In 2018, the US Department of Justice brought more than $61 million in claims against the two children of deceased diamond mogul and real estate dealer Chaim Lacks. The DOJ alleged that Moshe Lax, his sister Zlati Schwartz and their father fraudulently conducted complex counterfeit transactions to evade taxes. The taxes issued in the case included both income tax and wealth tax. Last month, the court delivered a ruling addressing some of those claims.
According to the DOJ complaint, in May 2007, following a cancer diagnosis, Lax transferred ownership of a holding company he controlled that had assets of at least $41 million, with Moshe and Zlati as trustees. As to Lax Family Trust.
The transfer was made in exchange for a self-canceling installment note (SCIN) with a face value of $40.75 million, a loan that would expire and expire upon Chaim’s death in November 2008. SCIN provided that the trust was to pay half-yearly $3,887,360 on the loan directly to Chaim. The government alleges that two payments were due under SCIN before Chaim’s death, but the trust did not make a single payment.
The government alleges that the timing of the SCIN transaction relative to Chaim’s terminal diagnosis and the fact that the installment due thereunder was never paid, evidence that the transfer was a fraudulent transaction intended only before Chaim’s death. Income tax liabilities were to be avoided and wealth tax which would be increased after his death.
The complaint further alleges that following Chaim’s death, Moshe and the other defendants carried out a scheme involving an assignment for the benefit of creditors under New York state law, whereby Moses took away his father’s estate. Changed the name of the holding entity and transferred the business assets from the named entity. , using assignment to the advantage of creditors to avoid both its creditors and its taxes.
On March 31, Judge I. Leo Glasser of the U.S. District Court for the Eastern District of New York ruled in favor of the government on income tax claims payable by the decedent for the tax years 2002, 2003, 2004, 2006, and 2007. , awarding summary judgment for interest accrued in excess of $55.1 million.
With regard to estate taxes, however, the court found that a form signed by the wife of Schwartz’s late father, Chaim Lacks, was not a binding agreement with the Internal Revenue Service, even though she signed a Form 890, “Restrictions on Assessment”. Remission of “and in 2012, the reduction and acceptance of the overassessment – estate, gift and generation-skipping transfer tax” collection, agreeing to a valuation of more than $4.4 million in federal estate tax.
In addition to the liability of the assets, the issue of whether Zlaty and Moshe should be held personally liable for their participation in transactions aimed at sheltering the assets remains outstanding. Criminal charges against siblings are also a possibility. During his statement, Moshe, representing himself in the case, answered almost every question he claimed of his Fifth Amendment privilege against self-incrimination, prompting the government to force a second statement, citing widespread invocations of the privilege. filed a motion for