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Justice Department tax lawyers pursuing cheats despite spending cuts

By Terry Frieden, CNN Justice Producer
updated 5:13 PM EDT, Tue April 9, 2013
STORY HIGHLIGHTS
  • Foreign tax havens, identity fraud are priorities for the Tax Division
  • Justice Department is working with the IRS to prosecute tax cheats
  • Some tax dodgers cite "constitutional" reasons why they don't have to pay

(CNN) -- With the April 15 tax filing deadline fast approaching, top Justice Department tax lawyers are pressing efforts to prosecute tax cheats in a cat-and-mouse game with billions of dollars at stake.

"We basically see the same attempts over and over again — it runs the range," Kathryn Keneally, assistant attorney general for the Tax Division, said Tuesday.

She said despite the forced spending cuts, also known as the sequester, the Tax Division, along with the IRS, expects to aggressively pursue tax violators.

"The IRS and Department of Justice have made significant strides in recent months to combat tax fraud, identity theft and offshore tax evasion," said Steven Miller, acting IRS commissioner.

Keneally said government prosecutors had achieved a 95% success rate in all civil and criminal cases they had litigated in the past year.

Prosecutors from the Justice Department obtained 127 indictments, which resulted in 137 convictions. Altogether the Tax Division has authorized 938 grand jury investigations, resulting in 1,751 prosecutions, according to a news release issued Tuesday by the Justice Department. The Justice Department said it had collected $290 million through civil litigation and retained more than $1 billion in requested refunds that officials prevented from being issued.

The federal investigators are particularly focused on the use of foreign tax havens, which they believe can account for $100 billion annually.

Government tax lawyers were particularly pleased with the guilty plea of Wegelin Bank of Switzerland in January. The oldest private bank in Switzerland was the first overseas bank to plead guilty to felony tax charges. The bank admitted it had tried to defraud the United States by helping American account holders hide assets from the IRS in undeclared accounts.

In the past year the United States has charged eight bankers and 11 account holders in connection with investigations into offshore banks located in Switzerland, India and Israel.

The Justice Department says it is also targeting individuals engaged in stolen identity refund fraud. In this scheme, criminals illegally obtain Social Security numbers and other identifying information then file false returns and pocket the refunds.

Keneally said authorities are still plagued by tax dodgers who purposely refuse to comply with the tax laws and use "frivolous" arguments to support their actions. The government has had some success in recent years targeting some of the leading dodgers who have claimed constitutional backing for their anti-tax views.

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