Credit Suisse Enabler Christos Bagios Plea and Sentencing (11/7/12)

Yesterday, Christos Bagios, a Credit Suisse Banker who had been in custody for some time, pled and was sentenced.  The following are the relevant documents:

Bagios Information, here.
Bagios Plea Agreement, here.
Bagios Sentencing Minutes, here.
Bagios Judgment, here.

Key features:

Defendant:  Christos Bagios
Bank:  Former employee of Credit Suisse; also involved UBS and Neue Zuercher Bank
Count of Plea:  Defraud / Klein Conspiracy (1 count)
Tax Loss:  $1,000,000 +  (See below indicating the tax loss was at least $1,086,75)
Fine: -0-
Restitution: -0-
5K1 Departure:  Irrelevant because of plea - see discussion below.
Sentence:  37 days imprisonment - see discussion below
Court:  SD FL
Judge:  Kenneth Marra (Wikipedia here)

Comments:

1.  Type of Plea.  Normally tax pleas leave sentencing in the discretion of the Judge who is guided by the Sentencing Guidelines and Booker.  This particular plea, however, was under FRCrP 11(c)(1)(C) and (3)(A), here.  In a plea pursuant to that rule, the parties agree upon the sentence.  If the Court rejects the plea as made, either party may withdraw from the plea agreement.  Obviously, such a plea takes out some of the risk of a guilty plea.  But judges have been known to reject those pleas.  One famous instance of a judge rejecting such a plea was in the Lea Fastow case, here.  Lea Fastor was the wife of Andy Fastow of Enron fame.

2.  The sentence is stipulated to be a "below Guidelines sentence."  The parties do state their respective Guidelines calculations in the plea agreement.  The United States Total Offense Level calculation is 23 which would produce a Guidelines range of 46-57 months; the defendant's Total Offense Level calculation is 13 which would produce a Guidelines range of 12-18 months.  The Guidelines Sentencing range table is  here.  The principal differences in their  calculations are the Base Offense Level (Government 22; defendant 16); Abuse of Position of Trust (Government 2; Defendant 0); and Minor Role (Government 0; Defendant -2).  The major difference is the Base Offense Level which is driven solely by the tax loss.  As noted below, the tax loss is stipulated to aggregate at least $1,086,750.  So, with this stipulation, it is not clear to me how Bagios could argue for a BOL of 16.  For the BOL Sentencing Table, see here.

3.  The sentence was time-served for "37 days' imprisonment from the time he was arrested in New York City on January 26, 201 1, and detained, transported to the Southern District of Florida, and held at the Broward County Sheriffs Office until released on bond on March 4, 2011."  A consideration in this regard was that "Since his release, for over 19 months, the defendant has been subjected to conditions similar to home confinement" including limited travel, inability to work, ankle bracelet; inability to see family while so confined, etc.).  In this regard, "While restricted to the Southern District of Florida, the defendant's m other passed away and he was unable to attend the funeral in Greece."

4.  Because of the agreed sentence, there was no occasion for the Court to consider a 5K1 plea.  However, as further justification for the sentence, the plea agreement recites factors which would have been relevant to a 5K1 plea.

C. The defendant has provided cooperation and substantial assistance regarding his former colleagues and customers at UBS AG. If the Court were to decline to accept the agreed sentence pursuant to Fed. R. Crim. P. l 1(c)(1)(C) and (3)(A), the government would file a motion for downward departure pursuant to U.S.S.G. § 5KI.I. If the Court were to decline to accept the agreed sentence pursuant to Fed. R. Crim. P. l 1(c)(1)(C) and (3)(A), the government and the defendant would jointly recommend to the Court that, in addition to any downward departure under U.S.S.G. § 5K1.1, a downward variance from the advisory sentence under the sentencing guidelines, resulting in the same sentence recommended herein, would be appropriate under 18 U.S.C. § 3553(a) in light of factors including the circumstances referenced herein. 

D. Compared to other foreign bankers and asset managers who have been prosecuted and/or indicted in this district and  elsewhere for conspiring with U .S. taxpayers to defraud the lnternal Revenue Service by concealing the assets and income of U.S. taxpayers in secret Swiss accounts, the defendant's conduct, while serious, is not as egregious as the conduct of those individuals

5.  The parties further agree:

E. The trial of this case would be both time consuming and expensive, requiring the government to produce witnesses from all over the United States and from at least one foreign country. In addition, many of the events occurred m ore than a decade ago, complicating the presentation of evidence. 

F. The parties agree that this is a reasonable sentence in consideration of the factors set forth in Title 18, United States Code, Section 3553(a).

6.  The defendant agrees to cooperate further (see par. 5).

7.  There is a standard -- well, if not standard, then at least not uncommon -- waiver of appeal both as to the sentence and any restitution order.  (par. 6.)

8.  The defendant waives venue in the SD FL.

9.  The parties agree to recommend that the PO not produce a Presentence Report.  The confined nature of the plea makes a PSR irrelevant.

