Tuesday, July 30, 2013

Liechtensteinische Landesbank Enters NPA (7/30/13)

Note: This blog entry was substantially revised on 11/31/13 at 4:30pm.

Liechtensteinische Landesbank AG entered a nonprosecution agreement ("NPA").  The
nonprosecution agreement is here.  The related forfeiture complaint is here.  The DOJ Tax press release is here;the USAO SDNY press release is here.

Although I provide substantial excerpts from the NPA and Forfeiture Complaint below, I cut and paste first significant portions of the DOJ Tax press release (I have not compared the two press releases, but assume that they are the same in material respects; I do note that the USAO SDNY press release links to the key documents for which I copy the links above):
[DOJ Tax, USAO SDNY and the IRS] announced today that Liechtensteinische Landesbank AG, a bank based in Vaduz, Liechtenstein (LLB-Vaduz), has agreed to pay more than $23.8 million to the United States and entered into a non-prosecution agreement (NPA) with the U.S. Attorney’s Office for the Southern District of New York.  The NPA provides that LLB-Vaduz will not be criminally prosecuted for opening and maintaining undeclared bank accounts for U.S. taxpayers from 2001 through 2011, when LLB-Vaduz assisted a significant number of U.S. taxpayers in evading their U.S. tax obligations, filing false federal tax returns with the IRS and otherwise hiding accounts held at LLB-Vaduz from the IRS.  The NPA requires LLB-Vaduz to forfeit $16,316,000, representing the total gross revenues that it earned in maintaining these undeclared accounts, and to pay $7,525,542 in restitution to the IRS, representing the approximate unpaid taxes arising from the tax evasion by LLB-Vaduz’s clients.  The NPA applies only to LLB-Vaduz and not to any of its subsidiaries or any individuals.  LLB-Vaduz has decided to close its wholly-owned Swiss subsidiary, Liechtensteinische Landesbank (Switzerland) Ltd. and has also decided to sell another wholly-owned subsidiary, Jura Trust AG.
         
Assistant Attorney General Kathryn Keneally stated “this non-prosecution agreement addresses the past wrongful conduct of LLB-Vaduz in allowing U.S. taxpayers to evade their legal obligations through the use of undisclosed Liechtenstein bank accounts, while also acknowledging the extraordinary efforts of the bank in bringing about significant changes in Liechtenstein law.  As a result of new Liechtenstein legislation, U.S. taxpayers who thought that they had obtained the benefit of Liechtenstein’s tax secrecy laws have learned that their bank files were turned over on the request of the Department of Justice.”

“With this agreement, one of Liechtenstein’s most important banks has put an era behind it.  Today’s agreement with Liechtensteinische Landesbank AG reflects the unprecedented nature of the bank’s cooperation, and serves as another reminder for U.S. tax cheats who mistakenly believe that their offshore bank will never turn over their account files to U.S. authorities.  To them we say, you can hide, but not forever”, said U.S. Attorney Preet Bharara.

 “In 2008, Liechtensteinische Landesbank AG began requiring all U.S. taxpayers with accounts at LLB-Vaduz to declare their income.  In addition, Liechtenstein’s Parliament amended their national law on tax matters to make easier the identification to the United States of non-compliant taxpayers. Today’s action sends a strong message to those Americans who hide their true income from the IRS.  It's time to come clean and pay your fair share of taxes like law-abiding citizens do every day”, said IRS-CI Chief  Weber.

The NPA recognizes that, in 2008, before the IRS and the U.S. Attorney’s Office began the investigation, LLB-Vaduz voluntarily implemented a series of remedial measures to stop assisting undeclared U.S. taxpayers in evading federal income taxes.  The NPA further recognizes LLB-Vaduz’s extraordinary cooperation in the form of its support and assistance in 2012 to obtain a change in law by the Liechtenstein Parliament that permitted the Department of Justice to request and obtain the bank files of non-compliant U.S. taxpayers from Liechtenstein without having to identify the taxpayers by name (the “2012 Law”).

