WASHINGTON – Paul Zabczuk, a resident of The Woodlands, Texas, pleaded guilty to filing a false tax return in Ft. Lauderdale, Fla., the Justice Department and Internal Revenue Service (IRS) announced today. Sentencing has been set for June 22, 2010, before Judge William Dimitrouleas of the U.S. District Court for the Southern District of Florida. Zabczuk remains free on $1 million bail pending sentencing, where he faces a maximum sentence of three years in prison.
According to court documents and statements made in court, Zabczuk admitted to filing a false tax return for 2004 wherein he failed to report that he had an interest in or a signature authority over financial accounts at UBS AG, one of Switzerland’s largest bank. He also failed to report income earned on his UBS Swiss bank account. The UBS account was opened in the name of ODF Limited, a nominee Bahamian corporation. For years 2002 through 2007, the tax loss associated with the ODF Limited account at UBS is approximately $267,597. The highest balance of all of the assets the defendant owned and controlled offshore was approximately $529,194.
According to court documents, Zabczuk provided consulting services relating to the purchase and sale of chemicals by companies involved in drilling for oil. Zabczuk directed his foreign clients to make payments to his company in offshore bank accounts he controlled in the Bahamas and in Switzerland. He also funded his offshore accounts by disguising payments made from his domestic corporation to his offshore corporation as commissions. Zabczuk would repatriate funds to the United States by making cash withdrawals at UBS branches in Nassau, Bahamas; London; and Zurich, Switzerland. He would also wire transfer funds from UBS AG to an agent in the People’s Republic of China, who would then purchase furniture and other antiques on his behalf, which were then sent to the United States for the defendant’s personal use and for resale.
According to court documents, in or about April 2009, with the assistance of a Swiss banker, Zabczuk transferred his funds from UBS AG to a smaller “off the radar” Swiss bank. The account at the second Swiss bank was opened in the name of a Panamanian nominee entity – Vangas Holdings. In September 2009, Zabczuk instructed the Swiss banker to transfer his assets to a bank in the People’s Republic of China.
In February 2009, UBS entered into a deferred prosecution agreement under which the bank admitted to helping U.S. taxpayers hide accounts from the IRS. As part of their agreement, UBS provided the United States government with the identities of, and account information for, certain United States customers of UBS’s cross-border business, including the defendant. Paul Zabczuk is the eighth former client of UBS to plead guilty to a tax felony.
Acting Assistant Attorney General John DiCicco and U.S. Attorney Jeffrey H. Sloman commended the investigative efforts of the IRS agents involved in this case, as well as Senior Litigation Counsel Kevin M. Downing and Trial Attorneys Mark F. Daly and John E. Sullivan of the Tax Division, and Assistant U.S. Attorney Jeffrey A. Neiman, who are prosecuting the case.
United States citizens who have an interest in, or signature or other authority over, a financial account in a foreign country with assets in excess of $10,000 are required to disclose the existence of such account on Schedule B, Part III of their individual income tax return. Additionally, United States citizens much file a Report of Foreign Bank and Financial Accounts (F-Bar) with the U.S. Treasury, disclosing any financial account in a foreign country with assets in excess of $10,000 for which they have a financial interest in or signature authority, or other authority over.