CHATHAM – A waterfront home on Stage Island played a role in the recent U.S. Justice Department tax fraud case against a Connecticut man.
Hyung Kwon Kim, a South Korean citizen but a legal U.S. resident since 1998, pleaded guilty to failing to report more than $28 million kept in Swiss bank accounts. He was sentenced Jan. 25 to six months in prison and paid more than $300,000 in restitution to the Internal Revenue Service as well as more than $14 million in civil penalties for filing false income tax returns, failing to report investment income and failing to disclose earnings from holdings in offshore accounts.
According to the department of justice, Kim worked with Dr. Edgar H. Paltzer, a Swiss attorney to conceal assets and income in Swiss bank accounts and to create sham corporate entities. One of those was Edraith Invest and Finance Ltd., which in 2005 purchased property at 176 Stage Island Rd. for $4.7 million. The Massachusetts Secretary of State's Office corporate database lists Edraith Invest and Finance Ltd. as a foreign corporation with an address n the British Virgin Islands. Its corporate directors are listed as Barbara Bachmann of Zurich, Switzerland; Dr. Edgar Paltzer, also of Zurich; and Georg Kieber of Liechtenstein.
A justice department press release states that Kim and Paltzer communicated about the purchase of the Stage Island Road property “in a manner that created the appearance that Kim was renting the property from a fictitious owner.”
According to town assessing records, Edraith remains the owner of record of the Stage Harbor-front property, which is currently assessed at $3.6 million.
Kim and Paltzer also issued checks worth nearly $3 million to third parties to purchase a property in Greenwich, Conn., between 2003 and 2004.
Between 2000 and 2008 Kim made numerous trips to Zurich and withdrew more than $600,000 in cash. Millions more in offshore assets were brought into the United States through the purchase of jewelry and loose gems, including an 8.6 carat ruby ring, purchased from a Greenwich jeweler and paid for by three checks totaling $2.2 million.
In 2008, Kim was told by a banker at Clariden Leu, one of several Zurich banks where he had accounts, that because of an ongoing investigation, he could either disclose the accounts to the U.S. government, spend the funds or move them to another institution. He moved the money to another bank. In 2011, Kim liquidated the accounts by withdrawing tens of thousands of dollars in cash and purchasing a 13.9 carat sapphire and three loose diamonds for about $1.7 million. He also sent “coded messages” to his bankers in order to maintain control of the money.
According to the justice department, Kim established the accounts in 1998 to receive transfers of funds from another individual in Hong Kong. By 2004 the funds totaled more than $28 million. For more than a decade, Paltzer and other bankers defrauded the United States, according to the press release, by opening accounts in the name of false entities based in Liechtenstein, Panama and the British Virgin Islands, so that Kim could use the money in the United States.
Paltzer pleaded guilty in 2013 in Southern District of New York to conspiring to defraud the United States.
Under U.S. law, citizens, resident aliens and permanent legal residents with financial interest in or authority over a foreign financial account worth more than $10,000 are required to disclose the accounts. Kim violated that law, as filing false tax returns, according to the department of justice.
The statement said that the sentence took into account Kim's cooperation with the investigation over a five-year period.