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US prosecutors allege Belize fraud and tax evasion conspiracy

Thursday, 11 September, 2014

The US authorities have charged six Belize business executives with organising a scheme to help American citizens evade USD500 million of taxes and escape their reporting obligations under the Foreign Account Tax Compliance Act.

The alleged conspiracy was investigated by a favourite technique of the US authorities – entrapment using undercover law enforcement agents posing as dishonest clients.

The indictment alleges that the six accused set up shell companies in Belize and Nevis on behalf of about a hundred clients – who, unknown to them, included agents of the US Federal Bureau of Investigations. These companies, registered with nominee directors, traded the shares of US quoted companies through broker firms in Belize, and were thus able to anonymously manipulate the share prices, according to the FBI.

The Bureau describes one such alleged fraud in which the manipulators suddenly buy large numbers of shares in a small company, causing the quoted market price to rise sharply. Then the manipulators sell off their shares at a large profit – a so-called 'pump and dump' operation.

The proceeds from these transactions were then allegedly laundered back into the US through unidentifiable debit cards for the clients, among other methods.

Because the true ownership of the shell companies was unknown, these funds could be hidden from the US Internal Revenue Service, the FBI alleges. When one of the clients – presumably an FBI agent – asked his Belize contact whether the proceeds were taxable under US law, he was allegedly presented with an IRS form signed by the nominee director of the shell company set up for that client. According to the FBI, the businessman told the agent that he had designed this corporate structure to counter President Obama's new laws, apparently a reference to FATCA.

Only one of the six accused, Bob Bandfield, is under arrest, as he happened to be in Miami at the time of the swoop. The other five are presumed to be in Belize and will be the subject of an extradition request. Law enforcement officers in Belize have already raided the offices of the companies allegedly used in the business.

Sources