Taxable Talk

Who is Kenneth Ryskamp? He’s a Senior Judge in the United States District Court for the Southern District of Florida. Judge Ryskamp was born in 1932, and has been a US District Court Judge since 1986 (and a Senior Judge since 2000). Why am I noting Judge Ryskamp? Because of a sentence he imposed on Thursday.

Mary Curran of Palm Beach, Florida inherited Swiss bank accounts from her husband. Those accounts had not been reported (and likely the interest not reported on tax returns). Her attorney, Roy Black, tried to get Mrs. Curran into the Offshore Voluntary Disclosure Program (OVDP) but her name had already been given to the IRS. She paid a large fine ($26 million); the Department of Justice brought criminal charges. She pleaded guilty to two false tax return charges. Judge Ryskamp wondered why:

Based on these facts, did it ever occur to the government to dismiss these charges. Instead, the government decided it had to make a felon out of this woman?

Judge Ryskamp gave Mrs. Curran one year of probation. Given Mrs. Curran could have faced six years at ClubFed, that sentence in itself was a huge win. But she got more good news a few moments later: The judge immediately revoked it! Her probation lasted all of five seconds. Judge Ryskamp noted:

This is really a tragic situation…It seems to me the government should have used a little more discretion.

The judge also suggested that Mrs. Curran request a presidential pardon, which he would endorse.

As Joe Kristan noted, the government goes after the accidental offenders with shotguns while slapping the wrists of some big-time offenders. Perhaps the IRS and DOJ will use some discretion in the future…but that’s probably asking too much.

News Coverage: Palm Beach Daily News, ABA Journal

Janet Novack has an interesting post in Forbes. It revolves around the Offshore Voluntary Disclosure Program.

The idea behind the OVDP is that a taxpayer who the IRS doesn’t know about who has (for example) secreted away funds in a foreign bank account (or accounts) overseas comes clean. He files amended tax returns, FBARs, pays a fine but does not face criminal prosecution. As Ms. Novack notes, the way it normally works is that a tax attorney will send a name and social security number to the IRS; the IRS will tell the attorney to go ahead or not to. The client (through the attorney) sends the IRS a detailed questionnaire; the IRS then sends a formal letter approving entry into the program.

All should go smoothly then, right?

Well, apparently not so for certain individuals who used Bank Leumi. The IRS has apparently sent rescission letters to some individuals who used Bank Leumi for hiding their funds. A tax attorney who I’ve met and highly respect, Robert McKenzie, is quoted in the piece, “I’m upset that I gave advice, relying on the government letter, only to find I couldn’t rely on my government to do it properly.’’

I suspect there will be significant legal ramifications from this. Consider if you are one of those individuals, and you are subsequently a subject of a criminal prosecution. I’m certain an argument will be made that the IRS cannot rescind the acceptance; that constitutes some form of “double jeopardy.” I’m not an attorney, so once again I’m sailing into waters I should avoid (well, I’m definitely not giving legal advice here). At minimum, how many tax attorneys are going to trust the IRS the next time?

When I see Mr. McKenzie later this year (he’s usually an instructor at a continuing education seminar I take), I’ll ask him about this. I suspect the words I hear will be the ones he uses to excoriate White Sox fans.