Anyone here in Panama who has not been living under a rock has seen the notices of the new enforcement effort that the IRS has implemented here and elsewhere. They have staffed up at the Embassies around the world looking for money. This needs no introduction, well maybe we start with “Stupid move Doc!”
Forbes report this last week.
Brandner: Alaska Plastic Surgeon Faces Forfeiture Of $4.656 Million For Undisclosed Offshore Account Used To Attempt To Cheat Ex-Wife
U.S. v. $4,656,085.10 in Bank Funds, Case No. 8:12-cv-00219-DOC-JPR (C.D.Cal., Filed 2/9/12). Full Opinion at http://goo.gl/7b64A
Dr. Michael D. Brandner, M.D., is a surgeon in Alaska who was involved in divorce proceedings with his former best friend and beloved, now known as his ex-wife, Sheila Brandner. What we know about Brandner we know for the recitations in a Complaint filed by the U.S. government as follows:
In 2008, in the middle of the divorce proceedings, Brandner made a transcontinental trek completely by car from Alaska to Panama, with $3.25 million in cashier’s checks. These checks were deposited by Brandner in a Panamanian Bank called Capital Bank, and under the account name of “Dakota Investment”.
The Complaint doesn’t identify who in Panama helped Brandner set up the Dakota Investment account, but it does let slip that such person (who, to spice things up, I will call “Mr. X”) later cooperated with the U.S. government in the separate investigation of a stock fraud scheme.
Mr. X claimed to have told Brandner that the latter was required to file a Form called the Report of Foreign Bank and Financial Accounts — commonly referred to as the “FBAR” — with the U.S. Treasury. Brandner later admitted to Mr. X that he knew about the FBAR filing requirement, but that he had not done so.
Brandner also had an IRA account with Pensco Trust Company that held about $1.26 million. Brander instructed Pensco to transfer these funds to his Bank of America account in Dana Point, California, and then a couple of days later transferred the moneys to the Dakota Investment account, plus personally kicking in a couple of more hundreds of thousands into that Panamanian account.
Now jump ahead almost exactly three years later, to 2011. Mr. X — whom Brandner had advised of the divorce decree that awarded the Pensco moneys to Sheila — placed a telephone call to Brandner and they talked about the Panamanian moneys in the Dakota Investment account. Brandner told Mr. X that “my intention is not to hand it over to the court.“
In that same call, Brandner and Mr. X came up with a new scheme, whereby Brandner created a new Panamanian company called Evergreen Capital LLC, and structured that company so that it was controlled and appeared to be owned by a foreign nominee of Brandner. Thus, Brandner could control Evergreen Capital LLC behind the scenes, and have it open a new bank account with Bank of America in Seattle to which all the money — by now $4.656 million — could be wire-transferred from Panama to the new Bank of America account.
Unbeknownst to Brandner, this telephone was monitored by the U.S. authorities, presumably because Mr. X had become a “cooperating witness” with law enforcement by this time.
At any rate, Brandner’s scheme became known to U.S. Attorney’s office, which then filed a civil Complaint against Brandner freezing the funds and seeking the forfeiture of all of his funds because of his failure to report his offshore accounts, file his FBAR, and then move the unreported moneys through the U.S. financial system by wire-transfer.
At this point, there is no indication that any criminal charges are pending or even will be filed by Brandner, but considering the nature of the U.S. Attorney’s allegations it would not be a complete surprise if someday that occurred.
Named as an interested person in the Complaint is the innocent victim Sheila Brandner, who can now presumably assert her claim against the seized funds, which the U.S. government is unlikely to contest — after the payment of taxes, interest, and probably what will be very substantial fines levied against her ex-husband.
There are quite a few lessons to be had from this case, but the most important is that it is stupid — very stupid — to engage in conduct that has the effect of turning a purely civil dispute (here, a divorce) into potential criminal charges.
The events related here are nothing like legitimate asset protection planning, but rather is another “Dumb Doctor Case” (the slang acronym is “ DDC’) where a physician wrongly concluded that he could out-smart the system. Probably every real asset protection planner who reads this Complaint will roll their eyes and count Brandner’s numerous missteps as he floundered through his scheme.
Attempting to cheat spouses out of their share of the marital estate is not a proper part of asset protection planning, either, and is wholly reprehensible conduct. Asset protection against spouses is cheap and easy and totally legitimate: It is called a “Pre-Nupt”, short for pre-nuptial agreement or pre-marital agreement. For those who are already married, most states allow post-marital agreements. Agreements to divide assets are proper; cheating the other spouse by hiding assets is not — that is what sleazy planners do.
Finally, when it comes to offshore planning, we once again see the truism: “Somebody Knows.” No matter how rock-solid the laws of some offshore jurisdiction seem to be, no matter how tight the security at an offshore bank, and no matter how carefully somebody keeps their paperwork out of the wrong hands, “ Somebody Knows.” Here, that somebody was our still-unknown Mr. X, and Mr. X was “flipped” by law enforcement to turn over his clients such as Brandner.
Brandner’s conduct was stupid on many levels, and we’ll probably see even more evidence of such stupidity as this litigation progresses. Stay tuned.
Full Opinion at http://www.assetprotectionbook.com/casedocs/brandner/001_Complaint_09feb12.pdf
See Related Article by Janet Novack at http://www.forbes.com/sites/janetnovack/2012/03/16/hiding-millions-from-your-ex-gets-harder-thanks-to-offshore-tax-crackdown/