More on Credit Suisse and the Larger SEC Issue for Some Swiss Banks (3/7/14)

I previously blogged on the Credit Suisse SEC fine.  Credit Suisse Take a Hit on U.S. Tax Evasion Business (Federal Tax Crimes Blog 2/21/14), here.  The Wall Street Journal has a good more recent article: Joel Schedman, Broker Dealer Rules Have Teeth Against Swiss Banks (WSJ World 3/6/14), here.  Some f the opening excerpts to get your interest:

Despite stories of unmarked elevators and secret wire transfers, the most damaging charge against Credit Suisse Group AG has been comparatively mundane: as it courted Americans for offshore accounts, the bank failed to register its bankers with the Securities and Exchange Commission. 

Credit Suisse Group AG bankers courted American tax evaders, between 2002 and 2008, schooling them in how to do an end-run around the Internal Revenue Service and hide behind Swiss secrecy rules, according to a 181-page report from the Senate’s Permanent Subcommittee on Investigations. Beyond just offering American clients undeclared Swiss accounts, Credit Suisse bankers helped set up “shell entities” to “mask their U.S. ownership.” The bankers also offered helpful tips in hiding financial activity, like keeping transactions below a certain dollar amount to avoid triggering greater scrutiny, according to the report. 

Credit Suisse acknowledges the “misconduct, centered on a small group of Swiss-based private bankers, previously occurred at our bank,” according to the bank’s statement submitted to the subcommittee. Bank officials “deeply regret these employees’ actions.” Since 2008, after the allegations came to light, Credit Suisse, “took proactive and decisive steps to ensure that only U.S. clients who established compliance with U.S. tax laws could remain at the Bank,” according to the statement. The bank says it shut down the unit responsible for in 2009. 

Despite the color of the alleged tax evasion, the most painful charge against the bank has been less sexy: As bankers recruited American clients, they failed to register with the SEC. Credit Suisse agreed to pay the SEC $196 million over those charges last month, in a case that bore a striking resemblance to the allegations against another Swiss bank, UBS AG. “It’s Deja Vu all over again,” said John C. Coffee, a professor at Columbia Law School.

Fifth Amendment and Immunity in Congressional Hearings (3/6/14)

Since the Darrell Issa witch hunt is back in the news regarding Lois Lerner's invocation of her Fifth Amendment privilege, I thought I would remind readers of the following blog entry earlier when this nonsense flared up.  Invoking the Fifth - the House Oversight Inquisition (Federal Tax Crimes Blog 5/25/13), here.

I now add two excerpts from law review articles -- the first discussing assertion of the Fifth Amendment in a congressional hearing and the second discussing the congressional committee's ability to avoid the Fifth Amendment by getting immunity for the witness.  (Note that the latter is the way that Committee can get Lerner's testimony that Issa and his crew claims is so essential to the  investigation; so one obvious question is why the Committee does not obtain immunity for her; could one answer be that they know the testimony she will give is not as damaging as they can claim if she does not give the testimony; in other words, is she more useful to the conspiracy theorists by claiming the Fifth when the truth to which she would testify is not helpful to their cause?)

Kalah Auchincloss, Congressional Investigations and the Role of Privilege, 43 Am. Crim. L. Rev. 165, 193-195 (2006) (footnotes omitted).

B. Fifth Amendment in a Congressional Investigation 

1. Watkins v. United States: The 5th Amendment Lives 

As noted several times previously, individual rights did not appear to pose a limit on congressional investigatory power until after the era of abuse by HUAC. Despite the importance of the Fifth Amendment, it is interesting to observe that even this explicitly constitutional privilege was not openly recognized by the Court as available to a witness before Congress until the 1950s.  

In Watkins v. United States [354 U.S. 178 (U.S. 1957), here], the Supreme Court granted certiorari to review the conviction of a witness for contempt for declining to answer questions posed to him by HUAC.  Watkins had cited the Fifth Amendment right to remain silent as justification for his refusal to testify. The Court overturned Watkins' conviction, finding that the Bill of Rights applies to congressional hearings just as it does to courts:

It is unquestionably the duty of all citizens to cooperate with the Congress in its efforts to obtain the facts needed for intelligent legislative action. It is their unremitting obligation to respond to subpoenas, to respect the dignity of the Congress and its committees and to testify fully with respect to matters within the province of proper investigation. This, of course, assumes that the constitutional rights of witnesses will be respected by the Congress as they are in a court of justice. The Bill of Rights is applicable to investigations as to all forms of governmental action. Witnesses cannot be compelled to give evidence against themselves. 

