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Miami Area Father-Son Hotel Developers Set to Begin U.S. Tax-Fraud Trial
Two Miami area hotel developers accused of hiding more than $150 million in assets from the Internal Revenue Service went on trial today in a case that will display their mansions, yachts and luxury cars.
Mauricio Cohen Assor, 77, and his son, Leon Cohen Levy, 46, are accused of conspiring to defraud the IRS and filing false tax returns. A jury was picked today in federal court in Fort Lauderdale, Florida, where prosecutors will try to prove the men used shell companies in tax havens to cheat the IRS. Opening statements to the jury are set for tomorrow.
Prosecutors claim they hid ownership of a $26 million Miami Beach home and another valued at $20 million. They never declared $45 million in investments, commercial properties worth $55 million and cars like a Rolls-Royce Phantom, a Porsche Carrera GT and a Ferrari Testarossa, prosecutors say. Defense lawyers will try to show they never meant to break the law.
“In a tax case, if you had a good faith belief that what you did was lawful, even if that belief was stupid or ignorant or insane, you’re not guilty,” said Robert Panoff, a Miami tax litigator who isn’t involved in the case. “The key words are a ‘good faith belief.’ Juries aren’t stupid.”
Seven men and seven women make up the panel of 12 jurors and two alternates.
Defense lawyer Michael Pasano, who is representing both men, didn’t return a call seeking comment.
“In this case there will be no proof of any agreement to violate the law,” he said in a Sept. 9 court filing. “Nor will there be proof of any knowing participation in criminal acts.”
Men in Custody
Cohen Assor and his son were arrested April 15 and have remained in jail in spite of several attempts to get bail. Prosecutors say they operated all-suite hotels in Europe under the “Flatotel” brand, as well as one in New York that they owned through nominees and sold in 2000.
They put proceeds of $33 million in a Swiss account of London-based HSBC Holdings Plc, Europe’s largest bank by market value, and failed to tell the IRS of the sale, prosecutors said.
The men also used shell companies like American Leisure Resorts Inc. and hid assets in tax havens such as the Bahamas, Panama, Liechtenstein, Switzerland and the British Virgin Islands, according to prosecutors.
In court papers filed after the arrests, Pasano denied that Cohen Assor or his son owned the hotel. He said the criminal charges recycle failed claims made in a civil case by CDR Creances SA, a company set up by the French government to sell unprofitable businesses of Credit Lyonnais SA. Pasano also has disputed the government’s claims about his clients’ residency.
Born in Morocco
Cohen Levy was born in Morocco, became a U.S. citizen in 2003, and moved to Monaco in 2008 to live with his parents, according to Pasano’s filings. His father was born in Algiers, spent most of his life in France, and retired to Monaco, according to Pasano.
The Cohens didn’t own American Leisure Resorts and were employees of the company, which bought and sold expensive properties, Pasano said in a June 2 court filing.
Prosecutors say Cohen Assor is a Spanish citizen who lived in France until 2000, lived full-time in the U.S. since 2001, and became a legal permanent resident in 2005. His son, prosecutors say, moved to the U.S. in 1991 and became a citizen in 2003.
Citizens, legal permanent residents, and non-resident aliens who live in the U.S. for more than 183 days a year must report their worldwide income to the IRS, prosecutors said. U.S. income must be reported regardless of residency or citizenship, according to a Sept. 8 court filing.
Opulent Lifestyle
While leading an opulent lifestyle, Cohen Levy filed IRS returns reporting income of $45,000 in 2004 and 2005, and $46,101 in 2007, according to prosecutors. His father reported income of $10,399 in 2004 and $41,821 in 2007, according to the indictment. All were false, prosecutors claim. If convicted of all counts, Cohen Levy faces as much as 14 years in prison and his father 11 years.
The government’s evidence includes HSBC bank records from Switzerland and New York, as well taped phone calls between Cohen Assor and bank employees, according to the Sept. 8 filing. HSBC bankers are also expected to testify, court records show.
The prosecution team includes Kevin Downing, a senior trial attorney in the Justice Department’s tax division, and Jeffrey Neiman, an assistant U.S. attorney. Downing led the Justice Department crackdown on UBS, Switzerland’s biggest bank, and Neiman was a key part of that prosecution team.
UBS avoided prosecution in February 2009 by paying $780 million, admitting it helped rich Americans evade taxes from 2000 to 2007 and handing over data on more than 250 U.S. clients. It eventually agreed to reveal data on 4,450 accounts.
Tax Charges
The government afterward charged 17 UBS clients in the U.S., two UBS bankers and three others accused of aiding tax evasion. Unlike the case against Cohen Assor and his son, none went to trial. Tax lawyers will follow the trial closely, attorney William Sharp said.
“It’s a very important case,” said Sharp, who practices in Tampa, Florida. “This is the first case going to trial of all the Swiss bank secrecy cases. Typically, when the government has evidence of tax non-compliance, that evidence is very difficult to refute.”
Still, he said, Cohen Assor and his son have defenses.
“When you get in front of a jury in a complex criminal tax proceeding that involves many technical issues, it may be difficult for the government to prove beyond a reasonable doubt that a taxpayer knowingly and willingly disregarded a known legal duty,” Sharp said. “In a criminal tax trial, the last thing the government wants to see are technical complexities.”
The case is USA v. Assor, 10-cr-60159, U.S. District Court, Southern District of Florida (Fort Lauderdale).
To contact the reporters on this story: David Voreacos in Fort Lauderdale, Florida at dvoreacos@bloomberg.net; Mort Lucoff in Fort Lauderdale at morsybil@bellsouth.net.
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