Caribbean Medical Faculty Founder Responsible at Florida Tax Trial

A Florida psychiatrist who helped her husband build two medical schools in the Caribbean was found guilty by a federal jury of tax charges related to offshore accounts.

Patricia Hough, 67, was convicted yesterday in Fort Myers, Florida, of conspiracy to defraud the Internal Revenue Service and filing false returns from 2005 to 2008. Prosecutors said Hough had told the IRS no more than $ 35 million that she and her husband, David Fredrick, made when the schools and properties were sold in 2007.

Prosecutors said Hough and Fredrick used funds in undeclared offshore accounts to buy an airplane, two homes in North Carolina, and a condo in Sarasota, Florida. Fredrick disappeared after the indictment, leaving his wife alone in court. US District Judge John Steele, who oversaw a trial that began October 8, declared Fredrick a refugee.

“DR. Hough’s financial transactions were nothing more than a shell game to hide her income,” said Richard Weber, director of the IRS crime department, in a statement. “Her earned income was transferred to overseas bank accounts to help fuel her tax fraud . “

Hough is about to appeal, said her lawyer Nathan Hochman.

“We believe the government case has proven none of the elements of the crimes charged,” Hochman said in a telephone interview.

The case is the largest of four dollar cases brought to court since the US cracked down on offshore tax evasion in 2008. Prosecutors have filed 61 confessions of guilt, including several with larger accounts.

Courtroom passed out
After the jury sentenced and dismissed Hough, Steele set the conviction for February 10th. As he set the date, Hough passed out, according to Steele’s deputy in the courtroom, Brenda Alexander. Paramedics were called in even though Hough refused to go with them. She faces up to five years in prison.

Hough’s lawyers said they helped Fredrick build Saba University School of Medicine on Saba Island in the Netherlands Antilles and Medical University of the Americas (MUA) on Nevis, West Indies.

Dan Saunders, a lawyer for Hough, said his client never believed the money from UBS AG, Switzerland’s largest bank, and other offshore banks was hers. Rather, he said she thought it belonged to the foundation that ran the schools.

“It wasn’t her money and she never believed it,” Saunders said in his opening speech.

Hidden money
U.S. assistant attorney Leigh Kessler opened the case by telling the jury that the couple had used a number of company accounts to hide their money from the IRS.

“You will see evidence that these nominee accounts had no other business purpose than to hide the income of the defendant and David Fredrick,” said Kessler.

Hough and her husband “used emails, phone calls and face-to-face meetings to instruct Swiss bankers and asset managers to make investments and transfer funds from their undeclared accounts at UBS,” the Justice Department said yesterday in a statement following the ruling.

At its opening, Saunders said the accounts were used for a business purpose: to protect the assets of their charitable trust from anyone attempting a hostile takeover. Hough and Fredrick used the foundation to build the two medical schools.

“The roughly $ 50 million that the government wants you to believe was stolen from the Saba Foundation is not in your account,” he said. “It’s not buried under a palm tree. It’s in the Saba Foundation account. “

Account signatory
Hough believed she was merely a signatory to the accounts of the foundation that ran the school in case something should happen to her husband, Saunders said.

Kessler said Hough and her husband used the proceeds from the school sale to buy a $ 1.6 million airplane, a $ 1.1 million house in Asheville, North Carolina, a $ 590,000 house in Greenville, North Carolina and an $ 800,000 condominium in Sarasota, Florida. She said they also gave money to relatives.

In a post-ruling interview, Hochman said an IRS financial agent expert admitted that Hough overestimated, not underestimated, her total income by more than $ 13,000.

“The expert also acknowledged that a 2006 refund was owed to Dr. Hough,” Hochman said. “Even so, the jury found that Dr. Hough underestimated her income for the year – an amazing result.”

PhD degree
Both Hough and Fredrick have doctorates, and Hough also has medical degrees. The couple opened the Saba University School of Medicine in 1993 through the Saba Foundation, which they first funded in 1988. Fredrick was president and director of the foundation. Hough was an Associate Dean of Clinical Medicine.

Equinox Capital Inc., a private equity firm based in Greenwich, Connecticut, bought the schools in 2007 for $ 36 million.

Hough has worked for the Florida Department of Health in Sarasota since 2009. She makes $ 60 an hour part-time seeing patients with behavioral disorders, according to Courtney Gager, a health department spokeswoman.

The case is US v Fredrick, 13-cr-00072, US District Court, Middle District of Florida (Fort Myers).