Korean American tax evader to pay $14 million penalty

A KOREAN/AMERICAN will pay the U.S. $14 million for filing false tax reports on his income  that he hid in foreign bank accounts.

Hyung Kwon Kim of Greenwich, Conn., pleaded guilty last week to failing to report funds he maintained in foreign bank accounts to the Department of Treasury, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division, U.S. Attorney Dana J. Boente for the Eastern District of Virginia, and Chief Don Fort, IRS Criminal Investigation.  

“For more than a decade Hyung Kim concealed his wealth in secret offshore accounts, evading reporting requirements and the payment of income taxes due,” said Goldberg. “With his guilty plea, he is now held to account for his criminal conduct."     

According to court documents and information provided in court, Kim, a citizen of South Korea and, since 1998, a legal permanent resident of the United States, resided in Massachusetts and later in Connecticut.  

Around 1998, Kim traveled to Switzerland to identify financial institutions at which to open accounts for the purpose of receiving transfers of funds from another individual in Hong Kong.  Over the next few years, Kim opened accounts at several banks, including Credit Suisse, UBS, Bank Leu, Clariden Leu, and Bank Hofmann.  In 2004, the value of the funds in Kim’s accounts exceeded $28 million.

U.S. citizens, resident aliens, and permanent legal residents with a foreign financial interest in or signatory authority over a foreign financial account worth more than $10,000 are required to file a Report of Foreign Bank and Financial Accounts, commonly known as an FBAR, disclosing the account.

Kim conspired with several bankers, including Dr. Edgar H. Paltzer, to conceal the funds from U.S. authorities.  Paltzer, who was convicted in 2013 in the Southern District of New York for conspiring to defraud the U.S., and the other bankers assisted Kim in opening accounts in the names of sham entities organized in Liechtenstein, Panama and the British Virgin Islands.  

Paltzer and the other bankers facilitated financial transactions for Kim, so that Kim could use the funds in the U.S.  For example, between 2003 and 2004, Kim directed Paltzer and another banker to issue nearly $3 million in checks payable to third parties in the U.S. for the purchase of a residence in Connecticut.  In 2005, Kim created a nominee entity to hold title for the purchase of another home on Stage Harbor in Chatham, Mass., for nearly $5 million.  Kim and Paltzer communicated about the purchase in a manner that created the appearance that Kim was renting the property from a fictitious owner.

Between 2000 and 2008, Kim took multiple trips to Zurich, Switzerland and withdrew more than $600,000 in cash during these visits.  He also brought his offshore assets back to the U.S. by purchasing millions of dollars’ worth of jewelry and loose gems.  For example, in 2008, Kim purchased an 8.6 carat ruby ring from a jeweler in Greenwich, Connecticut, which he financed by causing Bank Leu to issue three checks totaling $2.2 million to the jeweler.

Kim also admitted that from 2000 through 2011, he filed false income tax returns for 1999 through 2010, on which he failed to report income from the assets held in the foreign financial accounts that he owned and controlled in Switzerland.  

As part of his plea agreement, Kim will pay a civil penalty of over $14 million dollars to the United States Treasury for failing to file, and filing false, FBARs, which is separate from any restitution the Court may order.

“We owe it to the vast majority of honest U.S. taxpayers to tirelessly search for and prosecute those who avoid paying their fair share, regardless of how they may try to disguise their income,” said Chief Don Fort, IRS Criminal Investigation.

Kim faces a statutory maximum sentence of five years in prison. Sentencing is scheduled for Jan. 26, the DOJ said. He may also face supervised release, restitution and monetary penalties in addition to the $14 million he has already agreed to pay, the government said.