Whistleblower Case Apparently Involving Wegelin (6/3/15; 6/6/15)

In Whistleblower 21276-13W v. Commissioner, 144 T.C. No. 15 (2015), here, the Tax Court held that the IRS Whistleblower Office must consider a claim that the whistleblower made after informing Government criminal investigators and the resulting criminal prosecution and guilty plea.  That is an interesting and important holding in and of itself.  I provide the following synopsis of the opinion provided by the Tax Court:

P-H was arrested for participating in a conspiracy to launder money. To minimize his punishment, P-H informed Government agents, including Internal Revenue Service (IRS) agents, that a foreign business (the Targeted Business) assisted U.S. taxpayers in evading Federal income tax. P-H told the Government agents that the Targeted Business had no presence in the United States and instructed its personnel to stay out of the United States. Although he did not have documentation sufficient to inculpate the Targeted Business, P-H was aware of an individual who did. 

Because the individual (X) was outside the United States, P-H and P-W designed a plan to induce him to come to the United States. In executing the plan, P-W met with X and persuaded him to enter the United States. Upon entering the United States, X was arrested. While in custody, X agreed to assist the United States in its pursuit of the Targeted Business. After his release, X tried to back out of his agreement. But after meeting with P-H, X agreed to follow through on his commitment. In part because of X's assistance, the Targeted Business was indicted, pleaded guilty, and paid the United States approximately $74 million. 

Ps filed separate Forms 211, Application for Award for Original Information, with the IRS Whistleblower Office, seeking awards under I.R.C. sec. 7623(b). The forms were filed after the Targeted Business pleaded guilty and paid the United States $74 million. 

Upon receipt, the IRS sent Ps' Forms 211 to its Ogden, Utah, Service Center, where a classifier noted that the forms were filed after the United States collected proceeds from the Targeted Business. On that basis, the Whistleblower Office rejected Ps' award applications and sent Ps separate award determination letters stating that no proceeds had been collected using the information Ps submitted. 

The IRS asserts that the Tax Relief and Health Care Act of 2006, Pub. L. 109-432, div. A, sec. 406(b), 120 Stat. at 2959 (TRHCA sec. 406(b)), provides the Whistleblower Office with exclusive discretion to either investigate the taxpayer or refer the information provided by the whistleblower to an IRS operating division. The IRS further asserts that under TRHCA sec. 406(b) a whistleblower is ineligible for an I.R.C. sec. 7623(b) award if he/she provides the information to an operating division of the IRS before submitting the information, via a Form 211, to the Whistleblower Office. 

Held: TRHCA sec. 406(b) does not endow the Whistleblower Office with exclusive authority to investigate the individual or entity that is the subject of an application for an award. The fact that Ps supplied their information to other Federal agencies, including an IRS operating division, before submitting the information to the Whistleblower Office on Form 211 does not, as a matter of law, render Ps ineligible for an award under I.R.C. sec. 7623(b).

Perhaps most interesting for many readers of this blog is that the underlying criminal prosecution and guilty plea appears to involve Wegelin Bank, the Swiss Bank that met its demise for its U.S. tax cheat enabler activities.  (See links to Federal Tax Crimes Blogs at end of this blog entry.)  Opinions in Whistleblower cases often are written to avoid disclosing who the whistleblower is and hence some of the facts are cryptically stated.  Here are some snippets:

Swiss Asset Manager Pleads to One Conspiracy Charge (4/1/15)

A Swiss asset manager, Peter Amrein, had pled to one conspiracy charge.  See DOJ press release here.  Key excerpts are:

Amrein worked as a client advisor at a Swiss bank (Swiss Bank No. 3) and, later, as an asset manager at a Swiss asset management firm (the Swiss Asset Management Firm).  In those roles, between 1998 and 2012, Amrein helped U.S. taxpayers evade taxes and hide millions of dollars in undeclared accounts at various Swiss banks, including Wegelin & Co., which was charged and pleaded guilty in the Southern District of New York for its conduct in conspiring with U.S. taxpayers to evade taxes.  Amrein, among other things, worked with an attorney based in Zurich, to establish sham foundations, which were organized under the laws of non-U.S. countries such as Liechtenstein, so that the undeclared assets of certain of Amrein’s U.S. taxpayer-clients could be maintained in the names of these foreign foundations rather than in the clients’ own names.  Amrein did so in order to help his clients conceal their ownership of these undeclared accounts from the IRS.  

