Indictment of HSBC India Client Provides Lessons for U.S. Citizens with Overseas Accounts

A superseding indictment has been returned in the US District Court for the Eastern District of Wisconsin against Dr. Arvind Ahuja of Greendale, Wis., adding a charge of conspiracy to defraud the Internal Revenue Service (IRS), the Justice Department and IRS announced.  Dr. Ahuja was previously indicted in June 2011 on four counts of willfully filing materially false tax returns and four counts of failing to file Reports of Foreign Bank and Financial Accounts (FBARs).

According to the superseding indictment, Dr. Ahuja, a board-certified neurosurgeon, wire transferred and maintained millions of dollars in bank accounts in India and the Bailiwick of Jersey at The Hongkong and Shanghai Banking Corporation Ltd. (HSBC).

In 2009, the HSBC bank account in India had a balance of $8,733,785. The superseding indictment alleges that Dr. Ahuja failed to report these bank accounts to the IRS on his 2006-2009 tax returns. The indictment further alleges that Dr. Ahuja failed to report more than $1.2 million in interest income that he earned from his HSBC India account and failed to pay the taxes due on that income. For the 2006-2009 tax years, Dr. Ahuja also failed to file FBARs to report his foreign bank accounts to the Department of the Treasury.

The superseding indictment also alleges that Dr. Ahuja conspired with HSBC bankers who worked at an HSBC India office in New York to conceal from the IRS the existence, ownership and income derived from his undeclared bank accounts at HSBC India and HSBC Jersey.  One of these bankers allegedly helped Dr. Ahuja avoid receiving bank statements at his house in Wisconsin, by, among other things, informing an HSBC employee in India that Ahuja “has requested that he does not want any kind of mail at his US or India address.  He wants a HOLD on all his accounts . . . he does not wish to receive any mail.”  The bankers also allegedly helped Dr. Ahuja access the funds in his undeclared bank accounts when he traveled abroad and transferred money from his undeclared HSBC India account to other undeclared financial accounts in India.

As alleged in the indictment, U.S. citizens have an obligation to report to the IRS on Schedule B of their U.S. Individual Income Tax Return, Form 1040, whether they have a financial interest in, or signature authority over, a financial account in a foreign county in a particular year by checking “Yes” or “No” in the appropriate box and identifying the country where the account was maintained.  They further have an obligation to report all income earned from foreign financial accounts on the tax return and to pay the taxes due on that income.  Separately, U.S.  citizens with a financial interest in, or signatory authority over, a foreign financial account worth more than $10,000 in a particular year, must also file an FBAR form with the Department of the Treasury disclosing such an account by June 30 of the following year.

Dr. Ahuja faces a maximum penalty of five years in prison for the conspiracy charge and a $250,000 fine.  Each false tax return charge carries a maximum penalty of three years in prison and a $250,000 fine.  The failure to file FBAR charges each carry a maximum penalty of 10 years in prison and a $500,000 fine.

A trial date has not yet been set.  An indictment is merely an allegation, and Dr. Ahuja is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

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