Swiss bankers sought tax-evading U.S. clients, government alleges

The U.S. Attorney’s Office in Manhattan has charged three Swiss bankers -- who sought to scoop up former UBS clients -- with conspiring to hide more than $1.2 billion in assets for U.S. clients from the Internal Revenue Service (IRS).

The indictment of the Swiss bankers lays out a simple business plan: The three bankers – Michael Berlinka, Urs Frei and Roger Keller – wanted to capitalize on the IRS investigation of Swiss bank UBS and another large international Swiss bank. To capture the business of those fleeing UBS and the other bank, they allegedly told U.S. clients that their bank wouldn’t disclose its clients’ identities to the U.S. because it had a long tradition of bank secrecy and “was less vulnerable to United States law enforcement pressure because, unlike UBS, the bank did not have offices outside Switzerland,” the indictment says.

The indictment doesn’t identify the bank Berlinka, Frei and Keller worked for, but Reuters reported they worked for Wegelin & Co., one of Switzerland’s oldest private banks.

G-20 countries should consider whistleblowers to help stop tax evasion

Many countries are trying to crack down on tax evasion as a way to increase revenues. But they are overlooking a powerful weapon: whistleblowers.

Tax evasion and compliance is on the agenda of the group of 20 countries this week. Only the U.S. has a program to reward whistleblowers for reporting tax evasion or other tax law violations. The Internal Revenue Service will reward whistleblowers 15 percent to 30 percent of funds recovered as a result of the whistleblower's information and help if the amount exceeds $2 million, including tax, penalties and interest.

The U.K. took a major step this week to encourage whistleblowers with information about financial crime. The Serious Fraud Office set up a whistleblower hotline and said it protect the whistleblower's identity.

Florida father and son convicted of tax fraud

A federal jury in Florida has convicted a father and son of tax fraud and evasion, citing $33 million in proceeds from the sale of their hotel brand hidden in a Swiss account and other proof of a lifestyle that didn't match their modest stated income.

Prosecutors accused Mauricio Cohen Assor, 77, and his son, Leon Cohen Levy, 46, of concealing vast wealth “through a web of lies, forged documents, and false statements.” Attorneys for the defendants denied that the men hid ownership of $46 million in Miami beach homes, $45 million in investments, and $55 million in cars. He claimed that the men never knowingly broke the law, and said prosecutors presented an “Alice in Wonderland” case that broke from reality.

Both men now face up to 11 years in prison. Tax lawyers have been following this case closely as it is the first trial for offshore tax evasion since the Justice Department began a crackdown in March 2009, the New York Times reports.

Judge sends to prison four involved in aiding tax evasion

A federal judge sentenced to prison today four men found guilty of helping dozens of clients, including actor Wesley Snipes, evade over $1 billion in taxes. All four of the company’s promoters were found guilty of both conspiracy to defraud the government and mail fraud.

One of the four, Eddie Ray Kahn, was sentenced to 20 years in prison on top of the 10-year sentence he is currently serving following his conviction in the 2008 Snipes case. Prosecutors said Kahn founded and ran a group called the American Rights Litigators/Guiding Light of God Ministries that worked to sell “tax defiance schemes” and misrepresented the legality of its efforts.

The Washington Post article on today’s sentencing quotes John A. DiCicco, Acting Assistant Attorney General of the Justice Department’s Tax Division, who said that “those who promote illegal tax defiance face prosecution and lengthy prison terms.”

Court of Appeals upholds conviction in tax shelter case

The conviction of ex-KPMG LLP senior manager John Larson was upheld by a U.S. appeals court, which confirmed that the prosecution’s evidence supported the finding that tax shelters sold by Larson were “marketed solely as tax evasion schemes.”

This ruling follows from the U.S.’s initial accusation of 17 ex-KPMG executives and two others of selling shelters that cost the treasury $2 billion in lost revenue. The judge in that 2007 case dismissed charges against all but four defendants and assigned Larson a $6 million-dollar fine. The most recent decision of the appeals court has ordered that this fine be recalculated as $3 million, the legal limit given that Larson’s calculation of harm and loss was made without a jury finding.

Larson has been sentenced to 10 years in prison. In 2007, KPMG paid a $456 million fine for its sale of illegal tax shelters, and charges against it were dismissed.

IRS to drop suit following Swiss assurance to disclosure names of suspected tax evaders

The Internal Revenue Services has said that it will drop a lawsuit against UBS, the world’s largest private bank, following confirmation from Switzerland that it is on track to produce details for the remaining 2,450 of 4,450 American clients suspected of using UBS accounts for tax evasion. The IRS has received 2,000 thus far.

Although this provides some respite for UBS and the Swiss banking system, the impending disclosures themselves could bring more litigation against those professionals that may have facilitated tax evasion.

William M. Sharp, a tax lawyer who represents a number of former UBS clients, told the New York Times that some Americans among the 4,450 names had hidden accounts of more than $100 million. While it has not happened yet, the IRS has indicated that if all 4,450 names are received by this fall, it may withdraw the John Doe summons, a separate request for 52,000 UBS client names.