In 2008, it became publicly known that UBS AG (UBS) was being investigated by U.S. law enforcement for helping U.S. taxpayers maintain undeclared accounts in Switzerland.  Because of the investigation of UBS, one of the Swiss banks where Amrein had opened undeclared accounts for U.S. taxpayers (Swiss Bank No. 4) informed Amrein that it was going to close these undeclared accounts.  In order to assist his clients in continuing to maintain undeclared accounts, Amrein searched for other banks in Switzerland that, despite the public investigation of UBS, were still willing to open undeclared accounts for U.S. taxpayers.  Amrein found such a bank (Swiss Bank No. 1). 

 Thereafter, Amrein opened undeclared accounts for U.S. taxpayer-clients at Swiss Bank No. 1 in the name of sham foundations, and transferred the clients’ undeclared assets from Swiss Bank No. 4 to these accounts at Swiss Bank No. 1.    

For some of these clients, Amrein, with the assistance of others, helped send funds back to the United States and to other foreign jurisdictions in ways that were designed to ensure that U.S. authorities would not discover the existence of the clients’ undeclared accounts.  For instance, Amrein instructed a client advisor at Swiss Bank No. 1 (the Swiss Bank No. 1 Client Advisor) to empty one of the accounts by sending checks in amounts smaller than $9,900 to the beneficial owner of the account, i.e., the U.S. taxpayer.  On another occasion, Amrein instructed the Swiss Bank No. 1 Client Advisor to transfer the balance of one of the accounts, which was then valued at more than $2.4 million, to another account controlled by the U.S. taxpayer in Belize City, Belize.  Moreover, as late as 2011, Amrein continued to look for other Swiss banks that were still willing to open undeclared accounts for U.S. taxpayers.  For example, in June 2011, Amrein met with a client advisor at a Swiss bank (Swiss Bank No. 2), to discuss opening undeclared accounts for U.S. taxpayer-clients at Swiss Bank No. 2.    

Superseding Indictment for Wegelin Individual Enablers to Add Tax Obstruction Count to Tax Conspiracy Count (2/21/15)

A superseding indictment has been filed in United States v. Berlinka, Frei & Keller (SDNY S 12 Cr. 02 (JSR)).  For discussion of the original indictment, see New Swiss Enabler Indictments - Bankers Related to UBS and, Allegedly, Wegelin (Federal Tax Crimes Blog 1/3/12), here.  The superseding indictment continues the original offense and defraud / Klein conspiracy charge and adds one charge each against the three defendants.  One of the defendants, Keller, was recently arrested in Germany.  See Wegelin Banker Arrested in Germany on U.S. Charges (Federal Tax Crimes Blog 2/6/15), here, so this apparently was the time to expand the scope of the indictment..

The additional charge against each defendant is the substantive crime of tax obstruction, Section 7212(a), here.  The charge is under what is called Section 7212(a)'s Omnibus Clause.  Tax obstruction has been called a one-person Klein conspiracy (which is also charged against each of the defendants).  So, I thought I would discuss the new tax obstruction charge as it relates to the conspiracy charge.

The guts of the conspiracy charge is:

STATUTORY ALLEGATIONS 

138. From at least in or about 2002 up through and including in or about 2011, in the Southern District of New York and elsewhere, MICHAEL BERLINKA, URS FREI, and ROGER KELLER, the defendants, together with Wegelin, Managing Partner A, Executive A, Client Advisor A, Beda Singenberger, Gian Gisler, Clients A through JJ, and others known and unknown, willfully and knowingly did combine, conspire, confederate, and agree together and with each other to defraud the United States of America and an agency thereof, to wit, the IRS, and to commit offenses against the United States, to wit, violations of Title 26, United States Code, Sections 7206(1) and 7201. 

139. It was a part and an object of the conspiracy that MICHAEL BERLINKA, URS FREI, and ROGER KELLER, the defendants, together with others known and unknown, willfully and knowingly would and did defraud the United States of America and the IRS for the purpose of impeding, impairing, obstructing, and defeating the lawful governmental functions of the IRS in the ascertainment, computation, assessment, and collection of revenue, to wit, federal income taxes. 

140. It was further a part and an object of the conspiracy that various U.S. taxpayer-clients of MICHAEL BERLINKA, URS FREI, and ROGER KELLER, the defendants, together with others known and unknown, willfully and knowingly would and did make and subscribe returns, statements, and other documents, which contained and were verified by written declarations that they were made under the penalties of perjury, and which these U.S. taxpayer-clients, together with others known and unknown, did not believe to be true and correct as to every material matter, in violation of Title 26, United States Code, Section 7206(1). 

