US indicts HSBC tax-dodging client who hid money in India

New York: America is gunning for its citizens who don’t pay their taxes. Ashvin Desai of San Jose who owns a medical device company was on Wednesday indicted on charges of tax evasion. He hid the existence of his HSBC bank accounts in India and pocketed $1.3 million in interest income, prosecutors said on Thursday.

Desai is the latest of several clients of HSBC’s India operations to face tax-evasion charges. This year, the Internal Revenue Service (IRS) and the US Justice Department have concentrated on Americans with offshore accounts in at least two banks - HSBC and Credit Suisse - since winning a similar legal battle against Swiss banking giant UBS. US media reported that UBS agreed to a $780 million settlement to defer prosecution on charges it secretly sent bankers into the US to help American clients duck taxes by hiding assets in offshore bank accounts.

[caption id=“attachment_52315” align=“alignright” width=“380” caption=“Most of the tax evasion cases in the US this year have been against Indian-American HSBC clients living in New Jersey, New York and Wisconsin. Reuters”]  [/caption]

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US prosecutors said on Thursday that Desai, his wife and two children hid as much as $8.8 million in 2009 in undeclared HSBC bank accounts in India. They said Desai did not report $1.3 million in interest he earned from 2007 to 2009, and he did not report the existence of his accounts to the US government, as he was required to do.

A federal grand jury indicted Desai on Wednesday on three counts of tax evasion, two counts of wilfully aiding the preparation of materially false tax returns and three counts of failing to report foreign accounts to the US Treasury Department.

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The indictment further alleges that during 2009 Desai closed an account he maintained at HSBC in England and directed that the funds from that account be transferred to a bank account maintained at HSBC in Dubai in the name of one of his children.

Desai is the latest of several clients of HSBC’s India operations to be hauled up for tax evasion. Cases have been brought this year against mostly Indian American HSBC clients living in New Jersey, New York and Wisconsin.

Employing legal tactics also used in the UBS case, federal officials in April this year won San Francisco federal court approval to serve HSBC with an IRS summons seeking account details on American clients.

USA Today reported that an IRS declaration filed in the investigation shows that London-based banking giant HSBC told US authorities “roughly 9,000 Americans held “premier” accounts as of September 2010 under a special program for wealthy, non-resident Indians.” The accounts collectively held nearly $400 million, the legal declaration shows.

“Yet the American owners had disclosed fewer than 2,000 of those accounts to the IRS as of 2009, the declaration shows,” said the US daily.

US citizens are required to report interest earned abroad, and to pay any tax due, when they file taxes with the IRS. They also must tell US authorities about foreign accounts worth $10,000 or more.