Tuesday, August 2, 2011

New Swiss Enabler Indictment (8/2/11)

Today brings a new Swiss enabler Indictment in the Southern District of Florida, a hotbed of the DOJ juggernaut against banks and enablers. Martin Lack, a citizen and resident of Switzerland, was indicted for the defraud / Klein conspiracy. The indictment is here

Lack operates Lack & Partner Asset Management AG in Zurich and is a confederate of Renzo Gadola, previously indicted and blogged here.

As is the way with defraud / Klein conspiracy indictments, Lack's indictment is flowered up with a lot of detailed allegations of skullduggery presented as overt acts. These are just variations on the themes of how far the -- at least some -- Swiss bankers went to accommodate the U.S. clients' needs to hide their tax evasion (for a share of the ill-gotten gains, of course). For example, it is alleged that Lack solicited cash deposits in the U.S. in furtherance of the scheme and further failing to file the required Form 8300.  Thus, the following allegation:
26. It was further a part of the conspiracy that defendant MARTIN LACK and his conspirators would and did assist United States customers with undeclared Swiss accounts at Cantonal Bank in structuring the transfer of funds, including cash, within the United States without disclosing such transfers to the United States government on a Form 8300 as required by law.
It's all laid out in the 22 page indictment, so I won't go further into the details here.

The banks involved are UBS AG and a bank pseudonymed as "Cantonal Bank."  Cantonal Bank is described as follows:
10. A bank that was an independent, incorporated public-law institution wholly owned by Base1 City Canton, Switzerland ("Cantonal Bank") provided cross-border banking services to U.S. customers. In 2000, Cantonal Bank entered into a Qualified Intermediary Agreement ("QI Agreement") with the IRS which commenced on January 1, 2001 and expired on December 31, 2006. The QI Agreement required Cantonal Bank to verify the identity and citizenship/domicile of its customers and to withhold and pay over to the IRS taxes on certain accounts beneficially owned by United States customers. On or about June 7, 2006, Cantonal Bank entered into the "Qualified Intermediary Agreement Renewal Instrument to effect the Second Agreement" ("QI Renewal Agreement") with the IRS, an agreement to renew the QI agreement for a term to run from January 1, 2007 through December 31, 2012. As part of the QI Renewal Agreement, Cantonal Bank declared that "it is currently in full compliance with the [QI Agreement] and intends to remain in full compliance."
News reports indicate that bank is Basler Kantonalbank.  The Tax Notes article, Randall Jackson, Former UBS Banker Indicted in Tax Evasion Case, 2011 TNT 149-5 (8/3/11), says:  "Because cantonal banks are effectively state-owned entities, the involvement of Basler Kantonalbank adds a diplomatic aspect to the case."

An unindicted co-conspirator is alleged as follows:
11. Unindicted co-conspirator S.L. ("Swiss Banker S.L.") was a banker at Cantonal Bank's private banking office in Zurich, Switzerland, who assisted United States customers to  open and maintain undeclared accounts at Cantonal Bank.
The Tax Notes article cited above says:  "S.L. is Stefano Longo, a private banker at Basler Kantonalbank's Zurich office and a member of the bank's management committee, according to an August 2 Reuters report."

I will update the spreadsheet and post it, hopefully this afternoon.

Note: This blog has been updated as of 8/3/11 @ 7:30am.

David Voreacos, Ex-UBS Banker Martin Lack Is Indicted in Tax Conspiracy Case (8/2/11).
Lynnley Browning, U.S. indicts ex-UBS banker for tax evasion services, Thomson Reuters News & Insight (8/2/11).


  1. This indictment gives a vivid snapshot as to the level of complicity that banks and enablers have taken in the Swiss secret bank account saga. How in the world can the Swiss refute such compelling evidence other than to capitulate and take their medicine. They have large banks with significant U.S. footprints that face daunting issues. They are negotiating agreements with other European nations for the same reasons. I wonder what it will take to get them right with the U.S. government? I think there will be a very steep price to pay and Credit Suisse is caught in the thick of it.
    Any thoughts as to what the end game will be? I think common sense will indicate that the end of Swiss bank secrecy for U.S. persons is a given.


  2. But its now just bank account set-up fraud that is an issue. The really big money is in setting up complex shelters (using the term loosely) such as conversion transactions (converting ordinary income and STCG to LTCG) through complex entity and derivative transactions. CS and HSBC were major purveyors in this area setting up shell entities in tax havens to accommodate the transactions. In essence, these transactions involved the renting out of their massive balance sheets. Also, phony insurance transactions again using SPVs and, of course, enabling and facilitating securitization transactions.

    I believe that one of the banks (likely CS or HSBC) has to be indicted and convicted to prevent a re-occurrence once the heat is off, if that is what Anon123 is suggesting. Sometimes people cant see what is blatantly obvious, especially if their jobs depend on their not seeing it. I would place the Swiss government in that category. Therefore, we need a public hanging to restore some respect for the law.

    Anybody agree or disagree?

  3. I think that what the Swiss are most afraid of is losing the good reputation of a "Swiss bank account". It used to be a symbol of wealth, privilege, but, in the US anyway, it is starting to be affected by this bad publicity and is now becoming synonymous with "tax-cheater".

    This is why the Swiss Parliament is likely cooperating with tax authorities pursuing their citizens' money abroad.

    For a country of 7 million people to take on the US of 350 million, plus the EU, and others, it is becoming too much.

    I think they have enough business from the rest of the world, to bother with individual Americans.

    This is likely a good development for the US tax authorities -- the closing of a tax haven.

    As far as corporate taxes, I doubt much can be done. They are doing business like all business, including American business. I understand Apple Computers has over 50 billion abroad, that it cannot bring back without paying tax on it. And it is one of many major US corporations with major amounts of cash abroad (trillions). They are waiting for the tax laws to change.

    It is easy to pinpoint the location of an individual and see where he lives, therefore owes taxes. It is less obvious for a multinational.


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