Feds Boast of Exposing Tax Cheats
Feds Boast of Exposing Tax Cheats
Aug. 03, 1999
NEWARK, N.J. (AP) _ Federal officials say they have finally breached the secrecy surrounding banks in the Cayman Islands with the help of a former banker whose records exposed hundreds of U.S. citizens as tax cheats.
The one-time banker, John M. Mathewson, 71, was sentenced Monday to probation on federal conspiracy and money laundering charges after prosecutors credited him for providing an unprecedented look at how Cayman banks operate.
U.S. authorities said the case shows that the approximately 500 banks in the British colony exist only to serve as illegal tax shelters for a mainly American clientele.
``The Cayman Islands are no longer the safe haven they once were,'' said a ranking FBI agent, Robert Jordan. ``This case enabled us to get on the inside.''
Because of Mathewson's help, the U.S. government has recouped $50 million in back taxes and penalties, and can expect to get a total of $300 million, according to the former banker's lawyer.
Authorities did not confirm those figures, but Jordan said the FBI and the Internal Revenue Service are pursuing 1,500 potential cases around the nation.
Although other countries, such as Switzerland, offer tax haven accounts, the Caymans and other Caribbean locations are favored by U.S. citizens because they are close. The Cayman Islands are 290 miles south of Florida.
U.S. citizens who maintain bank accounts in offshore tax havens must report the accounts to the IRS and pay U.S. taxes on income received from them. Bank secrecy laws in the Cayman Islands and other British colonies are under fire from London, which in March insisted they be scrapped.
Authorities stumbled on the Caymans case by accident while pursuing a nationwide investigation into a cable piracy operation, according to court papers.
When FBI agents arrested Mathewson in San Antonio in 1996, they found over a year's worth of computer records from the now-defunct Guardian Bank & Trust Limited of Grand Cayman.
Mathewson, the bank's owner, immediately offered the records, leading to a continuing investigation that has so far brought cases in about 20 states, Assistant U.S. Attorney John Carney said in court.
The bank had about 2,000 depositors, and Mathewson dealt personally with each and prepared fake documents for shell corporations, invoices and other items to help conceal the true account holder and the extent of their business, said Paul Machalek, chief criminal investigator for the IRS in New Jersey.
Many depositors had legitimate income, including New Jersey businessman Mark Vicini, who pleaded guilty to concealing millions in Guardian, and Jeffrey Lavigne, a surgeon who treated hemorrhoids and advertised on New York City subways as ``M.D. Tush.''
Mathewson pleaded guilty in March 1997 to charges that included conspiracy, money laundering and aiding income tax evasions as part of plea bargains with federal prosecutors in Florida, New Jersey and New York.
Carney urged U.S. District Judge Alfred J. Lechner to give Mathewson a lenient sentence to acknowledge his cooperation, which included testifying to grand juries and obtaining computer software to decode bank computer tapes, which were encrypted.
Saying his cooperation ``has been unparalleled,'' Lechner sentenced Mathewson to five years' probation, with six months to be served under house arrest, a $30,000 fine and 500 hours of community service. He could have faced nearly five years in prison.