Thursday, November 10, 2011

Another UBS Client is Sentenced - 1 Year and 1 Day (11/10/11)

According to the USAO SDNY press release (not yet mounted on the USAO SDNY web site), Richard Werdiger, "a former client of Swiss bank UBS AG (“UBS”), was sentenced today to one year and one day in prison for conspiring to defraud the Internal Revenue Service (“IRS”) by hiding more than $7.1 million at UBS, filing false federal income tax returns, and evading nearly $400,000 of taxes." Here are the key stats:

Taxpayer: Richard A. Werdiger
Bank : UBS AG
Entities: Yes
Guilt: By Plea Agreement
Sentence: 1 year and 1 day.
Admits: Failure to File FBARs but not charged or pled
Unreported Income: $1.300,000 +
Tax Loss: $400,000
FBAR Penalty: $3,844,129 (apparently based on 50% of the indicated highest balance).
Restitution: To be determined later
Fine: $50,000
Court: SDNY
Judge: Paul G. Gardephe

Recall that the good credit (18 USC 3624(b), here), which is available for sentences greater than 1 year (hence one year and one day is a sentence imposed to allow the good time credit).

I will update the spreadsheet later today.


  1. Between $5 of sandwich that a Hawaiian couple were arrested for failing to pay Safeway and $400,000 this guy failed to pay IRS, OVDI is a such a sweet deal.

  2. To tj November 10, 2011 8:52 AM

    Although not your precise point, your comment does raise another concern I have that is inherent in the Government's overall offshore account initiative, particularly the criminal prosecutions.

    The sentences in the criminal prosecutions have been relatively light, except in the case of those who went to trial (and even for sentences after trial the sentences have not been that harsh). When I say the sentences have been relatively light, I am comparing to sentences in the general run of tax cases. Although I have done no empirical studies, my sense is that sentences are greater in the general run of tax cases for conduct that, at least from my perspective, is not as culpable as the conduct in the criminal offshore bank cases.

    Culpability is a relative term, but all criminal conduct is not equal and hence there should be variations in sentencing. But, given the pattern for sentencing U.S. persons with offshore accounts and the conduct they undertook (including creation of dummy entities, etc.), one might infer that it is more socially acceptable to cheat on taxes with offshore accounts and related skullduggery. I think that is a misguided notion, but one could draw that inference.

    Now, I understand that, in order to induce pleas early on in the program, the Government had to offer up sweet sentencing factors designed to incline the judge to more defendant-friendly sentences, but we are beyond that point.

    And, I guess the counterpoint is that we have too many people in prisons now and, in order to avoid further overpopulating the prison system while still appearing to have rigorous criminal enforcement, the compromise is the conviction with light or no sentences. But still, the message / inference is a wrong one to send. Maybe we should just make all tax sentences lighter without having any distinction or appearance of distinction between offshore account evasion and other types of evasion.

    Jack Townsend

  3. What is "light" is a matter of opinion, but I would venture that a substantial portion of self-employed providers of services to consumers (plumbers, contractors, child care, etc.) have untaxed income and rarely go to prison. Just how many of these cases are there or of people who did not report income from a domestic bank or brokerage account?

  4. To Anonymous @ November 11, 2011 12:54 PM

    You make a good point. If I could restate it from a criminal tax enforcement perspective, the type of person you mention are rarely prosecuted because the Government has a limited number of prosecutions that it can bring and therefore, generally, it will bring only higher profile cases where it can get publicity and some incarceration (tending to have ripple effects to the public rather than just resolving the case at hand).

    Hence, it will not try the plumber where the tax fraud involved a relatively small amount of tax loss. But where the tax loss is significant, it seems to me that the offshore account holders are getting off lighter than their counterpart on shore run of the mill tax cheaters.

    Jack Townsend

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