Tuesday, August 21, 2012

Credit Suisse / Wegelin Client Pleads Guilty to FBAR Violation in SDNY (8/21/12)

The USAO SDNY has announced the guilty plea of DOJ Tax has announced the sentencing of Jacques Wajsfelner, a former Credit Suisse and Wegelin client.  The USAO press release is here.

The key facts are:

Taxpayer:  Jacques Wajsfelner
Age: 83
Plea Date: 8/20/12
Banks: Wegelin & Co.; Credit Suisse (reported in news but not identified specifically in press release; per the press release, the account in the unnamed bank was transferred to Wegelin as the heat ramped up on UBS)
Enabler:  Beda Singenberger, a Swiss financial adviser
Entities: Yes (Ample Lion, Ltd., a "sham" Hong Kong corporation)
Guilt: By Plea Agreement
Count(s) of Conviction: FBAR (1 count)
Admissions:  Failed to file FBARs from 1995 through 2011; filed false income tax returns by omitting information about his Swiss accounts; "failed to make voluntary disclosures under the IRS's Voluntary Disclosure Program."
Maximum Possible Sentence:  5 years.
Tax Loss: $419,940 (Agreed as restitution; News release says $419,000; see article below)
High Amount: $5,700,000.
FBAR Penalty: $2,840,000 +.  (Amount is per article below; News Release says $2,800,000+)
Court: SD NY
Judge: Naomi Reice Buchwald (Wikipedia entry here)


I have updated the spreadsheet (but need to correct for  the more specific tax loss and FBAR penalty provided by the article below)..

Article:


Patricia Hurtado and David Voreacos, Ex-Credit Suisse Client, 83, Admits Hiding $5.7 Million (Bloomberg Businessweek 8/21/12), here.  Excerpts are:

An 83-year-old Massachusetts man who held Swiss bank accounts at Credit Suisse Group AG (CSGN) and Wegelin & Co. pleaded guilty to hiding $5.7 million from U.S. tax authorities. 
Jacques Wajsfelner admitted in federal court in Manhattan yesterday that he failed to file Foreign Bank and Financial Accounts Reports. He will pay civil penalties of $2.84 million and restitution of $419,940. Under advisory guidelines, he faces 30 months to 37 months in prison at sentencing on Dec. 20. 
* * * * 
Wajsfelner was born in Germany and fled the Nazis as a teenager, according to Jeffrey Denner, his attorney. He became a U.S. citizen and worked in real estate and advertising in New York and Boston, Denner said 
“He pleaded guilty to some very bad judgment that he exercised,” Denner said in a telephone interview. “We are hopeful at his sentencing that the very serious mitigating factors of his life will be considered by the court.” 
Wajsfelner’s former Swiss adviser, Beda Singenberger, was indicted last year on a charge of conspiring to help more than 60 U.S. taxpayers hide $184 million from the Internal Revenue Service in offshore accounts. 
Wajsfelner admitted that he held an account in his own name at Credit Suisse in 1995, and Singenberger helped him open one there in 2006 in the name of Ample Lion Ltd. At the end of 2007 the account held almost $5.7 million, court records show. 
After Credit Suisse began exiting its U.S. cross-border banking business in 2008, Wajsfelner transferred his assets to Wegelin, opening an undeclared account, he admitted. His account was valued at almost $5.5 million at the end of 2010, and almost $4 million at the end of 2010, court papers show. 
He admitted failing to file FBARs for six years, from 2006 to 2011, court records show.  [Note that the USAO Press release covers more years] 
* * * * 
In Wajsfelner’s plea agreement, prosecutors said they wouldn’t charge him for lies he told IRS agents after flying to the U.S. from Germany on Sept. 15, 2011. 
He falsely said he didn’t know Singenberger, he didn’t have an account at Credit Suisse, he never heard of Ample Lion, and he didn’t have a foreign bank account at the time of the interview, according to the plea agreement. 
“There are good explanations for it all,” Denner said. “There was some level of miscommunication and misunderstanding.”

7 comments:

  1. This is interesting:

    Quote: "In Wajsfelner’s plea agreement, prosecutors said they wouldn’t charge
    him for lies he told IRS agents after flying to the U.S. from Germany on
    Sept. 15, 2011."

    One can assume:
    1. UBS gave the US Govt copies of the KYC documents. i.e. Passport copies

    Can one assume the following?

    1. The IRS has no ability to match passports with tax records?
    2. The IRS, with the help of DHS, is flagging passports?

    ReplyDelete
  2. The account's value had dropped to $4M at the end of 2010. Subtract FBAR penalty of 2.8M, a tax loss of $400K another 100K perhaps in legal fees, that leaves 700K.
    Now the tax loss of 400K on a $5.5M account over 8 (or more years) suggests that the principal was tax-compliant, but he only failed to pay taxes on income from the account.
    And he's 83 years old.
    Did he admit to willfully not filing the FBAR or simply to not filing?

    In response to the previous comment my guess is that the info came from the independent client advisor Singenberger (note this is just my guess) not the banks. (Note that the banks were CS and Wegelin, not UBS.)

    I would also assume that once the IRS had the data the independent advisor, it wasn't hard to locate Mr. W's tax returns or have him interviewed when he stepped on US soil.

    ReplyDelete
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  5. If he's 83 years old, he was born in 1929, give or take a year. His life began with the Great depression, then Hitler rose to power, the war started in 1939 when he was ten, and ended in 1945 when he was sixteen. He likely remembers bank failures and hyperinflation; he probably saw people taking bundles or wheelbarrows full of near-worthless currency to buy a loaf of bread, something most of us just know from history books. Anyone shaped by such experiences who is putting money away is quite likely to be doing it for safety in case of another calamity.

    The ratio of tax loss to high balance implies that he did not pay taxes on interest earnings, but that there were no tax issues with the principal.

    I don't know whether or not the entity was used to mask the transfer of funds abroad. But if the funds were already there in 2005, and the entity account was created in 2006 (the article seems to imply this but it's not clear) then the entity didn't do much if anything, so it doesn't seem to be bad conduct, just some bad advice that he was given.

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