U.S. Motion for Summary Judgment in Zwerner (3/5/14)

I have just had the opportunity to peruse the Government's motion for summary judgment in the Zwerner case.  The motion is here (Note to readers, I have bookmarked the outline of the presentation in the pdf but you must download the pdf to take advantage of the bookmarked table).  The motion was filed 2/28/14.  I did not downloaded or read the exhibits, but have listed them here as presented in the motion.  My quick cut is that the exhibits are not relevant for any comments that I will make here.  The docket entries as of this morning are here.

My comments are:

1. The Government asserts that the burden of proof it must meet to establish willfulness is by a preponderance of the evidence.  Two courts have so held, although in one of the holdings was dicta.  I continue to believe that a strong case can be made for the clear and convincing standard.  I have presented my basic position on this point in earlier blogs, although I have recently refined the argument.  So, maybe I'll post on it later.

2.  The Government asserts the willful blindness, saying it is not necessary to prove Zwerner's knowledge that the law required the filing of the FBAR and imposed penalties for failure to do so.  I think that argument is wrong.  Congress' command was that the person have acted willfully.  In this context, it is clear that willfulness is the intentional violation of a known legal duty.  Nobody can seriously question that proposition. See Ratzlaf v. United States, 510 U.S. 135 (1994), here (the defendant knew of the BSA CTR filing requirement and sought to avoid it but did not know the law penalized it)  The question is whether willful blindness is a substitute for intentional violation of a known legal duty (as the Government appears to argue) or, instead, is simply a fact pattern from which the trier of fact is permitted to infer that the person had the requisite intent to violate a known legal duty, which after all is the command of  the statute.  The cases are fuzzy on this distinction, but if it is as the Government argues -- i.e., a substitute for intentional violation of a known legal duty -- then the position adds to the statutory basis for liability enacted by Congress.  That cannot be right.  I too have recently refined my analysis on this position and may post on it later.  (Note that I usually refer to willful blindness as conscious avoidance, as the label below for links to other blogs on the subject suggests.)

3.  Willfulness -- in the sense of intentional violation of a known legal duty -- is an inference from the facts because, as the Government notes, it is hard to prove the workings of a mind.  It thus should be the rare case that a finding of willfulness is compelled as a matter of law, as the Government asserts.  This is a variation of the concern I express in paragraph 2, but I suppose that willful blindness also is an inference from facts and thus also not well-suited for summary judgment.

The outline for the Government's argument on the defendant's liability is:

The Scariest Tax Form? Scary Is in the Eye of the Beholder (3/3/14)

Robert Wood has a timely reminder that certain forms, if not filed or filed properly, can create major statute of limitations problems for U.S. taxpayers.  Robert W. Wood, Scariest Tax Form? Skip It, And IRS Can Audit Forever (Forbes 3/l3/14), here. The particular form he focuses on is the Form 5471.  The Form 5471 is here.  The instructions for the form are here (in pdf format) and here (in html format).  Here is the key excerpt:

The IRS normally gets three years to audit. Sometimes, say if you mess up with offshore account reporting, the IRS gets six. Having a foreign bank account and unreported income is tough to resolve. The safest approach is going into the IRS Offshore Voluntary Disclosure Program, although some clients opt for more aggressive approaches. 

What many people find surprising is that having a company that holds a foreign account is even more sensitive. Yes, we’re talking about controlled foreign corporations, also called CFCs. When a U.S. shareholderdholds more than 50 percent of the vote or value of a foreign corporation, the company is a controlled foreign corporation or CFC. A U.S. shareholder is a U.S. person who owns 10 percent or more of the foreign corporation’s total voting power. 

That triggers reporting, including filing an annual IRS Form 5471. It is an understatement to say this is an important form. Failing to file it means penalties, generally $10,000 per form. A separate penalty can apply to each Form 5471 filed late, and to each Form 5471 that is incomplete or inaccurate. 