141. It was further a part and an object of the conspiracy that MICHAEL BERLINKA, URS FREI, and ROGER KELLER, the defendants, together with others known and unknown, willfully and knowingly would and did attempt to evade and defeat a substantial part of the income tax due and owing to the United States by certain of Wegelin's U.S. taxpayer clients, in violation of Title 26, United States Code, Section 7201.

IRS Updates List of Foreign Financial Institutions or Faciliators with Bank Leumi and Sovereign Management & Legal Ltd. (12/26/14)

The IRS has updated its list of Foreign Financial Institutions or Facilitators, here.  One function of this list is to identify banks that the insided OVDP penalty rate increases to 50%. (See FAQ 7.2, here.)

The new list is as follows (with the additions in bold-face):

• UBS AG
• Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
• Wegelin & Co.
• Liechtensteinische Landesbank AG
• Zurcher Kantonalbank
• swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd., and swisspartners Versicherung AG
• CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
• Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
• The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)
• The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates
• Sovereign Management & Legal, Ltd., its predecessors, subsidiaries, and affiliates
• Bank Leumi le-Israel B.M., The Bank Leumi le-Israel Trust Company Ltd, Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A., and Bank Leumi USA

For the Federal Tax Crimes Blogs postings on the newly added institutions, see:

• Bank Leumi Admits Tax Wrongdoing, Agrees to Deferred Prosecution agreement, and Agrees to $400 Million Payments (Federal Tax Crimes Blog 12/22/14), here.
• New Direction for John Doe Summonses to An Enabler's Service Providers Subject to Summons Power (Federal Tax Crimes Blog 12/19/14), here.

Another UBS/Wegelin Related Indictment in SDNY (11/19/14)

USAO SDNY announced here the unsealing of an indictment against Peter Canale, a Kentucky resident who was arrested yesterday at this home in Kentucky. The indictment and prosecution will be in SDNY.  The key excerpts from the press release are:

Canale conspired with others – including Michael Canale, his brother, Beda Singenberger, a Swiss citizen who ran a financial advisory firm, and Hans Thomann, a Swiss citizen who served as a client adviser at UBS and certain Swiss asset management firms – to establish and maintain undeclared bank accounts in Switzerland and to hide those accounts from the IRS.  Canale used a sham entity to conceal from the IRS his ownership of the undeclared accounts and deliberately failed to report the accounts and the income generated in the accounts to the IRS. 

In approximately 2000, a relative of Canale’s who held an undeclared bank account in Switzerland died and left a substantial portion of the assets in the undeclared account to Canale and Michael Canale.  Canale and his brother met with Thomann and Singenberger and determined they would continue to maintain the assets in the undeclared account for the benefit of Canale and his brother.  

Thereafter, in approximately 2005, Canale, with Singenberger’s assistance, opened an undeclared account at the Swiss bank Wegelin.  The account was opened in the name of a sham foundation formed under the laws of Lichtenstein to conceal Canale’s ownership.  As of Dec. 31, 2009, the account held assets valued at approximately $789,000.   

For each of the calendar years from 2007 through 2010, Canale willfully failed to report on his tax returns his interest in the undeclared accounts and the income generated in those accounts.  For each of these years, Canale also failed to file a Report of Foreign Bank and Financial Accounts (FBAR) with the IRS, as the law required him to do.
Canale, 61, is charged with one count of conspiracy to defraud the United States, evade taxes, and file a false and fraudulent income tax return, which carries a statutory maximum sentence of five years in prison.  The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

My prior blog entries on Michael Canale are:

• U.S. Taxpayer Pleads to FBAR and Tax Perjury Violation (3/14/13), here.
• U.S. Using a Client List of Indicted Swiss Banker/Enabler (3/14/13), here.

The conspiracy count, as I read the description, is a defraud and offense conspiracy.  Also, it is not clear from  the description why the indictment was sealed and the necessity for an arrest.

When I first saw the venue in SDNY, I thought this might signal or evidence a trend to go to SDNY rather than more remote districts.  But given the relationship to the other conspirators, including his brother, Singenberger and Thomann who were indicted in SDNY, then SDNY would be the logical venue.  (Note that the Government has wide discretion of venue on conspiracy charges.)

FBAR Plea for U.S. Wegelin Depositor (5/28/14)

The USAO SNDY announced, here, a plea for Viktor Kordash for

willfully failing to file Reports of Foreign Bank and Financial Accounts (“FBARs”) with the IRS regarding a secret Swiss bank account that he maintained and controlled at Wegelin & Co. (“Wegelin”), a Swiss bank formerly headquartered in St. Gallen, Switzerland, which separately pled guilty in January 2013 to assisting U.S. taxpayers in maintaining undeclared accounts.

