Tax fraud case with the highest implications

A high profile multi-million dollar international tax fraud case (Unites States vs. Natalia Veselnitskaya 18 CRIM 904)  took a dark turn last week then a sealed indictment by federal prosecutors was revealed to the public. To be clear, this tax fraud case does not involve anyone in U.S. government. Yet this case brought special attention because of its ties to people close to President Trump. Trump boasts that his real estate companies pay little or no taxes. The public does not know if the tax avoidance schemes used by the president are legal because he chooses to keep his tax returns from public view. All we know is the the president’s tax returns are under audit but he has not, as far as we know, been accused of tax fraud. So when this huge tax fraud case made news, it brought public special attention because of the several overlapping factors implicating the U.S. and Russian government, whether coincidental or not. This case is notable in that it names high level officials in both the U.S. government officials and Russian government officials. A number of U.S. and foreign individuals have already been indicted for tax fraud in ongoing investigations and all commentators predict that more indictments are expected.

The greatest problem posed by this type of case is that it undermines trust in the tax system by ordinary taxpayers. If billionaires can get away with paying no taxes using fraudulent schemes that the government is unable to stop, then why should an ordinary taxpayer have any faith in government or the tax system?

In 2013, federal prosecutors office in New York City brought a civil tax fraud and money laundering case against Russian real estate company Prevezon Holdings Ltd.. The tax fraud scheme involved using stolen corporate identities to obtain tax refunds and funneling the illegal proceeds through a network of shell companies. The real estate firm with holdings in New York City Is alleged to be liable for $230 million in the tax-fraud scheme.

While it is possible to legally reduce or avoid taxes through multiple real estate holding companies, it appears clear that this scheme was not legal. In the original tax fraud case filings federal officials wrote that the tax fraud was “perpetrated by a criminal organization that included in its ranks corrupt Russian officials.”

Then on December 28, 2018 the US Attorney’s Office filed a criminal tax fraud indictment against Russian attorney Natalia Veselnitskaya. She is charged with filing an “intentionally misleading statement that, among other things, represented the supposed investigative findings by the Russian government”. The Russian attorney claims that she works only for a billionaire client “independently of any government bodies” that is named in the tax fraud case and not the Russian government directly.

In the simplest terms, the Russian attorney is saying that assets in the US are not available to pay taxes because the Russian government already has a claim on them. US government calls that a lie and a scam. The US government filed evidence in the indictment that Veselnitskaya is working for the Russian government in drafting its legal documents. The indictment says that the Russian attorney actually authored the documents she presents as official Russian government actions.

The case gets more suspicious due to apparently unconnected circumstances.  Veselnitskaya is the same Russian lawyer named in another federal investigation by US Robert Mueller who has connections to the Kremlin and Vladimir Putin who met with Donald Trump Jr., Paul Manafort and Jared Kushner at Trump Tower during the 2016 election. It is still not known what, if any, connections these people connected to US government had to the properties in the tax fraud scheme and the money laundering.

VeselnitskayaIs not expected to return to the US to defend the criminal charges.


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