Pioneer of Sham Tax Havens Sits Down for a Pre-Jail Chat
November 18, 2004
By DAVID CAY JOHNSTON
SEATTLE, Nov. 17 - Jerome Schneider, the nation's
best-known seller of fraudulent offshore banks, said in an
interview today that he had helped hundreds of rich
Americans evade taxes, including actors, celebrities and
business owners.
Mr. Schneider, who pleaded guilty in February to conspiring
to help his clients evade the tax laws, said that he
expected "every single one" of his clients to be prosecuted
or sued for the taxes they evaded. He said clients sought
to evade taxes on incomes ranging from $100,000 to $40
million, though most were from a third to half a million
dollars.
Mr. Schneider, 53, spoke in a cramped hotel room here under
the watchful eye of three Internal Revenue Service criminal
investigators, who said nothing but smiled broadly at times
as he answered questions and named clients and associates.
The I.R.S. set up the interview with Mr. Schneider but did
not interfere with it. The agency, by law, cannot comment
on individual taxpayers.
Under the terms of his agreement with the government to
plead guilty, Mr. Schneider may not make any public
comments about his former clients "without prior consent of
the government." He is to be sentenced on Monday in Federal
District Court in Los Angeles. In return for his
cooperation, he is expected to serve no more than 24 months
in prison. He has already paid $100,000 in restitution.
Mr. Schneider said he always reported his full income to
the I.R.S. and never personally used an offshore bank to
hide income.
Since 1976, Mr. Schneider has set up sham banks for clients
in the Cayman Islands, Grenada, Montserratt, Vanuatu, the
Cook Islands and, recently, in Nauru, a Pacific island.
Clients paid as much as $60,000 to "acquire" an offshore
bank, which consisted of nothing more than pieces of paper
to create the appearance of legitimate business activity,
he said, confirming the accusations in the government
indictment. He said that while most clients wanted to hide
money from the I.R.S., some also wanted to conceal money
from estranged spouses or creditors.
"Every one of my clients knew full well what they were
getting into, including the potential to be prosecuted," he
said, detailing how they signed contracts, were advised by
lawyers and were told that if tax authorities ever caught
onto them they could go to prison. "They understood that,"
he contended.
He said that all his clients had two things in common -
they were rich and they wanted to escape taxes.
Most of the nation's major accounting firms worked with one
or another of his clients, he said, and he named two law
firms that he said were central to his business.
He said one prominent actress sent money to the United
International Bank in Nauru, which he said he created. He
said the actress paid $50,000 for a legal opinion asserting
that the arrangement was legal.
Mr. Schneider also said that in 1988 he arranged for a
prominent motivation coach to place $250,000 in an offshore
bank without reporting the money to the I.R.S.
In addition, Mr. Schneider said that a billionaire media
businessman, one of several clients who he said were on the
Forbes 400 list of the wealthiest Americans, sent $40
million to a sham bank in Nauru to pay for a nut-processing
company in 1994. The owner of the company has died, but his
estate is challenging in Tax Court an I.R.S. demand that
taxes be paid on profits from the sale.
For 28 years, Mr. Schneider promoted offshore tax schemes.
He sold, he said, more than a million copies of his book,
"The Complete Guide to Offshore Money Havens," which he
advertised in The Wall Street Journal and SkyMall, a
magazine found in the seat-back pocket on many airlines.
The 2000 edition book carried an endorsement by
Representative Billy Tauzin, the Louisiana Republican, who
also spoke at one of Mr. Schneider's tax evasion
conferences. Mr. Tauzin's spokesman, Ken Johnson, said the
endorsement was "a stupid mistake."
Mr. Schneider, 53, who lives in Vancouver, British
Columbia, was the picture of a successful businessman,
dressed in a knit shirt, gray wool slacks and black
loafers, his graying hair clipped short, his face framed by
horn-rimmed glasses.
He began the interview by describing his conduct in terms
of helping people, but when pressed he said, "Yes, I am a
criminal."
Mr. Schneider said his undoing began the day more than a
decade ago when he asked Jack Blum, a former United States
Senate investigator, to speak at one of his offshore
seminars. Mr. Blum, who specializes in exposing
international financial crimes, wrote a letter to the
Justice Department that prompted the investigation that led
to Mr. Schneider's guilty plea.
Mr. Blum said, "That Schneider could operate openly for
years, buying ads in the Wall Street Journal and the
American Airlines flight magazine, shows the utter failure
of tax law enforcement." He said law enforcement had known
about Mr. Schneider for years, but failed to act.
The Senate Permanent Investigations subcommittee called Mr.
Schneider as a witness in 1983 hearings on offshore tax
evasion, and two years later the Comptroller of the
Currency warned American banks about dealing with some of
the offshore banks Mr. Schneider created.
The I.R.S., in court papers, said it began investigating
Mr. Schneider in 1997, 14 years after his Senate testimony,
because of the letter from Mr. Blum. It took five more
years to obtain an indictment.
Today, Mr. Schneider said, he is broke. "I lost
everything,'' he said. "My wife divorced me and with the
legal fees, everything is gone."
Asked about the millions of dollars he earned setting up
offshore banks, he replied, "It is gone, all gone."
Since he has held himself up as the world's leading expert
on hiding money offshore, how could one know for sure if
Mr. Schneider really is broke? The I.R.S. agents listening
to the question put their hands to their mouths to repress
grins.