The conduct is described as follows:

In the early 1980s, KORDASH opened an account at Wegelin. At that time, KORDASH was living in Russia and was a Russian citizen. In 1984, however, KORDASH emigrated to the United States, and in 1986, KORDASH applied for and was granted citizenship in the United States. After emigrating to the United States, and after becoming a United States citizen, KORDASH continued to maintain his account at Wegelin, and failed to declare it to the IRS, up until approximately November 2010. KORDASH used the undeclared account as an operating and investment account for his antique reproductions business, which he operated out of New York, New York. 

During the time period that KORDASH maintained his undeclared account at Wegelin, capital gains and losses were generated in the account from KORDASH’s investments in foreign securities. Between 2007 and 2010, the high value of KORDASH’s undeclared account was over $1.5 million. Further, between at least April 2008 and June 2010, KORDASH received a series of cash distributions from the undeclared account from Wegelin’s correspondent account in Stamford, Connecticut, which totaled over $168,000. In November 2010, KORDASH closed the undeclared account and transferred the balance to his wife. The balance of the undeclared account at the time of its closure and transfer was nearly $1 million. 

For each of the calendar years from at least 1986 through 2010, Kordash was required to, but failed to, file an FBAR with the IRS disclosing his signatory or other authority over his undeclared account at Wegelin. He was required to identify the financial institution with which his account was held, the type of account, the account number, and the maximum value of the account during the calendar year for which the FBAR was being filed. He willfully failed to do so.

Impact of Credit Suisse Guilty Plea on Resolution of Other Swiss Bank U.S. Tax Issues (5/21/14)

A Swiss web report has a good discussion of comments from various parts of the Swiss bank community regarding the effect of the Credit Suisse guilty plea.  Credit Suisse Deal Seen Paving Way for Swiss Banks to Settle (swissinfo.ch 5/210/14), here.  Excerpts that caught my attention are:

The Department of Justice reached the [Credit Suisse] deal after years investigating more than a dozen Swiss firms, including Julius Baer Group Ltd., the nation’s third-largest wealth manager. Many of the companies are close to settlements, said Andreas Brun, an analyst with Zuercher Kantonalbank in Zurich. 

“I expect resolutions in the next couple of weeks,” he said. 

* * * * 

'Speedy Resolution’ 

Julius Baer, which had 264 billion francs ($296 billion) of client assets worldwide at the end of April, may achieve a better deal than Credit Suisse as it has no business operations in the U.S.
“I can now see Julius Baer settling rapidly as well,” said Alevizos Alevizakos, a London-based analyst with Mediobanca SpA. In this bank’s case, four analysts polled by Bloomberg News estimated fines ranging from 400 million francs to 2 billion francs. 

Julius Baer dropped 0.8 percent to 39.4 francs as of 3:21 p.m. in Zurich today, extending the stock’s decline this year to 9 percent. 

“Removing the overhang of these tax disputes will be beneficial for any Category 1 bank,” Alevizakos said, using a Justice Department term for Swiss banks under investigation before it opened a voluntary disclosure program. “A speedy resolution in the coming weeks or months would be marginally positive for Julius Baer.” 

* * * *

David Massey, Former USAO SDNY on Offshore Bank Prosecutions, Moves to Law Firm (12/13/13)

David B. Massey, a prosecutor, heavily involved in the prosecution of Swiss banks (including Wegelin) and bankers has left USAO SDNY to join Richards Kibbe & Orbe.  See Matthew Goldstein, Prosecutor Who Oversaw Swiss Bank Case Moves to Private Practice (NYT DealBook 12/12/13), here.  Key excerpts:

During his nine years as an assistant federal prosecutor in New York, Mr. Massey led the prosecution of the Swiss bank Wegelin & Company, which was indicted in February 2012 on charges of helping United States citizens hide more than $1.2 billion from the Internal Revenue Service. The private bank pleaded guilty this year to a tax evasion conspiracy charge and paid $74 million and fines and restitution.

David's bio information on the law firm website is here.  The firm's main webpage is here.

Judge Rakoff, the Wegelin judge, Is Interviewed on the U.S. Initiative Against Swiss Banks (12/12/13)

Judge Jed Rakoff (Wikipedia here), who presided over the Wegelin case that brought the venerable firm down, is interviewed by this publication:  Matthew Allen, ‘US is no bully’ says judge in Swiss bank case (swissinfo.ch 12/12/13), here.

