Tax evader who blamed Holocaust gets 10 months

UBS client said his fear of Nazi persecution led him to store millions in Swiss bank accounts

Topics: Hoarding,

A tax evader was sentenced Friday to 10 months in federal prison after claiming his Jewish parents’ experience fleeing the Nazi Holocaust drove him to compulsively hide more than $10 million in secret accounts at Swiss bank UBS AG and other offshore tax havens.

U.S. District Judge Adalberto Jordan imposed the longest sentence to date for a UBS client against 65-year-old Jack Barouh, even after giving him credit for cooperating in the ongoing investigation and belatedly attempting to come clean with the Internal Revenue Service.

Barouh pleaded guilty in February, the latest in a string of convictions won by the Justice Department after UBS last year admitted orchestrating tax evasion among rich U.S. clients and paid a $780 million fine. UBS also separately agreed to turn over more than 4,450 names of wealthy Americans suspected of dodging taxes through secret UBS accounts.

Jordan noted that Barouh has sought psychiatric help for the Holocaust compulsion, which his attorney described as the desire to “hide and hoard” assets to guard against a potential repeat of the Nazi attempt to exterminate Jews during World War II. After Barouh’s family fled Austria, they settled in Bogota, Colombia, where Barouh was born.

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“He and his family might lose everything, exactly as his parents risked everything in the 1940s,” Jordan said in explaining the fear.

“I have lived under the weight of the Holocaust,” Barouh told the judge. “Those fears are finally starting to subside.”

Assistant U.S. Attorney Jeffrey Neiman said criminal defendants invariably come up with some justification for their illegal actions — and that Barouh’s Holocaust trauma is no excuse.

“It does not give this defendant a license to break the law,” Neiman said. “Tax fraud is tax fraud.”

Barouh, of Golden Beach, founded the luxury brand Michele Watches, which he sold to Fossil Inc. for $50 million in 2004. But court documents show his effort to evade U.S. taxes started much earlier, in 1976, when he began skimming money from his company and stashing it in accounts in Hong Kong, the British Virgin Islands, Switzerland and Panama.

Eventually, Barouh turned to UBS, where he had as much as $10 million in accounts not declared with the IRS as required. Neiman estimated the total tax loss to the U.S. at over $736,000 from 2002 to 2007, the period covered by the U.S. investigation. Barouh pleaded guilty to a charge of filing a false 2007 tax return.

Although he faced up to 2 1/2 years in prison, prosecutors sought a reduction because he has provided extensive information about two Swiss money managers and one Swiss attorney. Neither was identified in court.

“The information he’s provided, we are using,” Neiman said. “It is ongoing.”

The 10-month sentence was half what prosecutors originally sought, but more than the one-year home detention Barouh requested. He also has paid more than $5 million in penalties for not reporting his overseas accounts and still owes back taxes, interest and penalties to the IRS, said his attorney, Robert Panoff. Barouh is scheduled to report to prison June 25.

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