Pursuant to such a request by the Department of Justice, Liechtenstein transferred to the Department of Justice more than 200 files of U.S. taxpayers who held undeclared accounts at LLB-Vaduz, directly or through sham corporations, foundations or trusts (“structures”).  In addition, pursuant to the 2012 Law, the Department of Justice has submitted a second request to the Liechtenstein government for records relating to various Liechtenstein firms that provided trust administration and other fiduciary services that enabled U.S. taxpayers to hold undeclared accounts through structures at banks in Liechtenstein, Switzerland and elsewhere.

As part of the NPA, LLB-Vaduz admitted various facts concerning its wrongful conduct and the remedial measures that it took to cease that conduct.  Specifically, LLB-Vaduz admitted that it knew certain U.S. taxpayers were maintaining undeclared accounts at LLB-Vaduz in order to evade their U.S. tax obligations, in violation of U.S. law.  In addition, LLB-Vaduz admitted that it knew of the high probability that other U.S. taxpayers who held undeclared accounts did so for the same unlawful purpose because significant numbers of U.S. taxpayers employed structures to hold their accounts, instructed LLB-Vaduz to use code names or numbers to refer to them on account statements and other bank documents, instructed LLB-Vaduz not to mail such documents to them in the United States, and instructed LLB-Vaduz not to disclose their identity to the IRS, among other things.  At the end of 2006, LLB-Vaduz held more than $340 million of undeclared assets on behalf of U.S. taxpayers in more than 900 accounts.

As part of the NPA, LLB-Vaduz has agreed to forfeit $16,316,000 to the United States, representing LLB-Vaduz’s total gross revenues from services that it provided to undeclared U.S. taxpayers from 2001 through 2011.  In connection with this forfeiture, LLB-Vaduz has agreed not to contest a civil forfeiture action filed by the United States.  That action was filed on July 30, 2013, in U.S. District Court for the Southern District of New York and assigned to U.S. District Judge Katherine P. Failla.

            The U.S. Attorney’s Office entered into the NPA based on factors including:

·          LLB-Vaduz’s voluntary implementation of various remedial measures beginning in June 2008, before the investigation of its conduct began;
·          LLB-Vaduz’s voluntary cooperation with this Office and the government of Liechtenstein after becoming aware of this Office’s investigation;
·          LLB-Vaduz’s willingness to continue to cooperate with this Office and the IRS to the extent permitted by applicable law;
·          LLB-Vaduz’s substantial support for the 2012 Law, which has already permitted the production to the Department of Justice of more than 200 account files of U.S. taxpayers who held undeclared accounts at LLB-Vaduz;
·          LLB-Vaduz’s representation, based on an investigation by external counsel, that the misconduct under investigation did not, and does not, extend beyond that described in the statement of facts;   
The NPA requires LLB-Vaduz to continue to cooperate with the United States for at least three years from the date of the agreement.  The NPA applies only to LLB-Vaduz and does not apply to any of its subsidiaries, including its Swiss subsidiary, or to any individuals.  In the event that LLB-Vaduz violates the NPA, the U.S. Attorney’s Office may prosecute LLB-Vaduz. 
My one comment is that the amount seems very low.  Perhaps this was a sweet-heart deal to get a DPA done and a message sent to others whose deal will not be so sweer.  And, as the wave of other banks -- particularly Swiss banks -- decide that they had better get in line, perhaps their deals will ratchet up in cost.  The message, the early bird gets the worm!  (See here.)

Also, what does the payment for "restitution" mean.  I will have more to speak on that subject soon.  What are the consequences for the taxpayers whose taxes are being "restituted."  (I just made up that word, but you know what I mean.)

Nonprosecution Agreement ("NPA"), here.