I highly recommend reading the interview for it offers a rare look into the view of the Court.

Key excerpts:

However, the US perception is that Swiss banking secrecy is an economic decision taken by Switzerland to foster its strong banking activity. That’s not sufficient justification for the harm done to us through massive tax evasion. 

* * * * 

There have been far worse financial crimes to have come before me or other judges, such as WorldCom and Madoff. These were committed by people who set out to commit fraud on a mammoth scale. 

 No one views the cases of the Swiss banks in that magnitude, but no one views them as trivial either. There were large sums of money involved and no government can operate unless people pay their taxes.

JAT Comment:  With due respect to Judge Rakoff, I think the systemic problem that evidenced itself in Switzerland's economic choice to actively violate the tax laws of not only the U.S. but other countries (Germany, France and others) does rise at least equal to WorldCom and Madoff.  Indeed, in those cases you had just a few people whose greed caused the problelm.  By contrast, the Swiss banking system is, in my view, massively corrupt.  They have enabled crooks, swindlers, potentates stealing from their people and other unsavory characters (not to mention tax evaders) for years.  And, lest we forget, they tried to steal the deposits of Holocaust victims.  See Wikipedia entry here.  The Swiss felt themselves entitled to the economic rewards of their questionable activities, and that attitude infected a wide swath of the Swiss population.  I am not meaning to "indict" all the Swiss.  Far from it, but the Swiss banking empire was built on this type of systemic skullduggery and thus had a corrupt influence on the country.  The Worldcoms and Madoffs don't do that, although to be fair much of the financial activity that brought the recession of 2008 was based on equally questionable and systemic activity in the U.S.

Wegelin Chief Interviewed; Accepts Responsibility Somewhat (7/20/13)

This is an amazing article of an interview of Konrad Hummler, former president of Wegelin & Company (Wikipedia entry here) which unintentionally committed suicide through aggressive and incredibly stupid activity in assisting U.S. taxpayers cheat on their U.S. taxes.  See Wegelin chief takes blame for bank's collapse (The Local: Switzerland's News in English 7/18/13), here.  Hummler on the one hand accepts blame but on the other deflects it.  Read it for what it is worth.  I started to do significant excerpts, but I think the whole article should be read; please link to it.  However, these are a couple of excerpts:

He acknowledged he had underestimated the US authorities and the risk of penalties. 

While stressing the bank had always respected Swiss law, he admitted exploiting "differences between the (legal systems) in Switzerland and the United States."

Basically, as with many criminals, what he really regrets is (i) having been discovered and (ii) being too exposed on what the United States could do.  As his minions hawked Wegelin to U.S. taxpayers fleeing or driven from UBS, he was assuring them that there was nothing the U.S. could do to Wegelin's ability to keep the client data secret.  He was wrong.

The article also alludes to the situation of the Holocaust Jews with money in Swiss banks. Hummler uses that episode to paint Swiss bank secrecy as a good thing.  That episode had its darker side, of course, when the Swiss banks just decided not to return the money in many cases.  See The Wikipedia entry, World Jewish Congress lawsuit against Swiss banks (Wikipedia), here.  This is a mixed defense of secrecy as implemented by the Swiss.

IRS Makes Treaty Request for Wegelin Information Involving Asset Management Companies (6/15/13)

The IRS has filed a treaty request for U.S. taxpayer information from Wegelin & Company, the company that pled and went under.  See US continues hunt for tax dodgers in Swiss banks (6/14/13), here.  The following are key excerpts:

The United States tax authorities have filed a request for legal assistance to identify former American clients of the private bank Wegelin who are suspected of tax dodging. It is the fourth such request against a Swiss financial institute. 

Wegelin, which announced at the beginning of this year it would close its doors, on Friday confirmed reports that it had received notification by Switzerland’s Federal Tax Authorities to comply with the US request, based on a 1996 double taxation agreement.

A bank official added that Wegelin would submit the necessary information.

The request focuses on former Wegelin clients who were listed as beneficiaries of asset management companies between 2002 and 2012 and are suspected of fiscal fraud, according to the Neue Zürcher Zeitung newspaper on Friday. 

* * * * 

It is the fourth such demand against Swiss banks. The country’s two main banks, UBS and Credit Suisse, have also faced requests against a particular group of clients over the past few years.

