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US Justice Department Wins First FATCA Legal Victory – Shell Company and Its Nominees

Last week, the US Justice Department announced its first FATCA Legal Victory when it announced that Gregg R. Mulholland, owner of an offshore investment management company based out of Panama and Belize has plead guilty to money laundering and conspiracy.  The firm was accused of fraudulent behavior, manipulating the value of publicly traded stock in more than 40 US companies, and then laundering more than $250 million through multiple offshore law firms.  They allegedly used a shell company and its nominees to evade taxes and hide income.  This is a shot across the bow, as it is the first time the US Justice Department has brought criminal charges against an individual for FATCA violations.

The scheme utilized by Mr. Mulholland and his company closely resembles the strategies exposed in the “Panama Papers” recently: conceal profits generated by manipulating stock transactions through offshore shell companies and their nominees.  During the investigation to determine if the offshore income was taxable under US law, Mr. Mulholland’s company allegedly sent in an IRS form signed by the defendants as a nominee for the shell company that had been established to conceal profits of these transactions.


While the US Justice Department began pursuing offshore tax evaders as early as 2009, the case against Mr. Mulholland is the first example of successful criminal charges based upon FATCA to be brought against offshore investment companies, a shell company and its nominees.  FATCA gained full force in 2014, and the IRS and Justice Department have focused many of their resources on tracking the activities of US taxpayers and their offshore accounts, assets, investments and transactions.  IRS FBAR audits and challenges on those who have filed through the streamlined disclosure have only just begun.  We are expecting a substantial wave over the next few years.

Yes, the Justice Department and the IRS are serious about putting people in jail, and using the threat of criminal prosecution to collect offshore taxes based upon these assets, investments, accounts and transactions.  If you have not yet come into compliance with IRS FBAR reporting requirements, or have been “sold” on the idea of a foreign trust it is important to call for a free and substantive consultation at 866-631-3470.