Got a few million bucks you want to protect from the tax man, a nosey spouse or a greedy business acquaintance? Sovereign Management & Legal Ltd. says it has the answers.
Up until recently, it offered on its website the “‘Bullet Proof’ Panama E-Commerce Combo Corporation/Foundation Package” for $3,475. Total price, taxes included. FedEx deliveries, an extra $75 a pop. Lots of alternatives are available, too, for what it terms “Breaking the ‘Paper Trail.’”
The company’s aggressive online marketing has attracted enough customers that the Internal Revenue Service and U.S. prosecutors noticed. In December, they filed a court petition in New York to get records of Sovereign’s customers from HSBC Bank USA and from several delivery and money and wire transfer services, including the Federal Reserve Bank of New York.
And at the end of the year the IRS added Sovereign to its list of firms that trigger higher penalties — from 27.5 percent to 50 percent — for taxpayers who voluntarily disclose previously undeclared offshore accounts.
IRS agent Randy Hooczko’s declaration, filed in support of the petition, says Sovereign “offers its clients a number of structures and services that can be used for tax evasion purposes.” The idea, the court filings show, is to break through the layers of anonymity Sovereign’s handiwork provides and identify its customers from 2005 through 2013.
Sovereign hasn’t been charged. Calls and email messages to the company seeking comment weren’t returned.
The company’s website amounts to “one stop shopping for money launderers,” said Josh Simmons, policy counsel for Global Financial Integrity, in an interview. The Washington-based nonprofit presses governments to curtail the flow of secret money.
Though other offshore firms offer services like Sovereign’s, “what’s surprising” is how comprehensive and “how blatant they are,” he said.
Among the site’s offerings are investment vehicles in New Zealand and Delaware, as well as the usual island tax havens; the Sovereign Gold Card, a prepaid debit card; and its ship and yacht registration service.
Joseph N. Cordaro, an assistant U.S. attorney, said in a legal memo based on Hooczko’s testimony that the company offers more than 30 offshore structures, including five “bullet proof” packages. Cordaro said Sovereign’s website told potential clients it could “help you avoid foreign account reporting requirements.” He also said Sovereign assured customers that “it is unlikely¸ unless you are careless, that such information will ever reach the authorities.”
To make an account “anonymous to the world,” the site suggests using a company, foundation or trust, which can use nominees to open and run the business. One sign: Hooczko and Cordaro identified a woman who was Sovereign’s corporate counsel and was listed on a website as a director of 147 companies and an agent for almost 900 companies.
“We care about your success,” Sovereign’s website says, noting it is unlike “many offshore incorporation mills.” Sovereign invites potential clients to visit its Panama City office and notes its “excellent banking connections.”
Under frequently asked questions, Sovereign addresses concerns about morality and tax authority scrutiny. “There is nothing immoral in trying to protect your hard earned assets,” it says. “It is the essence of rational self-interest.”
Hooczko’s 44-page statement cited cases involving:
- an online drug trafficking operation, shut down in 2012, where customers trying to buy controlled substances sent payments through Western Union to Sovereign accounts in Budapest, Hungary.
- an unidentified taxpayer who acknowledged using Sovereign to set up “an undeclared scheme” of structures between 2006 and 2011. Among them was a company with a bank account at HSBC Panama “because this was the bank that [Sovereign] worked with.” HSBC sold its Panama bank in 2013.
- a Securities and Exchange Commission case in 2009 in which an alleged Ponzi-scheme defendant sent millions of dollars to accounts at HSBC Hong Kong. Two of those company accounts had addresses that were the same as Sovereign’s in Belize and Hong Kong. That suggested, Hooczko said, that the companies were created by Sovereign.
One of the Sovereign website’s “frequently asked questions” addressed concerns about scrutiny from tax agencies. The answer: “What we advocate is not illegal; it therefore does not attract undue attention from the authorities.”