"If you can find it," Mr. Schneider said, "I would say take
it."
http://www.nytimes.com/2004/11/18/bu...dab123b4b06edf
November 18, 2004
By DAVID CAY JOHNSTON
SEATTLE, Nov. 17 - Jerome Schneider, the nation's
best-known seller of fraudulent offshore banks, said in an
interview today that he had helped hundreds of rich
Americans evade taxes, including actors, celebrities and
business owners.
Mr. Schneider, who pleaded guilty in February to conspiring
to help his clients evade the tax laws, said that he
expected "every single one" of his clients to be prosecuted
or sued for the taxes they evaded. He said clients sought
to evade taxes on incomes ranging from $100,000 to $40
million, though most were from a third to half a million
dollars.
Mr. Schneider, 53, spoke in a cramped hotel room here under
the watchful eye of three Internal Revenue Service criminal
investigators, who said nothing but smiled broadly at times
as he answered questions and named clients and associates.
The I.R.S. set up the interview with Mr. Schneider but did
not interfere with it. The agency, by law, cannot comment
on individual taxpayers.
Under the terms of his agreement with the government to
plead guilty, Mr. Schneider may not make any public
comments about his former clients "without prior consent of
the government." He is to be sentenced on Monday in Federal
District Court in Los Angeles. In return for his
cooperation, he is expected to serve no more than 24 months
in prison. He has already paid $100,000 in restitution.
Mr. Schneider said he always reported his full income to
the I.R.S. and never personally used an offshore bank to
hide income.
Since 1976, Mr. Schneider has set up sham banks for clients
in the Cayman Islands, Grenada, Montserratt, Vanuatu, the
Cook Islands and, recently, in Nauru, a Pacific island.
Clients paid as much as $60,000 to "acquire" an offshore
bank, which consisted of nothing more than pieces of paper
to create the appearance of legitimate business activity,
he said, confirming the accusations in the government
indictment. He said that while most clients wanted to hide
money from the I.R.S., some also wanted to conceal money
from estranged spouses or creditors.
"Every one of my clients knew full well what they were
getting into, including the potential to be prosecuted," he
said, detailing how they signed contracts, were advised by
lawyers and were told that if tax authorities ever caught
onto them they could go to prison. "They understood that,"
he contended.
He said that all his clients had two things in common -
they were rich and they wanted to escape taxes.
Most of the nation's major accounting firms worked with one
or another of his clients, he said, and he named two law
firms that he said were central to his business.
He said one prominent actress sent money to the United
International Bank in Nauru, which he said he created. He
said the actress paid $50,000 for a legal opinion asserting
that the arrangement was legal.
Mr. Schneider also said that in 1988 he arranged for a
prominent motivation coach to place $250,000 in an offshore
bank without reporting the money to the I.R.S.
In addition, Mr. Schneider said that a billionaire media
businessman, one of several clients who he said were on the
Forbes 400 list of the wealthiest Americans, sent $40
million to a sham bank in Nauru to pay for a nut-processing
company in 1994. The owner of the company has died, but his
estate is challenging in Tax Court an I.R.S. demand that
taxes be paid on profits from the sale.
For 28 years, Mr. Schneider promoted offshore tax schemes.
He sold, he said, more than a million copies of his book,
"The Complete Guide to Offshore Money Havens," which he
advertised in The Wall Street Journal and SkyMall, a
magazine found in the seat-back pocket on many airlines.
The 2000 edition book carried an endorsement by
Representative Billy Tauzin, the Louisiana Republican, who
also spoke at one of Mr. Schneider's tax evasion
conferences. Mr. Tauzin's spokesman, Ken Johnson, said the
endorsement was "a stupid mistake."
Mr. Schneider, 53, who lives in Vancouver, British
Columbia, was the picture of a successful businessman,
dressed in a knit shirt, gray wool slacks and black
loafers, his graying hair clipped short, his face framed by
horn-rimmed glasses.
He began the interview by describing his conduct in terms
of helping people, but when pressed he said, "Yes, I am a
criminal."
Mr. Schneider said his undoing began the day more than a
decade ago when he asked Jack Blum, a former United States
Senate investigator, to speak at one of his offshore
seminars. Mr. Blum, who specializes in exposing
international financial crimes, wrote a letter to the
Justice Department that prompted the investigation that led
to Mr. Schneider's guilty plea.
Mr. Blum said, "That Schneider could operate openly for
years, buying ads in the Wall Street Journal and the
American Airlines flight magazine, shows the utter failure
of tax law enforcement." He said law enforcement had known
about Mr. Schneider for years, but failed to act.
The Senate Permanent Investigations subcommittee called Mr.
Schneider as a witness in 1983 hearings on offshore tax
evasion, and two years later the Comptroller of the
Currency warned American banks about dealing with some of
the offshore banks Mr. Schneider created.
The I.R.S., in court papers, said it began investigating
Mr. Schneider in 1997, 14 years after his Senate testimony,
because of the letter from Mr. Blum. It took five more
years to obtain an indictment.
Today, Mr. Schneider said, he is broke. "I lost
everything,'' he said. "My wife divorced me and with the
legal fees, everything is gone."
Asked about the millions of dollars he earned setting up
offshore banks, he replied, "It is gone, all gone."
Since he has held himself up as the world's leading expert
on hiding money offshore, how could one know for sure if
Mr. Schneider really is broke? The I.R.S. agents listening
to the question put their hands to their mouths to repress
grins.
"If you can find it," Mr. Schneider said, "I would say take
it."
http://www.nytimes.com/2004/11/18/bu...dab123b4b06edf
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