What’s more, this penalty can apply even if no tax is due on the return. That seems harsh, but the next rule—about the statute of limitations—is even more surprising. If you have a CFC but fail to file a required Form 5471, your tax return remains open for audit indefinitely. Normally, the statute expires after three or six years, depending on the issue and its magnitude. 

This statutory override of the normal statute of limitations is sweeping. The IRS not only has an indefinite period to examine and assess taxes on items relating to the missing Form 5471. In fact, the IRS can make any adjustments to the entire tax return with no expiration until the required Form 5471 is filed. You might think of a Form 5471 like the signature on your return. Without it, it really isn’t a return.

This is scary.  But there are many returns and return filing obligations that are scary.  Picky and choosing is a matter of personal preference.  Mr. Woods is concerned about an unlimited civil statute of limitations -- or at least a civil statute suspension until the information is provided.  The criminal statute of limitations is not suspended.

IRS CI Is Looking at Renunciations of Citizenship Just in Case (3/1/13)

It is reported the IRS CI is interested in the reasons that U.S. citizens renounce their citizenship.  Jaime Arora, IRS Criminal Investigation Division Looking Into U.S. Citizenship Renunciations, 2014 TNT 41-8 (3/3/14).  The article is nonspecific about what the IRS is looking for and the consequences might be if they found something.

Still, there are tax requirements for renouncing citizenship in certain cases.  I won't go into them now, but link to blogs on the subject here.

I can imagine that mishandling the various forms and representations required for renunciation, including the tax forms and representations, could be a crime under various federal statutes -- tax and nontax -- and, at last if something was done wrong related to taxes, conceivably the renunciation conduct could refresh statutes of limitations for tax crimes that might have otherwise expired.

Did the Credit Suisse Boss Throw Some Employees Under the Bus? (2/28/14)

Credit Suisse CEO faces call for U.S. testimony apology (Reuters 2/27/14), here.  Excerpts:

A group representing Swiss bank employees demanded an apology from Credit Suisse boss Brady Dougan on Thursday after he said the practice of helping Americans conceal their wealth was the work of a few dishonest employees. 

* * * * 

He said the wrongdoing appeared to have taken place before 2009 despite "industry-leading compliance measures" at the bank. 

The body representing staff at Credit Suisse and other Swiss banks reacted with astonishment to Dougan's comments, saying it was "hardly credible" that the bank's bosses knew nothing of the practices. 

"It was common knowledge that tax evasion was the strategy, a business model pursued by many banks for a long time," the Schweizerischer Bankpersonalverband said in a statement.
It said Dougan's comments "vilify lots of employees that had nothing to do with offshore U.S. banking", and demanded he apologize to the bank's 46,000 staff. 

* * * * 

Credit Suisse management has accepted responsibility for wrongdoing by its staff, while rejecting any suggestion that it was bank policy to help foreign clients hide their wealth from their governments. 

"Credit Suisse repeatedly said that wrongdoing was centered around a small group of employees. This reflects the findings of our internal investigation as well as statements made by the SEC (Securities and Exchange Commission) in their order of February 21, 2014," the bank said in an emailed statement. 

When the bank sent data on employees to U.S. prosecutors investigating its U.S. dealings last year, some staff voiced outrage and went to court to prevent Credit Suisse from releasing the data.

First, I don't know the facts except anecdotally from an outside practitioner's perspective.  Second, I have seen enough both in practice and in other sources that I can draw inferences that have a high probability of being fair.  Third, the Swiss bank problem is so systemic -- not just U.S. enabled tax evasion, but similar acts and general skullduggery, all centered on Swiss secrecy -- that Credit Suisse had the culture that led to U.S. enabled tax evasion, similar acts and general skullduggery.  Are the participating employees not culpable.  No.  Is the institution culpable.  Yes.  Does that mean that everyone in the Credit Suisse organization is culpable.  No.  But some are.  And  that some has to include management which allowed the general culture where such systemic behavior could thrive until they were caught red-handed and, not only caught, but caught by some power with the power to do something about it.  The Swiss Government and bankers should have done something about this long ago.  They didn't.  They now will be brought to task.  But it is not just rogue employees that should be brought to task.

