Offshore tax probe seeks data from Panama firm

NEW YORK – The multiyear federal crackdown on wealthy Americans who duck taxes by hiding income and assets offshore is targeting a Panamanian legal services firm suspected of arranging anonymous banking services.

A Manhattan federal judge on Friday approved special summonses for Sovereign Management & Legal. The approval also covered summonses for Federal Express, DHL, UPS, Western Union, the Federal Reserve Bank of New York, Clearing House Payment and HSBC, firms and institutions Sovereign may have used to send funds to its clients.

Investigators use the so-called John Doe summonses when they suspect a company may be facilitating illegal activity but do not know the names of the firm's clients. The summonses demand that the recipients disclose the identifying information and data.

"By issuing these John Doe summonses, we continue our joint efforts with the IRS to identify and hold accountable those who conceal their foreign assets in order to dodge their legal responsibility to pay taxes," said Manhattan U.S. Attorney Preet Bharara.

Sovereign's representatives could not immediately be reached for comment Friday.

The summonses mark the latest development in a sweeping investigation that initially focused on evidence that Swiss banking giant UBS secretly sent employees into the U.S. on tourist visas to help American clients evade taxes. Opening major cracks in Switzerland's traditional banking secrecy, UBS in 2009 agreed to pay $780 million in a deferred-prosecution deal and provide financial data for nearly 4,500 U.S. clients.

Federal authorities subsequently expanded the investigation to focus on banks and other institutions in Luxembourg, Israel, the Caribbean and elsewhere. The probe so far has produced dozens of convictions of Americans who hid their wealth offshore, and hundreds of millions of dollars in back taxes, interest and penalties.

Sovereign has helped clients with the incorporation of offshore companies from an office in the Caribbean island of Nevis since 1996, a federal court filing shows. In 2002, the company created a management and legal services company in Panama that provides more than 30 offshore structures designed to provide maximum secrecy, the filing shows.

"These packages involve various combinations of bank accounts owned by entities, which are in turn owned by other entities, all in different jurisdictions and all controlled by nominees on behalf of the beneficial owner," according to the memorandum of law filed Wednesday.

Sovereign's website refers to such arrangements as "breaking the paper trail," and offers to help clients "avoid foreign account reporting requirements that many countries now have (such as the USA and Germany)," the filing shows.

Federal prosecutors said the summonses were approved for Federal Express, DHL and other companies because IRS investigators determined that Sovereign used the firms' services "to transmit funds to and from clients in the U.S."

Additionally, the IRS probe determined that the wire services operated by the Federal Reserve Bank of New York and Clearing House, as well as U.S. correspondent bank accounts HSBC maintained for foreign financial institutions, are likely to have records of financial transactions between Sovereign and its American clients.