'Right to Silence' To Avoid Disclosing Information About Offshore
The Nestmann Group, Ltd.
by Mark Nestmann: Governments
Agree: You Will Have No Electronic Privacy
The Fifth Amendment
to the U.S. constitution provides, in part:
be compelled in any criminal case to be a witness
of the Fifth Amendment come from the courts of England. In common
law, a confession signed under torture or threat of torture could
be used as evidence against a criminal defendant. But eventually,
torture fell into disfavor. English case law came to prohibit the
courts from considering evidence obtained through torture. U.S.
law inherits this prohibition in the form of the Fifth Amendment.
The Fifth Amendment,
though, has some glaring holes. For instance, the use of what could
only be considered torture continued in some states until the 1930s.
It ended only after the Supreme Court overruled convictions based
on coerced confessions.
recently, the Fifth Amendment also protected your private financial
records. An 1886 Supreme Court decision held that the Fourth and
Fifth Amendments create a zone of privacy which protects
an individual and his personal records from compelled production.
But in 1984, in U.S. vs. Doe, the Supreme Court effectively
overturned this decision. The court concluded that, The Fifth
Amendment provides absolutely no protection for the contents of
private papers of any kind. If the government subpoenas records
you compile voluntarily or under compulsion of law (e.g., tax records),
you must release them, or face a contempt citation. Those records
may then be used against you in a civil or criminal proceeding.
So much for the Fifth Amendment!
It was because
of the Doe decision that I didnt have high hopes that an unnamed
U.S. taxpayer with the initials M.H. would prevail when
he sued in federal court to quash a subpoena for records relating
to his offshore bank account. Sadly, I was correct. M.H. lost in
the U.S. District Court for the Southern District of California.
He appealed, and the Ninth Circuit Court of Appeals affirmed the
lower courts decision. The bottom line: the Doe decision,
along with other case law, completely overrules any right not to
incriminate yourself with respect to your records of offshore banking
M.H. had the
misfortune to be one of approximately 250 taxpayers whose account
records the Swiss bank UBS recently provided to U.S. investigators.
UBS gave up the records as part of a 2009 plea deal to avoid criminal
indictment for aiding and abetting tax evasion, among other possible
charges. The records showed that M.H. had a past account relationship
with UBS. Based on these records, a federal court issued a subpoena
to M.H. to produce records relating to this account or any other
foreign financial account. The obvious implication is that M.H.
failed to report and/or pay taxes on earnings from one or more foreign
financial accounts. Such failure is subject to criminal penalties,
so producing the records the subpoena demands is patently self-incriminating.
could M.H. have done differently? Complying with the law would have
been the most obvious solution. But M.H. could also have approached
the IRS through a tax attorney to voluntarily disclose his offshore
accounts once he learned that UBS had been targeted. In almost all
cases, this avoids the possibility for criminal penalties.
IRS offshore voluntary disclosure initiative (OVDI) ends Aug. 31,
2011. You must have the disclosure process underway by that date,
and completed by Nov. 30, 2011. To qualify for the OVDI, you need
to file amended tax returns; file delinquent disclosures of foreign
bank accounts on Treasury Form TD F 90-22.1 (the FBAR);
and pay whatever taxes, interest, and penalties apply. The 2011
OVDI Web site FAQs provide several examples of how specific taxpayers
with unreported accounts would be dealt with and yes, the penalties
mount up quickly. To view the FAQs, click here.
participate in the OVDI? The answer is maybe, but only after you
consult with a qualified tax attorney (not an accountant). This
arrangement provides attorney-client privilege for your discussions.
The tax attorney can then retain an accountant to prepare the necessary
returns, and decide whether you should participate in the program.
the Fifth Amendment, nor time, is on your side. You only have one
week to begin the process.
with permission from The
Nestmann Group, Ltd.
Nestmann [send him mail]
is a journalist with more than 20 years of investigative experience
and is a charter member of The
Sovereign Societyís Council of Experts. He has authored over
a dozen books and many additional reports on wealth preservation,
privacy and offshore investing. Mark serves as president of his
own international consulting firm, The
Nestmann Group, Ltd. The Nestmann Group provides international
wealth preservation services for high-net worth individuals. Mark
is an Associate Member of the American Bar Association (member of
subcommittee on Foreign Activities of U.S. Taxpayers, Committee
on Taxation) and member of the Society of Professional Journalists.
In 2005, he was awarded a Masters of Laws (LL.M) degree in international
tax law at the Vienna (Austria) University of Economics and Business
© 2011 Mark
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