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Indian-American pleads guilty to hiding $8 million

Updated: January 9, 2013, 3:29 PM IST
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Indian-American pleads guilty to hiding $8 million
According to documents filed in the case, Sanjay Sethi schemed with bankers from the US, UK and Switzerland to conceal his assets and income.

New York: An Indian-American entrepreneur has pleaded guilty to charges that he concealed from US tax authorities nearly $7.9 million which he held in secret bank accounts in India and Switzerland and has agreed to pay $2.4 million penalty for not disclosing them. Sanjay Sethi, 52, of New Jersey pleaded guilty on Tuesday before US District Judge Jose Linares in Newark federal court to an information charging him with conspiracy to conceal assets in undeclared bank accounts from the Internal Revenue Service (IRS).

Sethi used corporations in the Cayman Islands and the British Virgin Islands to conceal his assets and income he held in secret bank accounts in Switzerland and India, US Attorney Paul Fishman said. "Our criminal laws do not tolerate those who use foreign accounts to conceal their assets," Fishman said. "Cheating the government out of tax dollars hurts all honest taxpayers."

Sethi faces a maximum potential sentence of five years in prison and a fine of $250,000 when he is sentenced on April 18. He has agreed to file true and accurate tax returns and to pay to the IRS all taxes and penalties owed, in addition to the $2.4 million penalty.

The criminal information says that Sethi opened secret accounts with "one of the largest international banks" headquartered in England with offices in Hong Kong, Singapore, India and the US. While the information has not named the bank, media reports said the bank is HSBC. The bank operated a division in the US called NRI Services through which it encouraged US citizens to open undeclared bank accounts in India, the 12-page criminal information said.

According to documents filed in the case, Sethi schemed with bankers from the US, UK and Switzerland to conceal his assets and income derived from those assets. Sethi used nominee and shell companies formed in tax-haven jurisdictions to conceal his ownership and control of assets from the IRS, besides filing false and fraudulent tax returns with the IRS.

Born in India, Sethi became a lawful permanent resident of the US in March 1989 and a US citizen in June 2004. He opened an IT and software development company SanVision Technologies in 1992 and also set up an entity Karol Bagh Charitable Trust which he used to conceal his ownership of undeclared accounts in Switzerland into which Sethi deposited the proceeds of real estate transactions related to properties located in India.

Between 2001 to 2009, Sethi met with his co-conspirators and opened numerous undeclared bank accounts in India and Switzerland, and used shell companies to transfer millions of dollars to undeclared offshore accounts. The total tax loss to the government was between $80,000 and $200,000.

"This guilty plea serves as another warning to those who still think they can hide their assets offshore through the use of shell companies, nominees, and foreign bank accounts," Assistant Attorney General Kathryn Keneally of the Justice Department s Tax Division said.
According to the criminal information, Sethi met with 'UK banker A' at the offices of the bank in New York and discussed opening of an undeclared bank account in Switzerland. The banker told Sethi that the undeclared account would allow his assets to grow tax free and that bank secrecy laws in Switzerland would allow Sethi to conceal the existence of the

Since 2003, Sethi transferred $3.4 million, $2.3 million and another $2.2 million, when he sold a house in New Jersey, in the undeclared accounts. Sethi also failed to file a Report of Foreign Bank or Financial Accounts (FBAR) with respect to his foreign accounts. US citizens who have an interest in a financial account in a foreign country with assets in excess of $10,000 are required to disclose the existence of such account on their individual income tax returns.

"The object of the conspiracy was for Sethi and his co-conspirators to conceal from the IRS the existence, ownership and income derived from Sethi's undeclared bank accounts in Switzerland and India," the charges said. HSBC branches have been under investigation for offshore tax evasion. Last month, HSBC agreed to pay $1.92 billion to settle allegations of violating US money laundering laws. Apart from Sethi, several other Indian-origin men based in the US have been charged with using HSBC accounts to hide income in India. New Jersey businessman Vaibhav Dahake had pleaded guilty in April 2012 to conspiring with HSBC bankers to hide his Indian accounts from the IRS.

Last August, federal jurors convicted Milwaukee neurosurgeon Arvind Ahuja on tax fraud charges, including that he filed false tax returns and failed to report to federal authorities millions of dollars hidden in offshore accounts.

First Published: January 9, 2013, 3:29 PM IST
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