Small businesses join forces in opposition to tax evasion

A new grass-roots campaign against tax avoidance will be announced Tuesday; it will boast the support of hundreds of representatives and investors in small businesses and will be formed of a coalition of non-profit groups that believe tax avoidance is bad for U.S. business.

“The campaign is unusual because it is the first time that small businesses have organized to combat offshore tax avoidance and evasion in a significant way,” reports Lynnley Browning of The New York Times. The campaign is backed by Democratic senator Carl Levin, who has investigated offshore tax havens and their wealthy patrons.

The report to be released argues that American multinational corporations avoid at least $37 billion in federal taxes annually, and calls for new laws to prevent offshore finagling of taxable earnings as well as the repeal of certain rules that currently facilitate such tax evasion.

France aims to use leaked data to prosecute tax evaders

Details surrounding the acquisition and transfer of client information from HSBC’s Swiss private-banking arm have placed a Franco-Italian computer engineer and colleague at the center of a dispute between Switzerland and France. While Switzerland objects to the use of data that it claims was stolen, France intends to use the data to prosecute potential tax cheats and has even shared the information with other countries.

Although some evidence indicates that the computer engineer and colleague were attempting to sell the client banking information, France insists that it did not pay for the data and rather attained it lawfully. The data was in fact acquired by French authorities acting at the request of a Swiss prosecutor to conduct a search.

Regardless of the details of the data’s acquisition, the release of client information and the ensuing international dispute over legitimacy has, as The Wall Street Journal writes, “rocked the banking world.” Tax evaders in Italy, Spain, and the U.K. may soon face prosecution as a result of this data leak.

I.R.S. achieves victory over tax havens

Recent advances in the I.R.S.’s efforts to prevent tax-evasion among Americans illegally concealing taxable assets in offshore holdings may signal an end to the acceptability of these practices in popular tax havens.

“The Swiss Parliament’s approval of a deal to give the I.R.S. the names on 4,450 American accounts at the Swiss bank UBS is an important victory,” states a New York Times editorial today. Additionally, bilateral tax treaties entered into by the United States, Switzerland, Singapore, Luxembourg and other countries require that certain tax information be disclosed to treaty partners, overriding individual bank secrecy laws.

Further, Congress’s March passage of the Foreign Account Tax Compliance Act will require, beginning in 2013, foreign financial entities to disclose information about American account holders and business owners on penalty of a substantial withholding tax on income from U.S. securities.

Swiss Parliament sides with I.R.S. in deal to expose potential tax evaders

The Swiss Parliament agreed today to uphold an August 2009 arrangement with the United States, whereby UBS, Switzerland’s largest bank, would disclose information on 4,500 accounts held by Americans suspected of tax evasion.

Lynnley Browning of The New York Times reports that “The parliamentary approval was a watershed moment in the history of Swiss private banking, whose tradition of client confidentiality goes back centuries.”

The decision, which represents months of legal and diplomatic efforts, will likely be used as a template to pursue tax fraud and tax evasion perpetrated in conjunction with other banks in Switzerland, such as Credit Suisse and HSBC, as well as operations in such burgeoning tax havens as Hong Kong and Singapore.

UBS, U.S. and Swiss reach deal on releasing names of possible tax evaders

UBS AG and the U.S. and Swiss governments have worked out agreements to settle a dispute over whether the Swiss bank should be forced to disclose the names of 52,000 wealthy American clients suspected of tax evasion, media outlets reported today.

UBS and the two governments have initialed agreements that will "take a little time to be signed in final form," Department of Justice lawyer Stuart Gibson told U.S. District Court Judge Alan Gold during a brief conference call on Wednesday, according to Reuters.

"For U.S. taxpayers it is going to be impossible to hide money in Switzerland and it is just a matter of time that this is the case also for Germans and Britons," Asher Rubinstein, a partner at law firm Rubinstein & Rubinstein, said in a separate story by Reuters.

See also:

- UBS Tax Lawsuit Settled by U.S., Swiss Governments (Bloomberg)

- UBS Welcomes IRS Settlement (Dow Jones Newswires)

UBS fight with IRS convinces Swiss banks to drop U.S. clients

More ripples from the UBS-IRS standoff: Some Swiss banks reportedly aren't accepting or are cutting off U.S. clients out of concern the Internal Revenue Service might get into a similar fight with them over client account information as it has with UBS AG.

DowJones Newswires says it's "a sign that UBS AG's high-profile spat with the Internal Revenue Service is chipping away at Switzerland's private banking industry."

The IRS is after information about the UBS accounts of 52,000 U.S. citizens in a major tax-evasion probe, challenging not just UBS but Swiss bank-secrecy laws.

U.S. says it will continue case against UBS; plea agreement reached with UBS client

The Justice Department issued a statement denying it was considering dropping a high-profile case against UBS AG as reported in The New York Times.