Having observed the tax shelter operations of the big accounting and law firms, the Swiss bank behavior -- exemplified by UBS, Credit Suisse and others among the 14 (as well as Category 2, who can buy their way out) -- the Swiss behavior is much worse.  In my opinion.  For what it is worth.

Another Sentencing of UBS Client (2/27/14)

According to a DOJ Tax Press Release:  "Christopher B. Berg of Portola Valley, Calif., was sentenced yesterday to one year and one day in prison to be followed by three years supervised release."  See press release here.  The key excerpts from the relatively short press release:

Prior to sentencing, Berg paid restitution to the Internal Revenue Service (IRS) of more than $250,000 as well as a penalty of $287,896 for failure to properly report his foreign account.   Berg previously pleaded guilty to willfully failing to file the required report of foreign bank account for an account he controlled in 2005 at UBS in Switzerland that had a balance over $10,000.                                                             

According to court documents, Berg began working as a consultant in 1999.   In 2000, Berg met with Beda Singenberger, a Swiss financial consultant, and a vice president of banking at UBS in San Francisco regarding setting up a bank account at UBS in Switzerland to shelter a portion of his consulting income from taxation.   Beginning in 2001 and continuing through 2005, Berg used wire transfers to deposit $642,070 in earned income into UBS accounts.   Berg used money in these Swiss UBS accounts to purchase a vehicle, to obtain cash while in Europe and to pay the balance on a Eurocard he used while traveling in Europe.   Berg did not disclose the existence of his accounts at UBS in Switzerland to his certified public accountant, and also failed to disclose the income earned by these accounts or the consulting income deposited to the accounts.   The tax harm associated with Berg’s conduct exceeded $250,000.  

Maybe I'll do an analysis of the correlation of indicated wealth to sentences.  I don't know Mr. Berg's wealth, but doubt that it matches Ty Warners.  I wonder if there is some reverse correlation there.  That limited data set does not prove it, of course.  Will take a lot more work.

UBS Banker Pleads Guilty; DOJ Recommends Probation and No Restitution (2/26/14)

As DOJ was getting trashed by the Senate Permanent Subcommittee on Investigations, a former UBS banker was entering a plea.  See Susannah Nesmith and David Voreacos, Ex-UBS Banker Lack Pleads Guilty in U.S. Tax Case (Bloomberg 2/26/14), here.  Key excerpts:

Shifted Money 

The U.S. Securities and Exchange Commission is investigating whether Credit Suisse improperly shifted money in its private banking unit to obscure a drop in asset growth amid the U.S. probe, said a person familiar with the matter. 

U.S. District Judge William Dimitrouleas today accepted the plea agreement and said it included a recommendation that Lack be sentenced to five years’ probation. The agreement also recommended that Lack receive no fine or be forced to make restitution, the judge said.
“As a condition of probation the lawyers are going to recommend that I require you to cooperate in any investigation they might be interested in,” Dimitrouleas said, noting Lack had already begun to cooperate with federal investigators. 

“I’m very sorry for what I did and I apologize,” Lack told the judge.

Of course, the restitution numbers for the active enablers such as Lack, etc., would be very large.  The plea is to a Title 18 offense for which restitution is available without a specific agreement in the plea. Although the restitution number and the tax loss may be roughly the same (OK, there may be differences), the judge will likely be aware that the tax loss number is large and hence that the potential restitution -- which the U.S. is not seeking -- could also be large (albeit net of collections from the taxpayers).  In any event, presumably the judge will take the recommendations or not vary materially from them.

