Apparel Manufacturer Sentenced to Federal Prison for Hiding Income in Israeli Banks

Masud Sarshar, known for taking a heritage workwear brand and converting it into a colorful pants collection under the Dickies Girl label, has been sentenced to two years in federal prison for hiding more than $21 million in income and $2.5 million in interest in Israeli banks and avoiding U.S. taxes.

On March 13, Sarshar was sentenced in U.S. District Court in Los Angeles by Judge Philip Gutierrez, who recommended the garment manufacturer be incarcerated in Lompoc Federal Correctional Institution, a low-security prison for male inmates. Sarshar is to report to prison in June.

“Masud Sarshar used every trick to avoid paying his taxes. He moved his money from foreign bank to foreign bank, switched passports and had his statements smuggled to the United States on a thumb drive secreted in the necklace of a bank manager,” said Stuart Goldberg, acting deputy assistant general of the U.S. Justice Department’s tax division.

Last summer, Sarshar, whose company was called Apparel Limited, was charged with one count of conspiracy to defraud the United States and one count of corruptly endeavoring to impair and impede the due administration of the internal revenue laws.

In an agreement signed July 30, Sarshar agreed to plead guilty and pay more than $8.3 million to the Internal Revenue Service. He also agreed to be sentenced to 24 months in prison, according to a press release issued by the U.S. Justice Department. In addition, Sarshar said he would pay a penalty of more than $18.2 million for failing to report his Israeli bank accounts.

Sarshar’s attorney, Edward Robbins Jr., said the investigation into the bank deposits started around April 2013.

According to the government, between 2006 and 2009, Sarshar diverted more than $21 million in untaxed business income to accounts with Bank Leumi, Israel’s largest bank, and a second, unnamed Israeli bank. Sarshar also earned more than $2.5 million in interest from those accounts between 2007 and 2012.

Court documents allege that Sarshar omitted all of this income from his 2006 through 2011 individual and corporate tax returns.

Managers from the unnamed Israeli bank and Bank Leumi frequently visited Sarshar in Los Angeles. At Sarshar’s request, neither bank sent him his account statements by mail but instead delivered them in person. Bank Leumi concealed his account statements on a USB drive hidden in a necklace, the U.S. Attorney’s office said. The second bank manager would meet Sarshar in his car.

At the banks’ suggestion, Sarshar obtained Israeli and Iranian passports (he was born in Iran) to avoid being identified as a U.S. citizen when he entered the country.

With help from the banks, the U.S. Attorney’s office said, Sarshar was able to bring back $19 million of his assets without creating a paper trail or disclosing the existence of his offshore accounts.