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form, I certainly felt that the information on it was the kind of information that we needed. I heard the testimony this morning, including Mr. Schulze's, and I must tell you that any form that we ask the business community to fill out is one that should only contain the information that is absolutely needed by the Service and interested parties so that we limit the burden on the taxpayers.
I feel as though the appropriate information is there, Mr. Chairman, but I am certainly willing to take another look at that to be absolutely sure that we are not requiring information that just is of no use to us.
Chairman PICKLE. I looked at the form and can see why, small lines, and it may be difficult for an untrained person to do it. I don't think it would be a big problem if you had before you a transaction worth $100,000 or $200,000. I would take my 5 to 20 minutes and that would be a bother to me if I wanted to get around the law.
I would like a recommendation how we could open it up so the businessman could fill it out easily and quickly, and get the essential information. I think we can work towards more simplification. Look at that and give me a specific report.
Mr. MURPHY. Maybe we can get the working group mentioned by our friends at Treasury to look at that.
Mr. SHAW. Any form from the IRS is intimidating to a certain degree, but I agree the form says who paid how much for what and I don't know how you can boil it down any further.
It looks like an IRS form. They all look the same. They do have a certain amount of intimidation about them, but I cannot conceive of a way that you can make it any more simple.
Chairman PICKLE. I think Mr. Schulze, as a former businessman, has an aversion against all forms.
Mr. SHAW. I was surprised that one of the witnesses or someone said that it took 20 minutes to fill it out. Maybe the first one, but after that I don't see where it would take 20 minutes.
Mr. MURPHY. We learned our lesson in saying what education level is capable of filling out income returns. We have to remember the form is really designated to facilitate that criminal prosecution. We will pay very, very careful attention that it doesn't minimize our chances of developing a case and recommending it for prosecution as well. OK?
Let me switch to the Criminal Investigation side. In addition to the Internal Revenue laws, Criminal Investigation is responsible for investigating all allegations of criminal violations of the Bank Secrecy Act except violations related to international transportation of currency and monetary instruments.
Since 1986, IRS Criminal Investigation has initiated more than 4,200 criminal cases on money launderers. Over 1,100 of these were initiated in 1990. These cases represent 27 percent of our criminal case inventory and involve about 20 percent of our Criminal Investigation resources.
Approximately 50 cases have been initiated for violations of the section 60501 reporting requirements. Nearly all of these have been since the increased penalties were enacted, from 1 year to 5 years. Seizures under the money laundering statutes have totaled some $135 million. Almost half of this has been seized during this fiscal
year. The rate of increase is at least partly attributable to the increased training and experience of our personnel-I might add, who do a very difficult job quite well.
I am not in this testimony trying to skirt away from the fact that we have a great deal of success on the CTR side. We have had a lot of activity there and more is needed in the 8300 area.
So over the years, Criminal Investigation has been extensively concerned with CTR compliance by regulated financial institutions. Criminal Investigation personnel have developed and conducted training sessions for bank tellers and officials. Video tape presentations on money laundering and the CTR form filing requirements have been prepared and distributed to the banking community.
If you are interested, Mr. Chairman, we would certainly make copies of those video tapes available to you and members of the subcommittee and to the staff.
Recently we have devoted a substantial amount of time to educate and to obtain the cooperation of bank personnel in identifying and reporting suspicious transactions. I don't think it is necessary to give you an example on it, but I can tell you that if a bank employee observes a suspicious transaction, they are encouraged to file a suspicious transaction report. This can be indicated by checking a block on the CTR form. Statistics on such reports are maintained by our Detroit Computing Center.
Suspicious transactions may also be reported by a letter or phone call to the local Criminal Investigation office. Western region has established a pilot program to track reports of suspicious transactions from all sources. These reports have increased from approximately 3,000 in 1986 to over 7,000 so far in 1990.
Converting illegal proceeds into autos, jewels, gold and silver coins, artifacts, and real estate is another trend among those involved in narcotics trafficking. The assets indicate economic stature and prestige to their peers as well as a method of laundering their profits. As an example, two luxury car dealerships have been seized by Criminal Investigation in the past several months for violations of the money laundering statutes and section 60501.
One dealership in Maryland was the subject of an undercover operation in 1989. The investigation began when the dealer offered to sell a Mercedes Benz to an undercover police officer and not file a form 8300. Sounds kind of familiar, doesn't it? During the operation, the dealer had been told that the cash came from narcotics sales.