JAT Comments:

Wegelin Sentenced (3/5/13)

Wegelin & Co. was sentenced on March 4, 2013.  The Press Release for USAO SDNY is here.  Since Wegelin is a lifeless, breathless artificial entity (although it may be a person in the Supreme Court's mythos), it cannot be sentenced to prison.  So, there are other punishments for criminal conduct.  Here they are as imposed by the Judge Rakoff (consistent with the plea agreement):

1. $16.3 million in forfeitures previously approved.
2.  $22.05 million fine
3. $20 million in restitution

Most of the press release recites a summary Wegelin's skulduggery / crimes,  most of which was known.  Here is the paragraph on the sentencing:

Preet Bharara, the United States Attorney for the Southern District of New York, and Kathryn Keneally, the Assistant Attorney General for the Tax Division of the Department of Justice, announced that WEGELIN & CO. (“WEGELIN”), a Swiss private bank, was sentenced today and ordered to pay approximately $58 million to the United States for conspiring with U.S. taxpayers and others to hide approximately $1.5 billion in secret Swiss bank accounts, and the income generated in the accounts, from the Internal Revenue Service (the “IRS”). Together with the April 2012 forfeiture of more than $16.2 million from WEGELIN’s U.S. correspondent bank account, this amounts to a total recovery to the United States of approximately $74 million. WEGELIN pled guilty in January 2013 to one count of conspiracy to defraud the IRS, file false federal income tax returns, and evade federal income taxes before U.S. District Judge Jed S. Rakoff, who also imposed today’s sentence. This case represents the first time that a foreign bank has been indicted for facilitating tax evasion by U.S. taxpayers and the first guilty plea and sentencing of such a bank.

From Nate Raymond, UPDATE 2-Swiss bank Wegelin to pay $58 mln in US tax evasion case, here:

But while Rakoff approved the plea deal, he said there was a "funny tension" between the U.S. Justice Department's decision not to seek the maximum $40 million fine and its assertion Wegelin acted with "extreme willfulness." 

Rakoff said even including the $16.3 million the government recovered in April 2012 by seizing money in Wegelin's U.S. correspondent account, the bank will be giving up just 12 percent of the 560 million Swiss francs ($613 million) it earned after it sold most of its assets to regional Swiss bank Raiffeisen last year. 

"Not much pain there, is there?" Rakoff said. 

Rakoff, who has previously rejected U.S. Securities and Exchange Commission settlements with Citigroup Inc and Bank of America Corp, ultimately accepted the proposal, which prosecutor Daniel Levy called "very substantial." 

The judge said the government could justify a smaller fine to avoid the jurisidictional challenges of pursuing Wegelin. 

Wegelin said in a statement that it was pleased with the judge's decision.

IRS Issues John Doe Summons to UBS (All Over Again) (1/28/13; updated 2/2/13)

A federal district judge in SDNY has authorized the issuance of a John Doe Summons to UBS for its correspondence accounts related to Wegelin and, through Wegelin, some other Swiss banks.  The USAO SDNY press release is here. The Government's Memorandum of Law in Support of the United States' Ex Parte Petition for Leave to Serve John Doe Summons is here.  Wegelin has previously pled guilty to conspiracy to defraud the IRS through promoting and exploiting secret accounts permitting U.S. taxpayers, co-conspirators, to avoid their income tax reporting and payment and their FBAR reporting requirements.

According to the press release:

U.S. District Judge William H. Pauley III entered an order authorizing the Internal Revenue Service to issue a summons requiring UBS AG (“UBS”) to produce information about U.S. taxpayers who may hold accounts at the Swiss bank Wegelin & Co. (“Wegelin”) and other banks based in Switzerland to evade federal income taxes. Specifically, the IRS summons seeks records of Wegelin’s United States correspondent account at UBS, which will allow the United States to determine the identity of the U.S. taxpayers who hold or held interests in financial accounts at Wegelin and other Swiss financial institutions that used Wegelin’s UBS account. 

Fitch Ratings Cites Swiss Settlement with U.S. as "Best Option" (1/9/13)

Fitch Ratings, homepage here, one of the three principal rating organizations along with Moody's and S&P (see below), has a release titled "US Global Tax Settlement Best Option for Swiss Banks," (Fitch Ratings 1/7/13), here.

According to Wikipedia, here:

Fitch Ratings, dual-headquartered in New York and London, was one of the three Nationally Recognized Statistical Rating Organizations (NRSRO) designated by the U.S. Securities and Exchange Commission in 1975, together with Moody's and Standard & Poor's. It is considered one of the "Big Three credit rating agencies" (Standard & Poor's, Moody's Investor Service and Fitch Ratings).

