Spokane, Washington Man Pleads Guilty in Federal Court
Spokane - William D. Hyslop, United States Attorney for the Eastern District of Washington, announced that John Thomas Blandi, age 74, of Spokane, Washington, pleaded guilty to filing a false tax return with the Internal Revenue Service (“IRS") that failed to report over $1 million in income earned in a foreign investment account.
According to court documents, Blandi, a U.S. citizen, held $5,221,514 in an offshore account in Switzerland. The offshore account generated $1,430,000 in income that Blandi did not report on his 2013 income tax return. As a result, Blandi underreported his 2013 tax liability by $598,700.
Blandi maintained the unreported income in an offshore Swiss “insurance wrapper" policy. An “insurance wrapper" policy was an insurance product offered by Swiss and other insurance companies and asset managers primarily to U.S. citizens to allow for asset protection and global investment benefits that was also used by some citizens to evade U.S. taxes. Insurance wrapper policies were private placement life insurance or annuity accounts that combined the benefits of insurance with those of private banking by funding a life insurance policy or annuity policy with investment assets of the client. In many instances, the product would not qualify for treatment as life insurance under United States law. The offshore insurance company would maintain the policy assets in an offshore bank account in the name of the insurance company, rather than the U.S. citizen, while the U.S. citizen still maintained a level of control over the assets and how they were invested. Blandi had an obligation to report this offshore financial account to the IRS on his tax return. He did not.
Blandi’s insurance wrapper policy involved a Swiss-based External Asset Manager (“EAM") who implemented the investment strategy Blandi desired and managed the assets in a custodial offshore bank account. Blandi communicated with the EAM regarding his offhsore investments, and expressed concerns about creating reportable events that would result in the United States authorities being notified about his offshore account.
Blandi also concealed his foreign financial account and foreign income from the tax professional who prepared his 2013 income tax return. Blandi’s tax return falsely claimed that he did not have a financial interest in or signature authority over a foreign financial account.
United States Attorney Hyslop said, “As he admitted, John Blandi tried to conceal over $1 million in income in an offhsore bank account from the IRS. Today’s plea is a reminder that the United States Attorney’s Office for the Eastern District of Washington continues to work with the IRS to investigate and prosecute individuals who may use off shore accounts to engage in conduct violating U.S. tax laws. I commend the outstanding and dedicated work of the IRS Criminal Investigation special agents who worked on this matter."
“Placing unreported income in an offshore account is not tax planning, it’s tax evasion," said IRS-Criminal Investigation’s Special Agent in Charge Justin Campbell. “IRS-Criminal Investigation has been very open about our aggressive efforts to combat offshore tax fraud schemes. We will investigate and seek prosecution of taxpayers who are concealing unreported income in offshore accounts in an attempt to evade their tax obligations."
Blandi faces a maximum sentence of three years in federal prison, a one-year term of supervised release, restitution and monetary penalties. Senior United States District Judge Wm. Fremming Nielsen set Blandi’s sentencing for Jan. 21, 2020.
This case was investigated by the Internal Revenue Service, Criminal Investigation. This case was prosecuted by George J.C. Jacobs, III, Assistant United States Attorney for the Eastern District of Washington.
Source: U.S. Department of Justice, Office of the United States Attorneys
