Wednesday, February 23, 2011

More enablers indicted

There is a new indictment out today here. The charge is one count of conspiracy. The individuals charged are:

The banks involved, identified by pseudonyms (I will supplement when/if I learn the bank names ["International Bank" is Credit Suisse]), are (paragraph numbers are to the paragraph numbers in the indictment):

1. An international Swiss bank organized under the laws of Switzerland and headquartered in Zurich, Switzerland, ("International Bank") directly and through its subsidiaries, operated a global financial services business. As one of the biggest banks in Switzerland and largest wealth managers in the world, International Bank provided banking, wealth management, asset management, and investment banking services, among other services, around the globe, including through branches located in the United States. For decades, International Bank operated a U.S. cross-border business through which its private bankers provided cross-border securities-related and investment advisory services to U.S. Customers who maintained accounts at International Bank in Switzerland and other locations outside the United States. This cross-border business was conducted through substantial contacts with the customers in the United States. International Bank's managers and bankers working in the cross-border business knew and should have known that they were aiding and abetting U.S. customers in evading their U.S. income taxes. As of the fall of2008, International Bank maintained thousands of undeclared accounts containing approximately $3 billion in total assets under management in those accounts.
6. A private Swiss bank organized under the laws of Switzerland ("Private Swiss Bank #1 ") was a family-owned private bank that was founded in 2000 and headquartered in Zurich, Switzerland that provided cross-border banking services to United States customers. On its website, Private Swiss Bank #1 touted its "strict policy to never open any branch or other representation outside the reach of the Swiss laws and jurisdiction ... " because "[ o ]nly that way can we be certain to maintain our values- and assure that no foreign authority will ever 'bully' us into giving them up." Private Swiss Bank #I entered into a QI Agreement with the IRS.
7. An Israeli bank with a head office in Tel Aviv, Israel, operated a subsidiary, organized under the laws of Switzerland, with offices in Geneva and Zurich, Switzerland ("Israeli Bank") that provided cross-border banking services to United States customers. Israeli Bank entered into a QI Agreement with the IRS.
8. A private Swiss bank organized under the laws of Switzerland ("Private Swiss Bank #2") was a family-owned private bank with a head office in Zurich, Switzerland, and private banking locations in Lugano and Locarno, Switzerland, that provided cross-border banking services to United States customers. Private Swiss Bank #2 entered into a QI Agreement with the IRS.
The activities involved standard fare for this type of skulduggery [I was going to say piracy, but at least the victim of piracy knows when he or she has been attacked and kidnapped].  I cut and paste here the Manner and Means (the details of which are provided in the Overt Acts which I do not cut and paste):

Manner and Means of the Conspiracy
Among the manner and means by which the Defendants and their co-conspirators would and did carry out the conspiracy were the following:

22. The Defendants and their conspirators solicited U.S. customers to open undeclared accounts because Swiss bank secrecy would permit them to conceal their ownership of accounts at International Bank and other Swiss banks;

23. The Defendants and their conspirators set up, or caused to be set up, and utilized, or caused to be utilized, nominee tax haven entities to open undeclared accounts;

24. International Bank's managers and bankers, in violation of International Bank's QI Agreement, accepted IRS Forms W-8BEN, or the bank's substitute forms, that falsely stated under penalties of perjury that the beneficial owner of the account was not subject to U.S. taxation;

25. International Bank's managers and bankers, including the Defendants and their conspirators, utilized the bank's representative office in New York, New York, to provide banking and investment services to U.S. customers with undeclared accounts;

26. The Defendants and their conspirators caused U.S. customers to travel outside the United States, to destinations including Switzerland and the Bahamas, to conduct banking related to their undeclared accounts;

27. The Defendants and their conspirators provided unlicensed and unregistered banking services and investment advice to U.S. customers in person while on travel to the United States and by mailings, email, and telephone calls to and from the United States;

28. Certain U.S. customers filed false and fraudulent U.S. Individual Income Tax Returns, Forms 1040, which failed to report their respective interests in their undeclared accounts and the related income;

29. U.S. customers failed to file and otherwise report their undeclared accounts on FBARs;

30. The Defendants and their conspirators advised U.S. customers to structure, and caused U.S. customers to structure, withdrawals from their undeclared accounts in amounts less than $10,000 in an attempt to conceal the undeclared account and the transactions from U.S. authorities;

31. The Defendants and their conspirators advised U.S. customers to utilize offshore charge, credit, and debit cards linked to their undeclared accounts and did provide such cards, including cards issued by American Express, Visa, and Maestro;

32. The Defendants and their conspirators advised U.S. customers not to maintain in the United States account records related to their undeclared accounts;

33. The Defendants and their conspirators caused International Bank, Private Swiss Bank #1 and Private Swiss Bank# 2 to retain in Switzerland account records related to the U.S. customers' undeclared accounts;

34. The Defendants and their conspirators discouraged U.S. customers from disclosing their undeclared accounts to the IRS through the Voluntary Disclosure Program; and

35. The Defendants and their conspirators encouraged and assisted U.S. customers to transfer their undeclared accounts at International Bank to other banks in Switzerland, including Private Swiss Bank #1, Israeli Bank, and Private Swiss Bank #2, and to a bank in Hong Kong as a means of continuing the concealment of their assets in undeclared accounts.
Addendum on 2/24/11

1.  According to the comments and other reports, the "International Bank" is Credit Suisse.
2.  The DOJ Tax Press Release is here.
3.  The is another shoe that has already dropped on Credit Suisse in the recent reported arrest and detention of Christos Bagios.  I haven't seen the indictment, although at least one of the reports had it that it was going to be unsealed this week.


  1. International Bank is Credit Suisse

  2. Jack,

    According to a Bloomberg News post, these are Credit Suisse Bankers.

    Hopefully, they will get some real time, if they are found guilty.

  3. I'm wondering why there's only one count of conspiracy ? Does it indicate these bankers may have struck a deal ?

  4. My speculation is that at least one of these defendants is outside the country and unlikely to come here now that the indictment is public information. So one count of conspiracy can make a statement. Further, my speculation is that the suspension of limitations period may be relevant. For reasons I note, as to persons outside the country, the Government will be able to supplement the charges at any time -- even years into the future.

    Under Section 6531, the statute of limitations for tax crimes and for conspiracies related to tax crimes is 6 years, but the statute is tolled during the period the taxpayer is either out of the U.S. or a fugitive as defined in 18 U.S.C. Section 3290. As noted in the CTM 7.03 (linked below), most courts deem intent as key to fugitive status and it may be difficult to prove intent for a bank employee who is a citizen and/or resident of Switzerland. But, the first of the disjunctive rules for tax crimes kicks in while they are merely out of the country whatever their intent for being absent.

    The net effect of all this is that the Government will have room in the statute of limitations to charge other tax crimes when and if these guys come into the U.S.

    And the truth is that, even if tried and convicted, these guys are unlikely to get more than 5 years even with other counts of conviction (and even with counting other related crimes as relevant conduct).

    Finally, just to note the other crimes that could be charged, these defendants could be charged with the underlying tax evasion by their U.S. clients, either under Pinkerton or aiding and abetting.

  5. Good Point Jack. Adding to your comment, I would speculate also that the indictment will put the person out of business in the financial world. A large institution cannot have an indicted person working for it, and frankly, it looks very bad for the institution especially for any business related to managing government pension funds and such like. Just my 5C.


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