Last week’s superseding indictment of movie producers Gerald and Patricia Green includes new allegations that Mrs. Green filed two false tax returns. The government says she signed returns in 2005 and 2006 that included deductions for “commissions” which she knew were “bribes to a foreign official for obtaining and retaining business.”
FCPA trouble can lead to tax problems, says Selva Ozelli, a New York City lawyer and CPA. In an earlier post (The FCPA Can Be A Very Taxing Matter), we talked about her excellent article, “Is This Bribe Deductible? Tax Implications Of the U.S. Foreign Corrupt Practices Act.” It appears in Tax Notes International (December 17, 2007, p. 1171).
She says that knowingly filing tax returns that characterize illegal payments abroad as deductible expenses can lead to criminal charges for fraud. The IRS has the burden of proving fraud — that is, that the filer knew its return was false and intended to evade paying taxes by making a false return. But, she says, the standard of proof is not “beyond a reasonable doubt” but by “clear and convincing evidence,” a lower burden for the government. She also says a taxpayer can be acquitted in a criminal bribery case and still lose a fraudulent-filing case.
The U.S. government is alleging that Patricia Green filed two tax returns she knew were false. Paragraph 29 of the superseding indictment contains one of the tax-related charges. It says:
On or about June 15, 2005, in Los Angeles County, within the Central District of California, and elsewhere, defendant PATRICIA GREEN did willfully make and subscribe a U.S. Income Tax Return, Form 1120, for SASO Entertainment (“SASO”), for the tax year 2004, which was verified by a written declaration that it was made under the penalties of perjury and that was filed with the Internal Revenue Service on or about June 20, 2005, which return defendant PATRICIA GREEN did not believe to be true and correct as to every material matter, in that said return claimed SASO paid $303,074 in “commissions” deductible from SASO’s gross income as costs of goods sold, whereas, as defendant PATRICIA GREEN then well knew, that figure was a false and overstated amount including bribes to a foreign official for obtaining and retaining business with SASO that were not commissions or costs of goods sold.
Each tax charge is punishable by up to 10 years in prison. The new indictment also contains one count of conspiracy to violate the FCPA and engage in money laundering, 10 counts of violating the FCPA, seven counts of transportation promotion money laundering, one count of a transaction in criminally derived property, and one count of forfeiture. The conspiracy and FCPA charges each carry a maximum penalty of five years in prison and each money laundering count carries a maximum penalty of up to 20 years in prison.
The Greens pleaded not guilty to the original charges. They’re scheduled to be arraigned on the superseding indictment on October 14.
As the DOJ says, an indictment is merely an accusation and a defendant is presumed innocent until proven guilty beyond a reasonable doubt.
Ms. Ozelli’s article is available exclusively from Tax Notes International (which is by subscription only) here.
View our prior posts about the Greens here.