The investigation showed that over a 4-month period in 1989, the dealership had structured in excess of $400,000 into its business bank account with no forms 8300 being filed. The proprietors were indicted for money laundering and 64 luxury vehicles were seized. A Los Angeles auto dealership was the subject of an IRS investigation. The owners catered to the exotic tastes and large cash business of the Blood and Crip gangs in Los Angeles. Vehicles were sold for cash with no forms 8300 being filed or filed with false information.
In some instances, the vehicle would be registered in a fictitious name or in the lienholder name of the dealership. This was done to prevent seizure by the local police if the vehicle was confiscated in a drug deal or by the Government in a tax or money laundering
investigation. The owners of the dealership were indicted and the business seized, which included 47 luxury automobiles valued at over $1 million. The indictments included filing false forms 8300, failing to file forms 8300 and personal tax charges.
IRS Criminal Investigation has launched several investigative projects to test form 8300 compliance around the country. In New Jersey, yacht brokers and real estate title companies were identified as businesses filing few form 8300s.
Agents did comparison checks on CTRS filed by financial institutions showing large cash deposits by these entities with no corresponding form 8300 on file. That matching process, by the way, is a necessary tool and we appreciate the support we get from the FinCEN operation on that as well.
When agents made a field call to a local yacht dealer, they inquired as to a particular $27,000 cash deposit the broker had made to his business account and no form 8300 had been filed. The broker explained that he had received the cash in three increments and produced records showing the sale of a yacht to a Philadelphia pharmacist for $360,000. The yacht broker's records showed that almost all the payments received on the sale were $9000 checks that the buyer had purchased at numerous financial institutions.
The ensuing investigation, joined by the Drug Enforcement Agency, resulted in the indictment of the pharmacist who had been selling a combination of codeine and methamphetamine on phony prescriptions.
Chairman PICKLE. Mr. Murphy, you have just given us an example now in Maryland where the dealer had been dealing in a Mercedes Benz purchase. He said he was indicted and they seized the car. In Los Angeles, an automobile dealership, the same essential procedure was followed and the owners of the dealership were indicted.
Now, you give me this last case of the one I guess in Philadelphia where the investigation had resulted in the indictment of the pharmacist. Have you had indictments? Are there cases pending on those? Has there been prosecution or conviction, or do you just indict them and move in and take over the dealership and its equipment? Have there been convictions on these?
Mr. MORICS. These cases that Mr. Murphy just mentioned, are still pending so the cases are awaiting action in the courts. Chairman PICKLE. How long have you been holding them? Mr. MORICS. I can't tell you. We can get that information for you. [The following was subsequently received:]
STATUS OF FORM 8300 Cases CRIMINAL INVESTIGATION, OCTOBER 15, 1990
A manual inquiry was performed by all Criminal Investigation offices in the 63 IRS District regarding Form 8300 cases. This inquiry disclosed that we currently have 62 cases under investigation and have referred 65 cases for prosecution. Of those cases referred for prosecution, a total of 13 have been convicted; 33 have been indicted and are awaiting trial; and 19 are pending indictment at a U.S. Attorneys office.
There can be several reasons why a case remains at the preindictment or pretrial stage. Lack of access to a Grand Jury, due to heavy workload, can cause an indictment to be delayed. Similarly, a crowded docket in the Federal District Court, or plea negotiation, can result in postponement of a trial.
Chairman PICKLE. For a year or two?
Mr. MORICS. No, these are fairly recent.
Chairman PICKLE. Is an indictment pending? Is the Justice Department attempting to make a conviction on those cases?
Mr. MORICS. Yes. The indictments have been returned and those cases are awaiting action in the courts. It is somewhat difficult for us to capture the convictions we have had, although there haven't been many for pure 8300 violations because of the way we keep our records. Violations would be under a failure to file statute including a 1040.
It is tough to break these out. We usually work these cases as part of an operation involving a major drug operation of some sort and part of what happens is you look at different statutes that would apply and often we will charge people with title 18, 1956, which is a money laundering statute, even though it may involve an 8300 because that has a much stiffer penalty, a 20-year jail term associated with it and a much stiffer fine.
So we are developing a recordkeeping system which should give us better information, but right now we are unable to give you the kind of statistical data that we would like to tell you what is going on in that area.
Chairman PICKLE. The committee would like to be advised.