The Justice Department is trying to force the Swiss bank to provide the names of 52,000 U.S. clients suspected of offshore tax evasion.

“While the department is always willing to consider settlement in any case, the suggestion that the department is planning to drop this suit is simply untrue," Justice Department spokesman Charles Miller said in an emailed statement, according to various media reports. "The department is continuing with the case against UBS and will file its brief asking the court to enforce the summons on June 30.”

At the same time, news agencies reported that Swiss Finance Minister Hans-Rudolf Merz said a deal was being discussed.

"I can confirm that efforts are underway," Merz told Swiss radio while in Berlin for a meeting of the Organisation for Co-operation and Economic Development.

In a separate development, a UBS client pleaded guilty to one count of filing a false tax return for tax year 2004. He also admitted that he had failed to file Reports of Foreign Bank and Financial Accounts (FBARs) disclosing his UBS bank account for years 2001 through 2007. Sentencing is set for Sept. 30.

Justice Department and UBS settlement reported likely

The New York Times reported today that the U.S. and UBS AG are likely to reach a settlement possibly as soon as mid-July over the Justice Department's efforts to get the names of 52,000 UBS clients who the U.S. says evaded taxes.

The Times said that Swiss government officials are considering giving the Justice Department filings made in Swiss court by extremely wealthy UBS clients, which would provide the names of some of the 52,000 UBS clients the Justice Department is investigating for tax evasion. The U.S. then would drop the case.

The agreement "would allow Switzerland to say that it has not breached its own secrecy laws," the Times said.

Hong Kong warns banks about tax evasion

The Hong Kong government has sent a letter to the top executives of all banks in the city warning them not to assist any clients in evading taxes, whether domestic or foreign taxes.

Karen Kemp, executive director of banking policy for Hong Kong, said in the letter that any banks that facilitate tax evasion could be prosecuted for money laundering.

"Further, it goes without saying that [banks] should not market themselves or schemes operated by them as being available for this purpose or incentivise their staff (whether through payments or bonuses or otherwise) to engage in such conduct," Kemp said.

 

The letter comes in advance of tax-information exchange treaties that Hong Kong expects to work out with the U.S. and other countries.

U.S, Switzerland agree to increase the exchange of tax information

The U.S. and Switzerland have reached an agreement to increase the exchange of tax information between the two countries, the U.S. Department of Treasury announced today.

The announcement comes as the IRS continues to pursue its investigation into tax evasion by wealthy U.S. citizens who are clients of Swiss banking giant UBS.

"This treaty will increase our ability to enforce our tax laws and will help bring an end to an era of offshore accounts and investments being used for tax evasion," Treasury Secretary Timothy Geithner said in a statement.

Official signing of the protocol is expected within a few months.

White House task force formed to examine tax system

The Obama administration is looking for ways to reform the U.S. tax system and to aggressively reduce the tax gap, such as by attacking tax evasion.

Administration officials announced March 25 that a task force headed by former Federal Reserve Chairman Paul Volcker will study options and make recommendations to the President by Dec. 4. Volcker is now head of Obama's new Economic Recovery Advisory Board.

For comments by Office of Management and Budget Director Peter Orszag about the tax reform task force, see Reuters' story, Volcker panel to study tax reform, report to Obama.

UBS clients consider admitting tax evasion to avoid criminal prosecution

Wealthy clients of Swiss bank UBS AG are seeking amnesty through an Internal Revenue Service voluntary disclosure program that allows U.S. citizens to avoid criminal prosecution if they acknowledge tax evasion and agree to pay taxes and penalties, according to The Wall Street Journal.

"The developments amount to a coup for U.S. authorities, who have spent the past two decades trying to crack offshore banking markets with only incremental progress," the newspaper said.

At the same time, the Journal said, the IRS is considering a national settlement for the estimated 20,000 taxpayers that worked with UBS to avoid taxes. The settlement reportedly would be based on a 2003 landmark offshore credit-card and tax-fraud deal but with stiffer penalties.

See "UBS clients seek amnesty on U.S. taxes."

World's richest tax cheats

With attention focused on European and U.S. investigations of individuals suspected of dodging taxes by hiding assets in Liechtenstein, Forbes magazine has compiled a list of the the world's richest tax cheats.

"To be included, an individual had to be convicted of tax evasion, or had to accept responsibility for the charges levied against him (as former Samsung Group Chairman Lee Kun-Hee did in April when he was indicted on charges of tax evasion and breach of trust)," says the article.

Former UBS executive helping IRS with tax fraud investigation

A former executive with Swiss bank UBS AG has agreed to plead guilty to tax fraud and cooperate with the U.S. government's investigation of wealthy individuals evading taxes with UBS help.

He is expected to provide the government with the names of his U.S. clients.

"UBS frequently teamed up with bankers in the tiny neighboring tax haven of Liechtenstein to help wealthy Americans hide assets from the Internal Revenue Service," the Wall Street Journal said.