Video of the Hearings for the Senate Permanent Subcommittee on Investigations Hearing (2/26/14)

FIRST HEARING (Credit Suisse Apologists):

Participants:

BRADY W. DOUGAN
Chief Executive Officer
Credit Suisse Group AG, Credit Suisse AG
New York, NY 

ROMEO CERUTTI
General Counsel
Credit Suisse Group AG, Credit Suisse AG
Zürich, Switzerland 

HANS-ULRICH MEISTER
Co Head, Private Banking and Wealth Management, Chief Executive Officer - Region Switzerland
Credit Suisse Group AG, Credit Suisse AG
Zürich, Switzerland 

ROBERT S. SHAFIR
Co Head, Private Banking and Wealth Management, Chief Executive Officer - Region Americas
Credit Suisse Group AG, Credit Suisse AG

This is the video from the first hearing (Credit Suisse Guys):

http://www.c-span.org/video/?318003-1/hearing-offshore-tax-evasion-panel-1

A reporter's contemporaneous notes of the first hearing.  Shannon Bond, As it happened: Credit Suisse Senate hearing (Financial Times 2/26/14), here.

Here is one report of statements by CEO Brady Dougan:  David Voreacos, Alan Katz and Elena Logutenkova, CEO Dougan Says Executives Weren’t Aware of U.S. Tax Dodges (Bloomberg 4/26/14), here.

“Some Swiss-based private bankers went to great lengths to disguise their bad conduct from Credit Suisse executive management,” Dougan said at a Senate subcommittee hearing in Washington today. “While that employee misconduct violated our policies, and was unknown to our executive management, we accept responsibility for and deeply regret these employees’ actions.” 

* * * * 

Senator John McCain, an Arizona Republican on the committee, said it’s not plausible that senior management wasn’t involved, considering the “systemic” misconduct. 

“If you believe that, I have some beachfront property in Arizona,” McCain said yesterday in a briefing on the report.

SECOND HEARING (DOJ Officials - Cole and Keneally):

Participants:

THE HONORABLE  JAMES M. COLE
Deputy Attorney General - Office of the Attorney General
U.S. Department of Justice
Washington, DC 

THE HONORABLE   KATHRYN M. KENEALLY
Assistant Attorney General - Tax Division
U.S. Department of Justice
Washington, DC

Here is the video from the second hearing

http://www.c-span.org/video/?318003-2/hearing-offshore-tax-evasion-panel-2

A reporter's contemporaneous notes of the first hearing.  Shannon Bond, As it happened: Credit Suisse Senate hearing (Financial Times 2/26/14), here.

JAT Comments: 2:18 pm:  Deputy Attorney General James M. Cole contrasted the OVDI/P results of 43,000 doing voluntary disclosure under OVDI/P.  Prior to that, he claimed, the voluntary disclosures per years were about 50 to somewhat over 100 per year.  This is a bit misleading.  The IRS got far more "voluntary disclosures" than that.  They were quiet disclosures which, at least outside the new OVDI/P initiatives, practitioners believed and practitioners' anecdotal evidence confirmed had the desire effect of voluntary disclosures -- i.e., no criminal prosecutions.  And, by doing the quiet disclosures, in almost all cases, civil penalties  were avoided because (i) the quiet disclosures were treated as qualified amended returns which avoid the accuracy related penalty and (ii) the IRS did not spend the resources to determine whether the civil fraud penalty  could apply.  I understand that even where noisy quiet disclosures were made in the past, it was problematic as to whether any civil penalties were asserted.

At least to some extent, it is almost healing to see that bipartisanship is possible.  And, if there is this degree of bipartisanship, those who are "deniers" -- Swiss banks and their enablers and their apologists -- should check into the real world.

I made the point early in this process that the only practical difference between Swiss bankers and Somali pirates is that Swiss bankers wear suits.  These Swiss bankers testifying today wore the uniform.  But, as the truth has come out, Swiss bankers would wear anything appropriate to the schemes they were promoting -- such as wearing Hawaiian shirts while claiming to be on vacation in the U.S.  And, as they look for more profit opportunities, they may even find it convenient to wear the garb of the Somali pirates (they too want to hide their ill-gotten loot).

2:41 pm:  Cole just testified that the U.S. Swiss Bank Initiative would generate a lot of leads about bankers and enablers that can be prosecuted.

I have been double tasking while this testimony was going on and taking some calls.  Still, I don't think Cole really knows the detail they are asking him about.  That's not surprising since he covers a whole lot of responsibilities at DOJ than this narrow(er) area.

Senator McCain is now asking whether 1 prosecution out of 14 or 15 (I suppose the Wegelin prosecution) is "success" or "progress."  Keneally says it is progress.  McCain is skeptical.

