Sunrider International, Los Angeles, CA
A ‘yen’ for Asian Antiques
Counsel in one of the largest income tax cases in the U.S. involving a privately held international company was required to refute allegations including money laundering and customs violations made by the U.S. government. The investigation focused upon the company’s business activities in Asia.
The husband and wife who owned the company were indicted in federal court for conspiracy, tax evasion and smuggling, where it was alleged that they had underreported their 1987-1990 income by more than $125 million.
It is essential that the forensic accountant in his financial fact-gathering role identify all relevant information that is good and bad for Counsel’s client in order to avoid a potential bad surprise. In a case such as this one, it is necessary to assess the role of the external bankers and auditors, especially when any business experiences extraordinary growth, whether from a garage location or Main Street U.S.A. The company’s external auditor was asked to create a schedule to present the source and use of funds amongst the related companies located in the U.S. and overseas. This accounting schedule gave the appearance of one pool of money and became one basis for the government to seize assets in the U.S.
However, upon re-examination, it was found that the money generated from business sales in the U.S. had no direct relationship to the assets seized in the U.S. The direct linkage suggested by the pooled accounting statement in fact did not exist.
When retained by defense counsel, it is most important to identify all possible weaknesses, no matter how small in the plaintiff’s case, especially when it is the U.S. government.