Mr. MURPHY. I think this is probably a good opportunity as well to show you a clip on a recent indictment in Milwaukee. I have here a headline that says, "Car Dealer Cases Send Message, Officials Say." Another headline says, "Indictment of Two Dealerships Stun Others." I think this goes back to Mr. Shaw's point that if indictments and convictions take place, this type of educational process is there both on the positive side and on the enforcement side then we can deal with this problem in a more effective way.
I might also add that I am very, very confident that as we develop the cases and refer them to the Department of Justice that we will receive effective support in bringing the appropriate taxpayers to prosecution.
I would like to submit this for the record, if I may.
Chairman PICKLE. Without objection.
[The following was subsequently received:]
It was the largest such seizure since 1985, when the Justice Department confiscated a Pewaukee foundry that had served as the front for a drug ring The foundry, Accurate Brass and Aluminum, was valued at the time at about $1.9 million.
The assets seized Thursday probably will amount to much more than that, according to local DEA chief Kelly Snyder.
Johnson said 56 vehicles were impounded at Antzoulatos, lot He. sold all makes of used cars, Snyder
five-count indictment alleging that Kaufmann was charged in a he laundered drug money and structured cash transactions to cir
cumvent federal reporting require leged to have, agreed to sell a ments In one instance, he is alPorsche to an undercover IRS agent posing as a drug dealer.
As part of the war on drugs, cash transactions in excess of businesses are required to report all $10,000 to the IRS. Structuring cash payments in smaller chunks is illegal
At Kaufmann's bail hearing, his Antzoulatos and Jim were attorney estimated the inventory at the Kaufmann lot was worth $1.5 charged with conspiracy to launder million. Kaufmann Motorcars drug money. They allegedly docdealt in used luxury cars and exotic tored papers to disguise the true sports cars, both foreign and do identity of drug dealers who were mestic models. It was the second of buying and selling vehicles through the two lots raided Thursday, and them. Antzoulatos also was 86 vehicles were impounded there, charged with three money launderaccording to Asst US Atty. Mel Sing counts involving the sale of Johnson individual vehicles
- Federal Magistrate. Aaron E O Goodstein allowed the release of Kaufmann and Jim on signature or property bonds, without cash bail, but set $50,000 bail for Antzoula tos. Asst US Atty. R. Jeffrey WagDer told Goodstein that Antzoula tos had been tape-recorded telling an informant he would. Gee to Greece, his native country, if he was charged.
"While this is a money-launder drug dealing" Wagner said. ing case, it also is steeped deeply in
A not guilty plea was entered for Antzoulatos by Goodstein. Jim and through their lawyers Kaufmann both pleaded not guilty
If convicted as charged, Kaufmann could face up to 100 years in prison and $2.5 million in fines, and Antzoulatos could face up to 80 years in prison and $2 million in fines. Jim could get up to 20 years, plus a $500,000 fine."
In a related development, the Internal Revenue Service plans to: send out a statewide letter to auto dealers reminding them of federal drug laws requiring the reporting of
large each transartinne
On Thursday morning, Myszka and his co-workers watched in amazement across the street from Olympic Auto as agents struggled to start the used cars on the lot, and then drove them onto an automo-. bue hauler. They saw Antzoulatos and Jim taken into custody and watched as police dogs trained to sniff out drugs were used in a scarch of autos on the lot and the office area.
"We never had any problems with him," Myszka said. "I never really associated with him much. He never really associated with many of the guys"
The simultaneous confiscation of property at Harry Kaufmann. Motorcars elicited a similar reac-: tion from others who knew and had done business with Kaufmann.
"He had a pretty well-organized operation," said Ron Faucette, the owner of Silver Spring Automotive,.. 5902 N. Green Bay Ave.
Bull Ehrhardt, the manager of the Silver Spring shop, said Kaufmann was a hardworking man who. was at his dealership when it opened in the morning and stayed there until closing which sometimes wasn't until 9 p.m.
'SEEMED LIKE A NICE GUY"
"He seemed like a nice enough guy who kept his business in line," Faucette said.
The indictments raise the ques tion of how common it is in the business to take dirty money.
"I would only say this is not the first time I ever heard about it" said the DEA's Snyder.
A spokesman for a group repre senting most new-car dealers in Milwaukee, and several used-car dealerships, said the car business was good about policing itself.
"I can't believe this is a preva leat type of thing," said Don Hansen, executive vice president of the Automobile Dealers Association of Mega Milwaukee. He called the events Thursday "a very lamenta ble situation."