Senate Staff Report on Offshore Tax Evasion for Hearings on 2/26/14 (2/25/14)

I previously blogged that the Senate Permanent Subcommittee on Investigations (a subcommittee of the Committee on Homeland Security and Governmental Affairs) would be conducting an investigation commencing tomorrow, February 26.  See U.S. Senate Committee Investigation of Crackdown on Offshore Tax Evasion (Federal Tax Crimes Blog2/20/14), here.  The Majority and Minority Staffs of the Subcommittee have produced a report, titled Offshore Tax Evasion: The Effort to Collect Unpaid Taxes on Billions in Hidden Offshore Account.  The report is available for download here.

The report is 181 pdf pages.  I cut and paste below the Executive Summary, pp. 1-8 of the report (footnotes omitted).  I will follow through with further comments on the balance of the report and the hearings and aftermath from time to time.

I. EXECUTIVE SUMMARY 

This investigation arises from the Permanent Subcommittee on Investigations’ longstanding focus on offshore tax abuse, including U.S. taxpayers using hidden offshore accounts. In 2008 and 2009, the Subcommittee held three days of hearings and released a bipartisan report examining how some tax haven banks were deliberately helping U.S. customers hide their assets offshore to evade U.S. taxes. The hearings focused on two tax haven banks, UBS AG, the largest bank in Switzerland, and LGT, a private bank owned by the royal family of Liechtenstein. On the first day of the hearings, UBS acknowledged its role in facilitating U.S. tax evasion, apologized for its wrongdoing, and promised to end it. It later entered into a Deferred Prosecution Agreement with the U.S. Department of Justice, paid a $780 million fine, and turned over about 4,700 accounts with U.S. client names that had not been disclosed to the Internal Revenue Service (IRS). It also committed to disclosing to the IRS all future accounts opened for U.S.  persons. 

Since then, significant progress has been made in the effort to combat offshore tax abuses. World leaders have declared their commitment to reduce cross border tax evasion. Tax havens around the world have declared they will no longer use secrecy laws to facilitate tax dodging. In the United States, over 43,000 taxpayers joined a voluntary IRS disclosure program, came clean about their hidden offshore accounts, and paid over $6 billion in back taxes, interest, and penalties. In addition, Congress enacted the Foreign Account Tax Compliance Act (FATCA), which requires foreign banks to either disclose their U.S. customer accounts on an automatic, annual basis or pay a 30% tax on their U.S. investment income. Just this month, at the request of G8 and G20 leaders, the Organisation for Economic Co-operation and Development (OECD) issued a model agreement that, like FATCA, will enable countries to automatically exchange account information to fight cross border tax evasion.

Stolen Identity Refund Fraud in the News (2/25/14)

I don't spend much time or energy in this blog covering stolen identity refund fraud (SIRF) in the federal tax system.  The reason is that I view identity theft fraud  in the tax system -- usually by filing false claims for refund -- as being apart from the tax fraud where the taxpayer attempts to lower his tax or, if an enabler, the enabler tries to lower the enabled taxpayer's tax.  In these cases, the taxpayer seeks to avoid paying his share of the burden of government - as Justice Holmes said, the cost of civilized society.  With identity fraud, however, the culprit merely seeks to blatantly steal from the Government via the tax system, just as a thief would steal by breaking and entering or defrauding.

Still identity theft fraud via the tax system is a big deal.  DOJ Tax recently issued a press release touting its efforts to curb identity theft fraud.  Such press releases are intended to discourage others from participating in this genre of identity theft fraud.

The press release, titled Justice Department Highlights Efforts to Combat Stolen Identity Tax Refund Fraud, is here.

I only have one comment.  The press release states that in fiscal year 2013 "more than 580 indictments or informations charging more than 880 defendants with SIRF-related crimes".  CI's annual business report, which I blogged yesterday, here, reports that SIRF indictments in the 2013 fiscal year numbered 1050.  I don't know why there is such a material difference in the numbers.

Wow! Ty Warner Is Ty Warner is Not Quite the Innocent Abroad (2/24/14)

Janet Novack is a great tax reporter.  She has this blog entry -- Beanie Babies Billionaire Ty Warner Secretly Fought Giving Bank Records To Grand Jury (2/24/14), here.