The following is from the NPA and the attached Statement of Facts:
* * * * 
This Office has entered into this Agreement based on: (i) LLB-Vaduz's voluntary and extraordinary cooperation with this Office and the government of Liechtenstein after becoming aware of this Office's investigation; (ii) LLB-Vaduz's substantial support for Liechtenstein's amendment of its Law on Administrative Assistance in Tax Matters with the United States on March 21, 2012 (hereinafter, "the Law on Administrative Assistance") to permit the production to the Department of Justice of account files relating to certain U.S. taxpayers who held undeclared accounts at LLB-Vaduz, including documents that identify the U.S. taxpayers who beneficially owned the accounts; (iii) the production of more than 200 such account files to this Office in 2012 and 2013; (iv) LLB-Vaduz's voluntary implementation of various remedial measures beginning in or about June 2008, before it was aware of this Office's investigation of its conduct; (v) LLB-Vaduz's willingness to continue to cooperate with this Office and the IRS to the extent permitted by applicable law; (vi) LLB-Vaduz's representation, based on an investigation by external counsel, the results of which have been shared with the Office, that the misconduct under investigation did not, and does not, extend beyond that described in the Statement of Facts; and (vii) LLB-Vaduz's decision to close its wholly-owned Swiss subsidiary, Liechteinsteinische Landesbank (Switzerland) Ltd., which also maintained undeclared accounts for U.S. taxpayers, and to sell its wholly-owned subsidiary, Jura Trust AG, a Liechtenstein firm that provided trust administration and other services to U.S. taxpayers who maintained undeclared accounts in Liechtenstein, Switzerland, and elsewhere. 
It is understood that LLB-Vaduz: (a) shall truthfully and completely disclose all information with respect to the activities of LLB-Vaduz, its officers and employees, and others concerning all such matters about which this Office inquires related to this Office's, investigation, which information can be used for any purpose, except as limited by this Agreement, by applicable law, or by the Government's Request for Assistance in the Investigation of Various U.S. Taxpayers and Others in Connection with Undeclared Accounts at Liechtensteinische Landesbank AG, dated May 11, 2012 (the "Request for Assistance"); (b) shall cooperate fully with this Office, the IRS, and any other law enforcement agency so designated by this Office, except as limited by applicable law and the Request for Assistance; (c) shall consent to the
production to the Department of Justice, through the Liechtenstein government, of any document, record, or other tangible evidence, except as limited by applicable law or the Request for Assistance; (d) shall, at the Office's request, use its best efforts to secure the attendance and truthful statements or testimony of any officer, agent, employee, or former officer, agent or employee, at any meeting or interview or before the grand jury or at any trial or other court proceeding, to the extent permitted by applicable law; and (e) shall commit no crimes whatsoever. It is further understood that LLB-Vaduz will bring to this Office's attention all criminal conduct by, and criminal investigations of, LLB-Vaduz or its employees that come to the attention of LLB-Vaduz's senior management, as well as any administrative proceeding, civil action or other proceeding brought by any governmental authority in which LLB-Vaduz is a party, related to the operation or management of LLB-Vaduz's business, and excluding routine proceedings. LLB-Vaduz's obligations under this paragraph shall continue until the later of: (1) a period of three years from the date this Agreement is executed, or (2) the date on which all prosecutions arising out of the conduct described in the opening paragraph of this Agreement are final. 
As a result of the conduct described in this Agreement and in the attached Statement of Facts, LLB-Vaduz agrees, pursuant to Title 18, United States Code, Section 981(a)(1)(C) that it will forfeit to the United States $16,316,000 (the "Forfeiture Amount"), representing the gross fees paid to LLB-Vaduz by U.S. taxpayers with undeclared accounts at LLB-Vaduz from January 1, 2001 through approximately April 2012. Payment of $15,899,000 of the Forfeiture Amount shall be by wire transfer to a seized asset deposit account maintained by the United States Department of the Treasury within three days of the execution of this Agreement. Payment of $417,000 of the Forfeiture Amount shall be made to the Principality of Liechtenstein Tax Authority to reimburse it for extraordinary costs incurred in connection with requests by the United States for documents pursuant to the Law on Administrative Assistance, as amended on March 21, 2012. The United States contends, and LLB-Vaduz agrees not to contest, that the facts contained in this Agreement, the Civil Forfeiture Complaint to be filed against the Forfeiture Amount, and