Sarasota Herald Tribune
Psychiatrist faces prison term for tax evasion
By Dale White
March 14, 2014
To her supporters, Patricia Lynn Hough is a kind-hearted psychiatrist who treats the downtrodden not only in Sarasota County but in foreign countries.
She opened medical schools in the Caribbean and provided free care to patients in Haiti and Latin America. She also worked for the Sarasota Department of Health.
But to federal prosecutors and the IRS, Hough, 67, represents one of the biggest cases yet in the government’s efforts to crack down on Americans who hide money foreign bank accounts to avoid paying taxes.
Convicted of failing to pay millions in taxes, Hough could get five years in prison and a $250,000 fine for conspiracy to defraud the U.S. government and three years and a $250,000 fine for filing false tax returns when she is sentenced on April 21.
The case against her is one of the largest income tax evasion cases brought by federal prosecutors since they started scrutinizing offshore accounts.
Adding to the intrigue, Hough’s husband, David Leon Fredrick, the co-founder of the medical schools, vanished after he and wife were indicted, leaving Hough to face trial alone. He remains a fugitive.
Charles Intriago, president of the Association of Certified Financial Crime Specialists, estimated that Hough and her husband evaded roughly $9 million or more in income taxes — “plus interest and penalties.”
For 42 years, Americans with assets in foreign banks have been required to report their holdings to the IRS, but many have avoided doing so.
But in 2009, the government began cracking down, finding that that an estimated 276,000 Americans had unreported holdings in foreign banks and were not paying their share of U.S. taxes.
The case against Hough stemmed from an investigation of the Swiss bank UBS AG, Internal Revenue Service spokesman Casey Tyska said. Hough and Fredrick had an account with UBS.
“UBS lured 52,000 U.S. persons to hide their money over there,” Intriago said.
UBS AG paid $780 million in fines after admitting it used secret elevators, avoided sending out account statements and took other measures to help Americans avoid scrutiny.
Hough and Fredrick could have avoided prosecution during an amnesty period after the UBS investigation but evidently did not, Intriago said.
Shortly after the federal crackdown on offshore accounts began, the number of Americans including the information with tax returns doubled from 276,386 to 594,488, according to the ACFCS.
In July, a new federal law will require all foreign banks to report the names of Americans who have accounts at their institutions and the account balances, Intriago said. “That’s going to smoke out a lot of money.”
‘A wonderful lady’
Hough is free on a personal surety bond.
Although Fredrick remains on the run, “they’ll find him,” Intriago said. “The U.S. Marshal’s service has long tentacles, unless he’s hiding in some country with no extradition treaty with the U.S.”
Hough’s attorney, Bruce Udolf of Fort Lauderdale, hopes to convince Judge John Steele to be lenient and consider “all the good works she has done . . . She’s such a nice lady, a wonderful lady. The charges are inconsistent with the person she is.
“She’s been doing public medicine her whole life . . . That’s what she’s devoted her whole life to.”
Until recently, Hough worked for the Sarasota County Health Department assisting patients with behavioral problems.
Although she offered to work for free, she was forced to resign after her conviction in October.
Udolf has already filed motions asking for the judge to override the jury and declare a verdict of not guilty.
Should that fail, he also filed a motion for a new trial on that grounds that an Internal Revenue Service agent reportedly gave conflicting testimony that Hough “overpaid rather than grossly underpaid her taxes . . . The jury still convicted her.”
A grand jury indicted Hough and her husband in May.
Udolf declined to say whether Fredrick may have engaged in tax fraud activities without his client’s knowledge.
“We didn’t get into what he was aware of,” Udolf said. “Our defense was that she was not aware.”
Prosecutors and IRS agents contend Hough knowingly participated in the tax evasion scheme.
“Dr. Hough’s financial transactions were nothing more than a shell game to hide her income,” Richard Weber, criminal investigation chief for the IRS, said in a statement released after her conviction.
Prosecutors accuse Hough and Fredrick of selling two medical schools — The Saba University School of Medicine in Saba, Netherlands Antilles, and The Medical University of the Americas in Nevis, West Indies — and associated real estate in April 2007 for more than $35 million.
The indictment describes a labyrinth of transactions that involved personal accounts and accounts opened in the names of various foundations and entities using banks in Switzerland, Lichtenstein and the United Kingdom.
The untaxed income reportedly went toward the purchase of an $800,000 Sarasota condominium, a house and three acres of adjacent land in Asheville, N.C., a house in Greenville, N.C., a $1.5 million Piper Meridian airplane and to Fredrick’s relatives.
According to property records, the Houghs sold a home on Manasota Key Road for $2.2 million last year.
A condominium in Burns Court Villas in Sarasota that the couple bought in 2008 using the name Lynn Leon & Lyon Group was transferred last year to a trust in Hough’s name.
Caryn Finley, lead prosecutor in the case, did not return a call from the Herald-Tribune.