Without further thought, I can not add anything meaningful right now to Ms. Novack's excellent blog entry.  But the caption of this blog suggests my conclusion that Ty Warner may have smoked a fast one past the criminal tax justice system.

A Mel Brooks film once had the line:  "It's good to be king."  In Ty Warner's case, it's good to be rich.

More later.

I do think the Ty Warner sentencing will test the limits of Booker discretion in the sentencing courts.

IRS CI Report for Fiscal Year 2013 (2/24/14)

IRS CI Annual Business Report Report for FY 2013, here.

The key subjects from the table of contents are as follows:

 Legal Source Tax Crimes
      General Tax Fraud
      Refund Fraud
           Identity Theft
           Return Preparer Program
           Questionable Refund Program
      Abusive Tax Schemes
      Non-filer Investigations
      Employment Tax
 Illegal Source Financial Crimes
      Financial Institution Fraud
      Public Corruption
      Corporate Fraud
      Gaming
      Insurance and Healthcare Fraud
      Bankruptcy Fraud
 International Operations
 Money Laundering & Bank Secrecy Act
 Narcotics and Counterterrorism
 Warrants and Forfeiture

The key items I spotted are:

• There are no statistics for general tax fraud.
• There are statistics on p. 26 for international operations investigation, prosecution and sentencing statistics (the anecdotal discussion leading to these statistics starts on p. 24.)  The anecdotal convictions and sentencings are for Peter Troost, Sameer Gupta, Leopoldo Valencia-Urrea, Aristotle R. Matsa.  I have written on this blog about all of these except Mr. Valencia-Urrea.
• The statistics for BSA investigations, prosecutions, p. 29

The statistics for international operations may be correct, based on the criteria for the statistics.  I don't know what that criteria is, however.  I know that the data I maintain for the offshore bank convictions and sentencings is not consistent with the indicated 51 months average sentence indicated in these statistics.  Maybe I will try to dig in, but just don't have the time now.

U.S. Authorities Focus on Swiss Insurance Products Used to Hide U.S. Taxpayer Assets and Income (2/24/14)

A reader, under the pesudonym GobalCapitalism, here, called the following article to my attention.  John Letzing, U.S. Examines Swiss Insurance Products In Tax Crackdown (WSJ Markets 2/23/14), here.  Excerpts:

U.S. authorities are scrutinizing Americans' use of Swiss insurance products to determine if they have been used to hide assets, signaling a potential new direction in the U.S. legal crackdown on tax evasion in the Alpine country, according to people with knowledge of the matter.
The U.S. Justice Department and the Internal Revenue Service are looking at the use of private placement life insurance, or PPLI, a product that meshes banking and insurance by linking the value of a client's policy to assets held in a Swiss bank account, these people say. 

Swiss insurers offering the product, which can be used legally by Americans to defer taxes, have nonetheless sought to reduce ties to U.S. clients. At least three big insurers say they aren't accepting new U.S. clients. In December, Swiss Life Holding AG SLHN.VX -0.15%  returned funds to hundreds of Americans who had invested in PPLI policies. Those policies were linked to accounts at Bank Frey & Co. AG, which is among a number of Swiss banks that have disclosed being under criminal investigation in the U.S. for allegedly aiding tax evasion, according to people familiar with the matter. 

* * * * 

PPLI policies are generally a lawful way for clients to defer taxes on wealth as it grows. But policies can be problematic for their owners and carriers if they haven't been set up in compliance with tax laws in a client's home country, or if they are loaded with undeclared assets. 

* * * * 

The Swiss banks that partner on PPLI once happily accommodated wealthy U.S. clients, but have more recently jettisoned Americans to avoid drawing unwanted attention from the Justice Department. Unlike banks, insurers are contractually bound to hold policies and pay out for a specific event, such as death. Only an unusual circumstance like Bank Frey's closure allows an insurer to prematurely dump a PPLI policy. 

Hundreds of Swiss banks have applied to a U.S. program in which they exchange information about dealings with Americans for guarantees they won't be prosecuted. Insurers aren't able to participate in the program.

