Thursday, December 23, 2010

Swiss Enabler for Offshore Accounts Pleads Guilty (12/23/10)

I reported last weekend on criminal charges against Renzo Gadola, a Swiss person, previously a UBS banker who served as an intermediary between U.S. depositors and at least one Swiss bank. The blog is here. The charges were presented by criminal information which often presages a plea agreement. The criminal information is here. Yesterday, Gadola pled guilty. The guilty plea and statement of facts are here and here. Just a few comments:

1. The guilty plea document itself is mostly standard fare. The plea is to the one conspiracy count charged in the criminal information. The parties' agreements as to the sentencing factors do strike me as unusual, so I will comment on them below.
2. The Statement of Facts appears to be a restatement, perhaps verbatim of most or all of the allegations in the criminal information. I summarized certain of the key allegations in my prior post.
The agreement does not give us the Base Offense Level or the tax loss which drives the Base Offense Level. The Base Offense Level, of course, is the starting point for Guidelines calculations. The agreement does, however, give information from which the starting point can be derived, so let's see what the agreement says. Paragraph 10 provides:

10 The United States and the defendant agree that, although not binding on the probation office or the Court, they will jointly recommend that the Court make the following findings and conclusions as to the sentence to be imposed:
   a. Adjusted Offense Level: 12 (U.S.S.G §§ 2Tl.l(b))(2), 2Tl.9)
   b. Abuse of Position of Trust or Use of Special Skill: 2 (U.S.S.G. §3B1.3)
   c. Total Offense Level: 14
The Guidelines and its earlier iterations require that the Base and Adjusted Offense Levels be determined for conspiracies either under first under § 2T1.9.  However, the § 2T1.1 calculation may apply if it (i) "most closely addresses the harm that would have resulted had the conspirators succeeded" in the Klein conspiracy and (ii) produces an Adjusted Offense Level in excess of 10. The agreement does not spell out exactly how the Adjusted Offense Level of 12 was reached, but it appears that number was likely reached by applying § 2T1.1 (a signal may be the reference to 2T1.1 in paragraph 10.a. of the Plea Agreement). So, focusing on § 2T1.1, an adjusted offense level of 12 would mean that the Base Offense Level was 10, because the use of foreign accounts would require a sophisticated means enhancement of 2 under § 2T1.1(b)(2). (Actually, that is not technically correct, for the Base Offense Level could have been less than 10 and § 2T1.1(b)(2) would increase the adjusted offense level to 12, but bear with me on the assumption that the Base Offense Level is 10.) Now, what is the tax loss under the tax table, § 2T4.1, that produces a level of 10? It is between $5,000 and $12,500. (If the Base Offense Level were less than that range, of course, so would the Base Offense Level be less than 10, but § 2T1.1(b)(2) would then kick up the Adjusted Offense Level to 12.) So, we can conclude that the tax loss assumed in the Adjusted Offense Level was $12,500 or less.

That number -- $12,500 -- is very low for the type of conspiracy alleged in the criminal information and repeated in the Statement of Facts. Even just considering the family mentioned in the conspiracy, an intended tax evasion of only $12,500 or less would hardly have justified the efforts alleged and admitted. Moreover, Gadola was doing it for other U.S. Swiss bank depositors and their achieved and intended tax evasion would far exceed that number and would -- at least should -- be considered as relevant conduct. So, what does this mean? It means that the prosecutors and Gadola's lawyer gerrymandered the Guideline's factors in order to produce a sentencing range that would induce Gadola to plead. At least that is how I read the tea leaves; others may read them differently, and if so I hope they will comment.

Of course, there is the standard disclaimer that the Probation Office and the Court are not bound by their agreements as to the Guideline factors.  (Plea Agreement paragraph 10.)

Now, looking at the agreed Total Offense Level of 14, the defendant will likely qualify for the acceptance of responsibility downward adjustment of 2 (3 only if above 16). (The prosecutors agreed to recommend the acceptance of responsibility adjustment in paragraph 6 of the Plea Agreement.) So the sentencing level for applying the Sentencing Table in Chapter 5, Part A contemplated by the Plea Agreement is 12 which is a Zone C range of 10-16 months, requiring some actual incarceration. The Government agreed to recommend sentencing at the low end of the range. (Plea Agreement paragraph 6.) But the parties have agreed that they may argue for variance (Plea Agreement paragraph 3), so, presuming that Gadola does not stub his toe in this process, his lawyer may be able to make serious variance arguments.  Still, one has to wonder whether courts will find the enablers are attractive for mercy as the depositors who they enabled.

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