March 25, 2014

Nonresident Alien Who Was Previously a U.S. Resident Indicted for Tax Crimes

Holland & Knight Tax Compliance Blog
Kevin E. Packman

On March 20, 2014, a federal grand jury in Kansas City, Missouri indicted Victor Lipukhin for tax crimes that occurred from 2002-2007.1 What makes this indictment stand out when compared against many others is that the taxpayer in question is not a United States taxpayer.  The crimes in question occurred when Lipukhin, a Russian citizen was a permanent resident of the United States.  From 2001 through mid-2007, Lipukhin lived in St. Charles, Illinois and served as president of Severstal Inc. (USA), a subsidiary of AO Severstal, the largest steel producer in Russia. Bloomberg Business Week noted that Lipukhin returned to Russia in 2007 to work at a hotel and resort being built in Sochi.2 

According to the Department of Justice press release, Lipukhin kept between $4 million and $7.5 million in two bank accounts with UBS in Switzerland from at least 2002 through 2007. The accounts were held through the following two Bahamian entities: (i) Old Orchard, which was initially funded with more than $47 million. The funds came from another previously maintained UBS account in the Bahamas; and (ii) Lone Star. Lipukhin failed to file FBARs reporting ownership of the accounts, Forms 5471 reporting his ownership of the entities, and also omitted the income from the accounts on his income tax returns.

While Lipukhin controlled the accounts and dictated virtually all transactions, it was a Bahamian national who served as nominee director of the entities that had direct involvement with the UBS accounts. The indictment also lists a number of additional steps that were taken to further conceal his ownership of the accounts.  For example, rather than purchase United States real estate directly with funds from the UBS accounts, he was charged with utilizing fictitious mortgages through an entity called Dapaul Management, which was controlled by a Canadian attorney. He also is accused of transferring funds from his UBS accounts to the Canadian attorney for ultimate transfer to a domestic account held in the name of domestic entity, Lipukhin controlled. 

Certainly, this is not the first instance in which a nonresident alien is indicted, as countless Swiss bankers who had no United States status have been indicted. Furthermore, the tax crimes Lipukhin is alleged to have committed occurred during the time he was a permanent resident.  Notwithstanding, it is wise to recall a statement Jeffrey Cooper, the deputy director of the IRS Criminal Investigation Division made last month. On February 28, 2014, when speaking at the Federal Bar Association's Section on Taxation meeting, he said that the IRS was looking at taxpayers who had expatriated to determine if the act was related to the violation of any particular laws.3 Expatriation involves relinquishing one's United States citizenship or permanent residency.



3 Jaime Arora, "IRS Criminal Investigation Division Looking Into U.S. Citizenship Renunciations,”\" 2014 TNT 41-8 (March 3, 2014).

Related Insights