Some significant excerpts from the release:

A government-led global settlement would be the best option for all Swiss banks involved in the dispute with US authorities about the private banks allegedly helping US citizens evade taxes, Fitch Ratings says.  

A global settlement has been pursued by the Swiss government since early 2012. While potentially costly, in our view it would remove the risk of potential indictments and other legal action, including ultimately the exclusion from US dollar clearing. This would allow the banks to refocus management attention on their core (non-US) private banking operations. 

Repercussions from inquiries and potential indictments by US authorities could be significant, take a long time to resolve and ultimately damage the banks' business models. This is despite US offshore clients typically accounting for a small proportion of the banks' earnings and assets under management.  

* * * 

The Swiss private banks will have to continue to centre their business models on fully-declared off-shore client assets and on-shore operations, notably in European markets given the US investigations and also negotiations between Switzerland and several European countries (including Germany) about revised double-taxation agreements. Many banks, in particular the larger private banks, have pursued this strategy since the late 1990s, anticipating continued pressure on undeclared client assets.

Wegelin & Co. Pleads Guity to Conspiracy (1/3/13)

The USAO SDNY announces here that Wegelin & Co. has pled guilty "to conspiring with U.S. taxpayers and others to hide more than $1.2 billion in secret Swiss bank accounts and the income generated in these accounts from the Internal Revenue Service (the 'IRS')."  The plea agreement is here (with two pages at end omitted to eliminate personal identifying information that is not relevant to readers of this blog)  The indictment to which the plea is entered is here. The indictment charges both an offense conspiracy (to file false federal income tax returns and evade federal income taxes) and the ubiquitous defraud / Klein conspiracy to defraud the IRS.

As part of its guilty plea, WEGELIN agreed to pay approximately $20 million in restitution to the IRS and to pay a $22.05 million fine. In addition, WEGELIN agreed to the civil forfeiture of an additional $15.8 million, representing the gross fees earned by the bank on the undeclared accounts of U.S. taxpayers. Together with the April 2012 forfeiture of over $16.2 million from WEGELIN’s correspondent bank account, this amounts to a total recovery to the United States of approximately $74 million.

The press release is a lot more detailed than most such announcements, but conviction of Wegelin, although practically defunct, is a major development.  I recommend reading the press release.  The press release contains a link to the indictment.

Addendum on 1/5/12 4:35 pm:

1. Probably the biggest point is that the U.S. brought a Swiss bank with deliberately minimum U.S. contacts to the table to take a plea agreement.

Another Plea Related to Offshore Activity (10/12/12)

Dennis Duban, a Los Angeles accountant, has pled guilty to conspiracy and aiding and assisting.  The DOJ Tax Announcement is here.

Mr. Duban was the accountant who aided and assisted another client commit tax crimes.  The client, Charles Alan Pflueger, previously pled guilty.  See my blog on that plea; Plea for Defendant Charged with Tax Crimes (including FBAR) (5/30/12), here.

As explained in the press release, Mr. Duban apparently got too close to his client, so the conspiracy charge related to that.  In addition, he had has own offshore accounts that he failed to properly report.  I quote the foreign activity portions of the press release below.

Defendant:  Dennis Duban
Plea:  Conspiracy to defraud IRS (1 count) and aiding and assisting (1 count)
Banks:  Wegelin (for his client) and "New Zealand accounts" for Duban
Entities:  Yes (both for Duban and his client)
Tax Loss: at least $1 million (apparently for the client and Duban)
FBAR Penalty:  50% of high balance in his personal accounts

Another UBS Client Sentencing (10/11/12)

Wolfgang Roessell has been sentenced.  I previously blogged his guilty plea:  Another UBS Related Taxpayer Plea Agreement (5/31/12), here.

I don't have all the information from the sentencing, but I cut and paste the core information from the blog on the plea and add information from the reports on the sentencing that I have.  I will try to clean up all this tomorrow and update the spreadsheet.

Defendant:  Wolfgang Roessel
Banks:  UBS, Wegelin, Bank A
Entities:  Yes (Cyan United A)
High Balance:  $11,501,868 (derived from statement that penalty was 50% of high balance)
FBAR Penalty: 5,750,933.99
High Balance:  Derived from penalty - $11,501,868
Count of Plea / Conviction:  Tax perjury, Section 7206(1) with 3 year max sentence
Tax Loss: $312,802.95
5K1 Departure Possibility:  Yes
Sentence: 8 months home confinement and 3 years supervised release
Judge:  Kathleen Williams, SD FL (see Wikipedia entry here)

Information from the Bloomberg report (Ex-UBS Client Roessel Avoids Prison in Offshore Tax Case (Bloomberg 10/11/12), here.

