Woodlands man receives house arrest in tax scam

July 27, 2010 12:11:03 PM PDT
A Texas businessman who admitted evading hundreds of thousands of dollars in taxes using secret accounts at Swiss bank UBS AG was sentenced Tuesday to a year of house arrest and probation, a reward for his quick guilty plea and substantial assistance to U.S. investigators Paul Zabczuk, 55, became the seventh former UBS client to avoid jail out of 10 prosecutions in a crackdown on offshore accounts to hide wealth. Dozens more prosecutions are expected in the coming months, especially with UBS's agreement to disclose the identities of 4,450 suspected American tax dodgers.

Zabczuk, an oil industry supplier from Woodland Hills, Texas, used four secret accounts set up by UBS in the Bahamas and Switzerland to hide assets from 1999 until 2009, according to court records. One method he used to access money was to transfer funds to China for the purchase of antiques, which were then shipped to him in Texas for his own use or to be sold.

In October 2009, Zabzcuk attempted to voluntarily disclose his illegal accounts to the Internal Revenue Service under a program that would allow him to avoid prosecution -- something about 15,000 other offshore account holders did. But he was rejected because the IRS had already obtained Zabzcuk's name from UBS, leading to his agreement to plead guilty to filing a false tax return and disclosure of Swiss bankers who had advised him.

"Mr. Zabczuk has done everything the government has asked," said his attorney, Scott Frewing.

Frewing added that Zabczuk has already begun paying the government $832,000 in back taxes, penalties and interest, which will require that he sell his Texas home. Zabczuk, in tearful remarks to U.S. District Judge William Dimitrouleas, said he was sorry for his actions.

"This is the first time that I've broken the law and I will never break it again," Zabczuk said. "I showed bad judgment."

Prosecutors had sought prison time of 18 months, even with credit for Zabczuk's cooperation.

UBS in 2009 paid a $780 million fine under a deferred prosecution agreement with the U.S., which also led to disclosure of an initial batch of between 250 and 300 American clients. UBS later agreed under pressure to reveal an additional 4,450 names and said Tuesday it expects the tax dispute with the U.S. to be resolved by October.


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