The bullet points are:
Taxpayer Defendants: Stephen M. Kerr and Michael Quiel
Enabler Defendant: Christopher M. Rusch (a U.S. lawyer whose website is here, who in addition to enabling allegedly failed to meet his own obligations.
Banks : UBS, "Swiss Bank A" (described as a partnership and one of Switzerland's larged private banks; subsequently identified as Pictet & Cie, here), "Panamanian Bank A"
Other Players: "Financial Intermediary A," a Swiss investment management firm; "Financial Intermediary B," an independent Swiss wealth management company; "Account Manager," a Swiss national and managing director of Financial Intermediary A and long-time friend of Rusch; Red Rock Investment AG, a nominee Swiss entity for Kerr's benefit; Swiss Fidelity Investment AG, a nominee Swiss entity for Kerr's benefit; Cyril Capital, LLC, a nonminee St. Kitts & Nevis entity for Kerr's benefit; Legacy Asset Management AG, a nominee Swiss entity for Quiel's benefit; Swiss International Trust Company AG, a nominee Swiss entity for Quiel's benefit; Worldnet Corporate Services, S.A., a nominee Panamanian entity with bearer shares controlled by Rusch; and Attorney Trust Corp, A.G., a nominee entity controlled by Rusch. Not surprisingly, the creation nominee companies is alleged as "Overt Acts" of the conspiracy.
Charges: One count of conspiracy; two counts 7206(1) (tax perjury) for Kerr and Quiel for the 2007 and 2008 returns; and two failure to report undeclared accounts on FBARs for Kerr and Quiel. (The only charge for Rusch is the conspiracy count; it is interesting that Rusch was not charged under the derivative liability provisions for the substantive crimes, such as aiding and abetting them or under Pinkerton liabiltity).
Conspiracy Overt Acts (by Category): (i) creation of nominee entities in foreign tax havens; (ii) opening of undeclared accounts in foreign tax havens; (iii) Deposit of stock into undeclared accounts; (iv) sale of stock held in undeclared accounts; (v) sale of stock in a nominee entity's domestic account and transfer to undeclared accounts; (vi) transfers between Kerr's and Quiel's undeclared accounts; (vii) repatriation and use of funds held in undeclared accounts; (viii) concealment of assets purchased with repatriated funds; (ix) filing of false individual federal income tax returns by each defendant for the years 2007 and 2008; (x) failing to disclose the undeclared accounts on the FBARs each defendant filed
Maximum Incarceration periods: Kerr and Quiel - 262 months; Rusch - 60 months.
High Account Amounts: Kerr: More than $5.6 million; Quiel: More than $2.6 million
Court: USDC AZ
Judge: James A. Teilborg
Fun Facts (Some Alleged as Indicated):
1. The indictment was returned under seal on 12/8/11, apparently because Rusch was on the lam outside the country. Panamanian authorities returned him to the U.S. on 1/29/12, whereupon the indictment was unsealed on 1/30/12.
2. This is the first time I have seen a domestic attorney indicted for an enabler role helping clients hide money offshore. The allegations are that (i) Rusch was actively involved in the structures and movement of monies; (ii) Rusch has signatory authority over the accounts and worked with with Swiss enablers (account manager and financial intermediary); (iii) Rusch used his client trust account to facilitate the transfer of client monies; and (iv) in addition to helping his clients, Rusch helped himself to the benefits of secret Swiss accounts, including accounts held through nominee entities at UBS and a Panamanian bank.
Here is a Government Motion to have the Court determine whether information and documents otherwise subject to the attorney-client privilege may be used under the crime-fraud exception. As noted, Rusch is a lawyer and his documents might tell a damning tale if they can be used. Here is my general summary of the crime-fraud exception from my Tax Crimes Book.
b. Crime-Fraud Exception.
Another exception to the privilege is the so-called crime-fraud exception. The concept is that the attorney-client privilege and work product privilege do not apply where the communication or work product is in furtherance of a crime. Some courts do not limit the exception to just crime, but seem to expand it to situations involving intentional torts or other misconduct. The party seeking to invoke the exception – usually the Government in a criminal case – bears the burden of establishing that this exception applies to otherwise privileged communications or work product. Once the exception applies, however, the further question is the scope of the limitation – i.e., does it apply to all attorney-client communications or to all work product or only that portion of either reasonably related to the furtherance of crime? After a careful review of the authority, the Fifth Circuit recently concluded that “the proper reach of the crime-fraud exception when applicable does not extend to all communications made in the course of the attorney-client relationship, but rather is limited to those communications and documents in furtherance of the contemplated or ongoing criminal or fraudulent conduct.” And, an anonymous cementer on my Federal Tax Crimes Blog added the following points:
1. In this, as in other recent cases, counsel's ignorance of a client's intended wrongs does not mean the crime-fraud exception does not apply since this exception is governed by the client's intention. Indeed, counsel's knowledge or belief about a client's intended wrongs are, for the most part, irrelevant.
2. Although this was a criminal case, it seems likely that the 5th. Circuit would have readily taken the same approach to a civil case.
3. While the court found that the government had not substantiated its demand for access to the entire file, it may well be that, on further post-remand proceedings, the government's burden in such circumstances would not be impossible to meet.
David Voreacos, Three UBS Clients Accused of Hiding Offshore Money From IRS (Bloomberg 1/31/12), here
Patrick Temple-West, 3 U.S. men accused of evading taxes in Swiss banks (Reuters 1/31/12), here