Justice Department Asks Court to Authorize Service of a John Doe Summons Seeking the Identities of U.S. Clients of R. Allen Stanford’s Investment Companies

WASHINGTON – The Justice Department announced today that it has filed papers seeking a federal court order authorizing the Internal Revenue Service (IRS) to serve a "John Doe summons" on Ralph Janvey, the court-appointed receiver of the Stanford Group Company (SGC) and related entities. The John Doe summons requires the receiver to provide documents identifying those U.S. taxpayers holding foreign accounts at or through Stanford Group Company (SGC), Stanford Trust Company Ltd. (STCL) and Stanford International Bank (SIB) during 2002-2009.

On Feb. 16, 2009, the Securities and Exchange Commission accused Stanford of a fraudulent $7 billion investment scheme. As a result, the federal district court in Dallas appointed Mr. Janvey to take possession and control of Stanford’s books and records, as well as those of his related entities. On June 19, 2009, a federal grand jury indicted Stanford for mail, wire and securities fraud.

According to the papers filed in court by Justice Department Tax Division attorneys, the IRS does not know the identities nor the financial investment information of U.S. persons with such offshore accounts, and the IRS cannot readily acquire it other than through the John Doe summons. According to the declaration of IRS Revenue Agent Daniel Reeves filed in support of the petition, the IRS has evidence volunteered from a U.S. taxpayer that account statements and Form 1099s from Stanford-controlled entities did not include interest or income generated from SIB accounts or certificates of deposits.

According to the Reeves declaration, evidence available to the IRS suggests that many of the persons in the John Doe class may have been under-reporting income, evading income taxes or otherwise violating the internal revenue laws of the United States. The aggregate amount of the resulting taxes that should have been reported and paid to the U.S. Treasury is unknown.

With information sought in the John Doe summons, the IRS can inspect each taxpayer's income tax return to determine if there are any understatements or misstatements of income. Additionally, the IRS can determine if Stanford’s U.S. taxpayer clients filed "Reports of Foreign Bank and Financial Accounts" (FBARs). Any U.S. taxpayer who has a financial interest in or signature or other authority over any foreign financial account (including bank, securities, or other types of financial accounts) must file the FBAR if the aggregate value of the financial accounts exceeds $10,000 at any time during a calendar year.

According to the Reeves declaration, a large number of FBARs may not have been filed by U.S. owners of the offshore SIB CDs.

"We will work hand-in-hand with the IRS to vigorously enforce the tax laws against those taxpayers who use offshore accounts to evade taxes," said John A. DiCicco, Acting Assistant Attorney General for the Justice Department’s Tax Division.