One of two brothers who ran a Los Angeles wholesale clothing business was sentenced Wednesday to six months behind bars, while his younger sibling received probation for failing to file required paperwork that would have disclosed funds hidden in offshore accounts.
Israel Birman, 72, now a resident of Israel, was also sentenced by U.S. District Judge Percy Anderson to a year of supervised release following his term in federal prison and was ordered to pay a $30,000 fine. He pleaded guilty in November in Los Angeles federal court to filing a false tax return in order to conceal more than $187,000 in interest income earned from accounts held at Bank Leumi in Israel.
As part of the plea agreement, Birman agreed to pay a civil penalty of not less than $1.7 million, representing 50 percent of the balance in an Israel Discount Bank account in 2013.
“This defendant literally had it all,” Anderson said from the bench, adding that it appeared Birman “lost his way” and “gave way to greed.”
From 1977 to 2011, Israel Birman and his younger brother, Ben Zion Birman, co-owned Serge Felipe Inc., a wholesale clothing business, court papers show.
Between 2006 and 2014, Israel Birman held offshore bank accounts at Bank Leumi and Israel Discount Bank. The accounts had balances over $10,000 each year, which required the filing of Reports of Foreign Bank and Financial Accounts — known as FBARs, federal prosecutors said.
Israel Birman did not file FBARs from 2006 to 2014, but in 2013, his Israel Discount account had a total value of over $3.4 million, prosecutors said. Additionally, he instructed Bank Leumi to hold bank mail from delivery to the United States, and obtained access to his offshore funds through the use of “back-to-back” loans from Bank Leumi USA collateralized by his undeclared Leumi offshore funds.
The elder defendant declined to make a statement in court.
As part of what the government called a “package deal,” his 63-year-old brother pleaded guilty in August to willfully failing to file a report of foreign bank and financial accounts, which would have disclosed more than $1 million hidden in Bank Leumi accounts.
Anderson sentenced the younger sibling to a year of probation and ordered him to pay an FBAR penalty of $500,000 and a $5,000 fine. The judge noted that half of the FBAR penalty had already been paid.
In 2014, Bank Leumi acknowledged that for at least a decade, it had conspired to help U.S. taxpayers hide their income. The bank paid the U.S. government $270 million.
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