tax evasion and fully supports the U.S. efforts to promote appropriate payment of taxes by U.S. taxpayers. While complying with the law in all the jurisdictions in which it operates, HSBC cooperates with requests from U.S. authorities. We have been engaged in a constructive dialogue with U.S. authorities and hope any 'IRS summons' issues can be resolved expeditiously. No further comment."
The parent HSBC organization may have problems arguing the HSBC Indian operation in the U.S. was some rogue outfit. Reeves' statement cites postings on Internet Web sites like LinkedIn in which bankers staffing those two U.S. offices said they were "employees" of HSBC USA.
A tip-off of things to come materialized on January 26 when a grand jury in Newark, N.J. indicted Vaibhav Dahake of Somerset, N.J., on charges he evaded taxes by holding undeclared accounts in the British Virgin Islands and at HSBC India. In his statement today, agent Reeves said the IRS is investigating taxpayers "who directly or indirectly hold or held interests in, or have or had signature or other authority over, financial accounts at HSBC USA's affiliate foreign bank, HSBC India, and who are not or may not be complying with U.S. internal revenue laws requiring the reporting of foreign financial accounts, and income earned on those accounts."
In its multi-year campaign against undeclared offshore accounts held by U.S. taxpayers, the IRS has focused primarily on accounts held by banks in Switzerland, including UBS AG. And the agency has struck pay dirt: UBS admitted two years ago it had plotted to defraud the U.S. government of huge amounts of taxes by helping well-heeled Americans hide their assets. UBS paid $780 million to avoid the crippling stain of a criminal prosecution and turned over upwards of 4,000 names. Presumably, the IRS is eagerly going through the list.
In February, four bankers who used to work for Credit Suisse Group were indicted in the U.S. on charges they plotted to help well-heeled Americans avoid taxes through offshore accounts.
Word of this latest IRS initiative might considerably increase interest in the agency's newest amnesty for offshore cheats. They have until August 31 to fess up and avoid criminal prosecution.
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