HSBC India Client Indicted for Tax Evasion and Failing to Report Foreign Bank Accounts

WASHINGTON – A federal grand jury in San Jose, Calif., Wednesday indicted Ashvin Desai of San Jose on three counts of tax evasion, two counts of willfully aiding the preparation of materially false tax returns and three counts of failing to file Reports of Foreign Bank and Financial Accounts (FBARs), the Justice Department and Internal Revenue Service (IRS) announced.

According to the indictment, Desai, the owner of a medical device company, his wife and his two adult children maintained millions of dollars in undeclared bank accounts in India at The Hongkong and Shanghai Banking Corporation Ltd. (HSBC). During 2009, Desai maintained approximately $8.8 million in his undeclared accounts at HSBC in India. Desai attempted to evade his income taxes for tax years 2007-2009 by filing false tax returns that failed to report $1,306,810 of interest income, and that falsely reported that he did not have an interest in, or signature authority over, bank accounts located in a foreign country . Desai also prepared false tax returns for his children for tax year 2009 that failed to report approximately $189,000 of interest income paid by HSBC in India, and that falsely reported that the children did not have an interest in bank accounts located in a foreign country.

The indictment further alleges that during 2009 Desai closed an account he maintained at HSBC in England and directed that the funds from that account be transferred to a bank account maintained at HSBC in Dubai in the name of one of his children, and that, for tax years 2007-2009, Desai failed to file FBARs to report his foreign bank accounts to the Department of Treasury.

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 had 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 Treasury disclosing such an account by June 30 of the following year.

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

This case is being prosecuted by Senior Litigation Counsel John E. Sullivan and Trial Attorney Melissa S. Siskind of the Justice Department’s Tax Division, with the assistance of Assistant U.S. Attorney Thomas Moore of the U.S. Attorney’s Office for the Northern District of California, and was investigated with the assistance of the IRS.

An indictment is only an allegation of criminal conduct and is not evidence of guilt. A person is presumed innocent until and unless proven guilty beyond a reasonable doubt in a court of law.