I don't think it is a surprise that insurance products can mimic the essential features of financial accounts and thus should be treated as financial accounts, but provide an added guise in the form of appearing to be an insurance product or have some blended features of an insurance product.  If the IRS and DOJ Tax were not interested in those products, that would be an easy way of avoiding the gains made in transparency with banks.

The article also notes that "Hundreds of Swiss banks have applied" to the U.S. Swiss bank initiative.  The later authoritative source information I have seen indicated that 106 banks joined as Category 2.

Credit Suisse Take a Hit on U.S. Tax Evasion Business (2/21/14)

See Credit Suisse to Pay $197 Million in SEC U.S. Client Case (Bloomberg 2/21/14), here.  Excerpts:

Credit Suisse Group AG (CS) agreed to pay $197 million to regulators and admitted servicing thousands of U.S. clients without approval, leaving unsettled a criminal probe of whether it helped Americans evade taxes. 

Credit Suisse, the second-biggest Swiss bank, never registered a cross-border securities business that served 8,500 client accounts between 2002 and 2008 and collected $82 million in fees, according to a settlement today with the U.S. Securities and Exchange Commission. The accounts were valued at about $5.6 billion in 2008. 

* * * * 

Credit Suisse’s advisory and brokerage services began as early as 2002 and involved more than 107 trips to the U.S. by relationship managers. The bank was aware of the registration requirement, though the procedures it had to prevent violations weren’t properly implemented and monitored, according to the SEC. 

Credit Suisse was slow to implement rules that would have forced its bankers to follow local laws, according to the SEC. 

After some bankers were arrested in Brazil in 2006, including the head of private banking in the country, Credit Suisse started a project it called “Cross-Border+.” The head of the bank’s Switzerland-based group that handled American accounts complained that the proposed rules were too strict. 

‘No Air Left’ 

“People have no air left to breathe,” he complained to his boss in 2007, according to the SEC. “The latest changes will make this business impossible.” 

When Credit Suisse’s auditors looked into the handling of U.S. accounts in 2006, some bankers altered reports to take out references to American trips that broke securities laws, the SEC said. The auditors dropped some preliminary findings of cross-border issues from their final report. 

Credit Suisse didn’t begin taking steps to end the business until October 2008, after probes into similar conduct by UBS had been publicized, the SEC said. The majority of U.S. client accounts were closed or transferred by 2010 though the bank still held an average total of about $34 million in American client accounts by mid-2013, according to the SEC.

U.S. Senate Committee Investigation of Crackdown on Offshore Tax Evasion (2/20/14)

Senator Levin is at it again.  The U.S. Senate Permanent Subcommitteee on Investigations, which he chairs, "will hold a hearing on a crackdown on offshore tax evasion that has stalled as prosecutors conduct criminal probes of 14 banks, including Credit Suisse Group AG."  Offshore Tax Evasion Will Be Focus of Senate Hearing (Bloomberg 2/19/14), here.  (It is not evident to me how this crackdown on the Swiss bank variety of offshore bank tax evasion is stalled.)  

Here are some other excerpts from the article

The hearing will focus on “the status of efforts to hold Swiss banks and their U.S. clients accountable for unpaid taxes on billions of dollars in hidden assets,” according to a statement by the committee. Chairman Carl Levin, a Michigan Democrat, estimates that offshore tax avoidance costs the U.S. Treasury more than $100 billion a year. 

Witnesses will represent an unidentified Swiss bank and the Justice Department, the committee said. Since 2009, the U.S. has charged more than 70 U.S. taxpayers and almost three dozen bankers, lawyers and advisers with using hidden accounts to cheat the Internal Revenue Service. At the same time, the Justice Department hasn’t resolved criminal probes involving Credit Suisse, the second-largest Swiss lender, and other banks. 

* * * * 

“If I were Senator Levin, I’d ask the Justice Department, ‘You did this program with the Swiss and 106 banks signed up for non-prosecution, so will you take that prototype to other countries with a history of unreported bank accounts, such as Israel, India, Singapore and Hong Kong?’” said Lawrence Horn, a tax attorney at Sills Cummis & Gross in Newark, New Jersey.