First Data Corp.’s involvement in offshore tax-evasion schemes may go beyond just passively processing credit- and debit-card transactions for third parties, according to the Internal Revenue Service.
A federal judge on Thursday ordered First Data to release client lists to the Department of Justice in its investigation into alleged offshore tax evasion.
The IRS probe is focused on merchants who deposit the proceeds of domestic sales into offshore banks to hide them from tax authorities.
The government is targeting First Atlantic Commerce, an e-commerce provider based in Bermuda. It’s partnered with First Data subsidiary Cardservices International (CSI), based in Moorpark, Calif.
“CSI clearly markets offshore merchant account services to U.S. merchants as a means of tax avoidance by advertising its services on the websites of foreign promoters of abusive offshore tax schemes and products,” IRS agent Daniel Reeves declared in court documents filed in U.S. District Court in Denver.
First Atlantic’s founder, Andrea Wilson, implemented First Data’s credit-card processing system at a bank in Bermuda before launching a consulting and software service the IRS alleges is helping merchants hide sales revenues from tax authorities.
First Data believes the IRS is seeking information from the company only in its capacity as a holder of third parties’ records and not targeting the company itself, spokeswoman Jody Soper said.
“First Data does not approve or support any practice whose purpose is unlawful tax avoidance,” she said. “First Data has an excellent track record of cooperating with all government agencies and will continue our practice of complying with all lawful requests for information with due regard for the confidentiality of our customers’ data.”
In earlier investigations, the IRS focused on U.S. citizens holding money in offshore accounts who used credit and debit cards to access their unreported holdings.
American Express, Master Card International, Visa International and First Data have cooperated in those investigations.
U.S. citizens had more than $1 trillion in assets held offshore and illegally evaded between $40 billion to $70 billion in U.S. taxes each year, according to a report in the summer of 2006 from the Senate Permanent Subcommittee on Investigations.
President Barack Obama has made the elimination of illegal offshore tax shelters and tax-evasion schemes a priority in his administration.
Aldo Svaldi: 303-954-1410 or asvaldi@denverpost.com
