Scams & Theft

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The Endangered Species List

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On September 1, 1914, "Martha," the last remaining passenger pigeon (ectopistes migratorius), died at the Cincinnati Zoo. On September 7, 1936, "Benjamin," the last Tasmanian tiger (thylacinus cynocephalus), died at Australia's Hobart Zoo. And on June 24, 2012, "Lonesome George," the last living Pinta Island tortoise (chelonoidis nigra abingdoni), died in Ecuador's Galapagos National Park.

When you think of endangered species, you naturally think of plants and animals. But the IRS has its own endangered species list (called "listed transactions"), and that means sometimes even tax strategies go extinct. So, for example, in October, 2006, the last grandfathered private annuity trust was formed. On April 10, 2007, most so-called "Section 419(e)" plans were shot down. Now, could the venerable Swiss bank account (bankum secretus strongius) be next?

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"Ardente!" is Portuguese for "Hot!"

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Tax collectors generally don't choose their line of work for the pay. Glassdoor.com, a gossipy website covering salaries and careers, reports the average Revenue Agent earns $73,967. Careerbliss.com tells us the average criminal investigator earns $99,000 — which makes sense considering there's at least a chance they get shot at while working. That's not bad coin . . . but it's hardly enough to party with the rich and famous.

But what's true here in the United States may not be true in the rest of the world. Our neighbors to the south in Brazil have been transfixed lately by a sordid scandal of glitz and bling featuring — you guessed it — a gang of tax collectors, accused of helping construction companies evade over $200 million in taxes.

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What's Not to "Like"?

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Let's imagine, just for a minute, that you decided on a new line of work: ripping off the IRS. How do you think you would launch your new business? Maybe you'd open a secret bank account in one of those "sunny places for shady people" like the Cayman Islands or Bahamas. You might rent a secret flop house where you could hide evidence of your crimes. And you'd probably look for someone who could make you a fake passport, just in case the heat comes down and you have to flee the country under a secret identity.

You probably wouldn't post anything about your new career online, would you? Right? But if you're Rashia Wilson — the self-appointed "first lady of tax fraud" — you'd brag about it all on Facebook! Why play it safe and discreet when you can

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Don't Be Like These People

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Last week, we talked about the IRS Criminal Investigation unit, which just released their Fiscal 2012 report. That report was filled with the sort of dry statistics you would expect from an IRS annual report: 5,125 total investigations launched, 202 crooked tax preparers indicted, 199 identity thieves sent to prison, and 64 months average time behind bars for money launderers. But the report also includes dozens of stories of tax cheats who really just should have known better — and some whose stories are so entertaining we just had to share them. Are you having a bad day? Well, be glad you're not one of these people!

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Biggest. Crybabies. Ever.

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Here in America, we're used to people running to court every time life throws a curveball. Spill hot coffee in your lap? Sue McDonald's! Get drunk, drive your car into a bay, and drown because you can't open your seat belt underwater? Mom and Dad can still sue Honda and win $65 million! Electrocute yourself trying to rob a bar? There's a lawyer for that!

Earlier this month, though, we saw some satisfying comeuppance in one of those cases that makes us roll our eyes in amazement.

First, a little history. UBS is Switzerland's biggest bank — and, like most Swiss banks, it used strict Swiss secrecy laws to attract depositors. They solicited Americans to open accounts, knowing full well that many of them were using those accounts to cheat the IRS — and in some cases, even advising them how to do it. In 2007, a disgruntled employee blew the whistle (and earned a record $104 million reward in the process). Two years later, UBS paid $780 million

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Turns Out Crime DOES Pay

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Back when you were a little kid, Mom and Dad warned you that crime doesn't pay. (They also told you it was the tooth fairy leaving that money under your pillow.) But it turns out that crime does pay — at least for one felon-turned-whistleblower.

Bradley Birkenfeld grew up in suburban Boston before moving to Switzerland to pursue a career in banking. In 2001, he started work at Switzerland's biggest bank, UBS. His job was to solicit American depositors, 90% of whom he said were trying to evade taxes. His main duties included schmoozing clients at UBS-sponsored events like yacht races in Newport or the Art Basel festival in Miami Beach. But he also helped clients create shell companies to hide ownership of their accounts, shredded documents recording transactions in their accounts, and once even smuggled a pair of diamonds through U.S. Customs in a tube of toothpaste. (Doesn't everyone carry their diamonds in their toothpaste?)