Justice Dept. Goes After HSBC To Name Possible US Tax-Dodgers In India


The US government is opening a second front in the war on offshore tax secrecy.

The Department of Justice said Thursday it is seeking an order from a federal court in San Francisco to authorize the IRS to ask for information from global bank HSBC about Americans who may be hiding money in offshore accounts in India to dodge taxes.

The government wants to serve a "John Doe" subpoena on HSBC to obtain information about people whose identities are unknown.

"Apparently, war is breaking out between the US government and HSBC," said one person familiar with the case. "This is the next bank."

In 2009, UBS announced it would pay a $780 million penalty in order to settle US government complaints the bank had helped US taxpayers duck the IRS by hiding money in secret Swiss accounts.

That settlement has touched off a wave of prosecutions, as government agents have rounded up bankers and their wealthy clients affiliated with UBS for tax evasion.

Today's action would seem to be designed to send a signal to clients of HSBC that they are not immune from the effort, even if they didn't have accounts at UBS, or in Switzerland.

In a statement, a spokeswoman for HSBC said, "While we haven't seen the summons, HSBC does not condone tax evasion and fully supports the US efforts to promote appropriate payment of taxes by US taxpayers. While complying with the law in all the jurisdictions in which it operates, including India, HSBC cooperates with requests from US authorities."

The HSBC spokeswoman also pointed out the bank has "been engaged in a constructive dialogue with US authorities," and hopes any IRS summons issues can be resolved quickly.

The government has an interest in driving as many offshore account holders as possible into an IRS amnesty program in which they can pay penalties and bring their accounts into compliance with US tax laws.

This is the second such amnesty the IRS has offered. The first, in 2009, brought in 15,000 Americans who confessed to holding secret offshore accounts.

In its press release Thursday, the Department of Justice said a grand jury in Newark, N.J., indicted Vaibhav Dahake of Somerset, N.J., in January, charging him with conspiracy to defraud the United States by using undeclared accounts in the British Virgin Islands and at HSBC India.

Employees of HSBC Holdings assured Dahake that accounts maintained in India would not be reported to the IRS, the government said.

The government also said HSBC India opened a “representative office” in 2002 at an HSBC USA office in New York City to enable “Non-Resident Indians” (NRIs) living in the United States to open accounts in India.

In 2007, the press release said, HSBC India allegedly opened a second representative office at an HSBC USA office in Fremont, Calif., purportedly “to make banking transactions more convenient for the NRI community based in California.”

“The Department of Justice is committed to ensuring that all US taxpayers meet their obligations to declare and pay taxes on foreign bank accounts,” said John A. DiCicco, principal deputy assistant attorney general for the Justice Department’s Tax Division, in a prepared statement.

“The ability to hide accounts in foreign countries is rapidly dwindling. We will continue working hand-in-hand with the IRS to enforce the tax laws against those who are using offshore accounts — wherever they are located — to evade taxes.

In the same statement, IRS Commissioner Douglas Shulman said, “The IRS continues to focus its attention on international tax evasion. This summons request is focused on obtaining more information to help us determine if additional actions are needed.

"As I’ve said all along, our international efforts are not about just one country or one bank, it’s about our wider effort to ensure compliance with the nation’s tax laws.”