10.  The following paragraph addresses immigration consequences:

9.  Defendant recognizes that pleading guilty may have consequences with respect to the defendant's immigration status if the defendant is not a citizen of the United States. Under federal law, a broad range of crimes are removable offenses, including the offense to which defendant is pleading guilty. Removal and other immigration consequences are the subject of a separate proceeding, however, and defendant understands that no one, including the defendant's attorney or the Court, can predict to a certainty the effect of the defendant's conviction on the defendant's im migration status. Defendant nevertheless affirms that the defendant wants to plead guilty regardless of any immigration consequences that the defendant's plea may entail, even if the consequence is the defendant's automatic removal from the United States,

11. The Rule 11(b)(3) Statement of Facts includes the following

CHRISTOS BAGIOS was a citizen of Greece and a resident of Switzerland. From approximately 1992 through approximately 2005, CHRISTOS BAGIOS was employed by UBS AG, and its predecessor Union Bank of Switzerland, as a private banker. From approximately 2005 through approximately 2008, UBS Swiss Financial Advisers AG employed CHRISTOS BAGIOS as a private banker. UBS Swiss Financial Advisers AG is a registered investment advisor with the United States Securities and Exchange Com mission. The bankers that were employed by UBS Swiss Financial Advisers, including CHRISTOS BAGIOS, provided investment advice in the United States under the entity's registration. From approximately 2009 until February 2012, CHRISTOS BAGIOS was employed by Credit Suisse Private Advisors AG as a Senior Relationship Manager and Head Relationship Manager East Coast, and was a registered investment advisor with the SEC. 

INTERACTIONS WITH UNITED STATES CUSTOMERS W ITH UNDECLARED ACCOUNTS AT UBS AG 

While employed as a banker at UBS AG, CHRISTOS BAGIOS assisted United States customers in opening and maintaining undeclared bank accounts. Specifically, CHRISTOS BAGIOS met United States customers in Switzerland and assisted them in opening undeclared accounts at UBS AG. CHRISTOS BAGIOS also helped manage the undeclared accounts, communicating with customers in the United States from Switzerland by phone, e-mail, and fax. CHRISTOS BAGIOS also traveled to the United States to meet with customers, and would provide them account balance information and provide them with investment advice in the United States. Additionally, on at least one occasion, CHRISTOS BAGIOS discouraged a customer from repatriating the funds in the account to the United States by telling the customer about the fees and taxes that he estimated the custom er would owe if such an account was declared. \ 

In 2005, CHRISTOS BAGIOS transferred to UBS Swiss Financial Advisers AG, which serviced United States customers with fully  declared accounts. Before his transfer, he flew to the United States with another UBS AG banker and introduced that banker to the U .S. customers, telling the customers that the new banker would take over the management of the undeclared accounts.  

While employed at UBS AG, CHRISTOS BAGIOS advised at least one customer with an undeclared "black'' account at UBS AG to open and maintain an additional fully declared "white'' account, and while employed at UBS Swiss Financial Advisers AG, assisted customers in maintaining the "white'' accounts. The purpose of maintaining the declared "white'' account was so that United States authorities would not suspect that the customer also had an undeclared account, thereby helping to conceal the undeclared  Account. In 2006, CHRJSTOS BAGIOS and a banker from UBS AG met with a married couple at their home in California to discuss their white account at UBS Swiss Financial Advisers (that the defendant managed) and their black account at UBS AG (managed by the other banker). In 2007, in furtherance of a plan to repatriate to the United States approximately $470,000 from their undeclared "black" account CHRISTOS BAGIOS permitted the customers to move the funds through the declared "white'' account that he managed. 

ln 2009, when UBS AG was informing United States customers with undeclared accounts that they needed to close the accounts, CHRISTOS BAGIOS informed a customer that he could potentially move the funds in his undeclared account into an undeclared account at a Swiss cantonal bank.

The tax loss is stipulated in a chart by customer and year.  While the tax losses aggregate $1,086,750, some of the customers amounts appear rather small.

12.  There is speculation that Bagios is cooperating in the investigation of the Swiss banks.  This is  not explicit in the plea agreement, but knowledgeable practitioners speculate that is the case.  In the Tax Notes Today article (see below), the following is provided:

[Scott] Michel said it also was interesting that the agreement refers to Bagios's cooperation against customers and employees of UBS but doesn't mention other banks. "Bagios worked at Credit Suisse, and it would be quite surprising were his cooperation not to extend to that institution as well," he said.

"Indeed, it is likely that he is cooperating against that bank and the government did not want to disclose that in this plea agreement," Michel added. "When individuals plead guilty and then cooperate, they normally cannot pick and choose their cooperation targets -- the government will expect full and complete cooperation on all relevant subjects. So I strongly suspect that Bagios has been telling the U.S. about more subjects than just UBS, and if that's the case, that will increase pressure on Credit Suisse and perhaps other banks to try to resolve their differences with the Justice Department as quickly as possible."

Other resources:

Kristen A. Parillo, Former UBS Banker's Plea Agreement Cout Put Pressure on Credit Suisse in Tax Probe, 2012 TNT 216-5 (11/7/12).

David Voreacos and Susannah Nesmith, Ex-UBS Banker Bagios Pleads Guilty in Tax-Evasion Case (Businessweek 11/6/12), here.

Lynnley Browning and Kevin Gray, UPDATE 2-Ex-Swiss banker pleads guilty in tax dodging case (Reuters 11/7/12), here.

Prior Federal Tax Crimes Blog Coverage:

Credit Suisse Advisor / UBS Banker Charged; DOJ Reaches Out to Him (Federal Tax Crimes Blog 3/3/11), here.