“Mr. Roessel does not claim to be an innocent victim,” his attorney, Lee Stapleton, wrote in an Oct. 9 court filing urging leniency. “While he relied on the advice of Swiss professional bankers, he chose to keep the accounts secret and for many years did not advise his accountant that he had a foreign bank account.”

Credit Suisse / Wegelin Client Pleads Guilty to FBAR Violation in SDNY (8/21/12)

The USAO SDNY has announced the guilty plea of DOJ Tax has announced the sentencing of Jacques Wajsfelner, a former Credit Suisse and Wegelin client.  The USAO press release is here.

The key facts are:

Taxpayer:  Jacques Wajsfelner
Age: 83
Plea Date: 8/20/12
Banks: Wegelin & Co.; Credit Suisse (reported in news but not identified specifically in press release; per the press release, the account in the unnamed bank was transferred to Wegelin as the heat ramped up on UBS)
Enabler:  Beda Singenberger, a Swiss financial adviser
Entities: Yes (Ample Lion, Ltd., a "sham" Hong Kong corporation)
Guilt: By Plea Agreement
Count(s) of Conviction: FBAR (1 count)
Admissions:  Failed to file FBARs from 1995 through 2011; filed false income tax returns by omitting information about his Swiss accounts; "failed to make voluntary disclosures under the IRS's Voluntary Disclosure Program."
Maximum Possible Sentence:  5 years.
Tax Loss: $419,940 (Agreed as restitution; News release says $419,000; see article below)
High Amount: $5,700,000.
FBAR Penalty: $2,840,000 +.  (Amount is per article below; News Release says $2,800,000+)
Court: SD NY
Judge: Naomi Reice Buchwald (Wikipedia entry here)

Another UBS Related Taxpayer Plea Agreement (5/31/12)

DOJ Tax has announced yet another taxpayer plea agreement regarding UBS accounts.  The DOJ Tax press release is here.  The plea agreement is here.  Here are the key features based on these documents.

Defendant:  Wolfgang Roessel
Banks:  UBS, Wegelin, Bank A
Entities:  Yes (Cyan United A)
High Balance:  $11,501,868 (derived from statement that penalty was 50% of high balance)
FBAR Penalty: 5,750,933.99
High Balance:  Derived from penalty - $11,501,868
Count of Plea:  Tax perjury, Section 7206(1) with 3 year max sentence
Tax Loss: $312,802.95
5K1 Departure Possibility:  Yes
Judge:  Kathleen Williams

Fact Summary (from press release because these are not covered in the plea agreement; apparently they were stated in  court at the plea hearing or otherwise put in writing in the record):

[D]ating back to the 1980s and up through the late 2000s, Roessel held accounts at different times at Bank Wegelin and another Swiss bank (Bank A) into which he deposited foreign proceeds from his business, yet which he neither reported on his tax returns nor on the required FBARs. In the early 2000s, the foreign account at Bank A was put into the nominee name of Cyan United. A Swiss money manager made investments on Roessel’s behalf and met with the defendant periodically to discuss the performance of the account. In 2008 and 2009, during which period the defendant was aware of the government’s grand jury investigation into his foreign UBS accounts, the defendant disclosed only the existence of the UBS accounts on his tax returns for those years and did not report the other Swiss account.

Wegelin U.S. Bank Assets Forfeited (4/25/12)

We have previously blogged that Wegelin and Co., a now defunct Swiss bank, had been indicted in the Southern District of New York and a contemporaneous forfeiture proceeding had been instituted against Wegelin's deposits in a U.S. correspondent account.  See Wegelin Indicted in SDNY with Money Laundering Forfeiture (FTCB 2/2/12), here.  Wegelin is defunct because of the reputational and other pressures arising from the U.S. investigation of Swiss banks' U.S. tax evasion enabler activities.

Yesterday, the Judge Swain of USDC SDNY entered a default judgment for the U.S. in the forfeiture proceeding.  See USAO SDNY press release, titled Manhattan U.S. Attorney Forfeits Over $16 Million Seized from Indicted Swiss Bank's U.S. Account (4/24/12), here.  There is a parallel DOJ Tax press release, in pretty much the same language, but it has not yet been posted on the DOJ Tax press release web page.  I will post the link when it is available.

Addendum 4/18/12:  Asher Rubinstein has a good post on the forfeiture:  Wegelin’s US Account Taken by US Treasury: Global Implications and What it Means for Non-Compliant Foreign Accounts (4/27/12), here.