the Statement of Facts are sufficient to establish that the Forfeiture Amount being paid by LLB-Vaduz to the United States is subject to civil forfeiture to the United States and that this Agreement, and the accompanying Statement of Facts, may be attached to and incorporated into the Civil Forfeiture Complaint. By this Agreement, LLB-Vaduz specifically waives service of said Civil Forfeiture Complaint and agrees to entry of a Final Order of Forfeiture against the Forfeiture Amount. Upon payment of the Forfeiture Amount, LLB-Vaduz shall release any and all claims it may have to such funds and execute such documents as are necessaiy to accomplish the same, including the release of its claim to said funds in a civil forfeiture proceeding brought against said funds. 
LLB-Vaduz further agrees to make a restitution payment to the United States in the amount of $7,525,542 (the "Tax Loss Amount"). LLB-Vaduz admits that the Tax Loss Amount represents the total approximate unpaid gross pecuniary loss to the United States as a result of the conduct described in the Statement of Facts. The Tax Loss Amount shall not be reduced by payments that have been made or may be made to the United States by U.S. taxpayers through the Offshore Voluntary Disclosure Initiative and similar programs (collectively, "OVDI") before or after the date of this Agreement. LLB-Vaduz agrees to pay the Tax Loss Amount to the United States by wire transfer within three days of the date of the execution of this Agreement. Other than the total sum of $23,841,542 (the Forfeiture Amount plus the Tax Loss Amount) that LLB-Vaduz is required to pay under this Agreement, this Agreement does not require LLBVaduz to pay any other fines or financial penalties.
* * * * 
STATEMENT OF FACTS 
II. The Offense Conduct 
From at least 2001 through 2011, LLB-Vaduz assisted certain U.S. taxpayers, including one or more taxpayers living in the Southern District of New York, to evade their U.S. tax obligations, file false federal tax returns with the Internal Revenue Service (the "IRS"), and otherwise hide accounts held at LLB-Vaduz from the IRS (hereinafter, "undeclared accounts"). LLB-Vaduz did so by opening and maintaining undeclared accounts for U.S. taxpayers and by allowing third-party independent investment advisers to open undeclared accounts for U.S. taxpayers at LLB-Vaduz. Specifically, in furtherance of a scheme to help U.S. taxpayers hide assets from the IRS and evade taxes: 
  • LLB-Vaduz entered into "code word agreements" with U.S. taxpayers under which the bank agreed not to identify the U.S. taxpayers by name within the bank or on bank documents, but rather to identify the U.S. taxpayers by code name or number, thus reducing the risk that U.S. tax authorities would learn the identities of the U.S. taxpayers. 
  • » LLB-Vaduz permitted many U.S. taxpayers to open accounts held in the name of non-U.S. corporations, foundations, trusts, or other legal entities (collectively, "structures"), thereby helping such U.S. taxpayers conceal their beneficial ownership of the accounts; 
  • LLB-Vaduz agreed to hold bank statements and other mail relating to the accounts at LLB-Vaduz's offices in Liechtenstein, rather than send them to the U.S. taxpayers in the United States, to ensure that documents reflecting the existence of the accounts remained outside the United States and beyond the reach of U.S. tax authorities, given Liechtenstein's bank secrecy laws.Exhibit A to LLB-Vaduz NPA dated July 24, 2013
  • - LLB-Vaduz maintained records in its files in which many U.S. taxpayers expressly instructed LLB-Vaduz not to disclose their names to the IRS.
  • One or more U.S. taxpayer-clients of LLB-Vaduz used the U.S. mails, private or commercial interstate carriers, or interstate wire communications to submit individual federal income tax returns to the IRS that were materially false and fraudulent in that these returns failed to disclose the existence of such taxpayers' undeclared accounts or the income earned in such accounts.
At all relevant times, LLB-Vaduz knew that certain U.S. taxpayers were maintaining undeclared accounts at LLB-Vaduz in order to evade their U.S. tax obligations, in violation of U.S. law. LLB-Vaduz knew that these U.S. taxpayers wanted to conceal the undeclared accounts based on, among other things, correspondence with certain U.S. taxpayer-clients, including requests from U.S. taxpayers instructing LLB-Vaduz not to disclose the identity of the taxpayer to the IRS. 
In addition, LLB-Vaduz knew of the high probability that other U.S. taxpayers who held undeclared accounts at LLB-Vaduz also did so for the same unlawful purpose. LLB-Vaduz knew this because significant numbers of U.S. taxpayers employed sham corporations, Foundations, or trusts ("structures") to hold their accounts, entered into code word agreements and hold mail agreements when they opened their accounts, expressly instructed LLB-Vaduz not to disclose their identity to the IRS, and/or conducted business with respect to their accounts through in-person visits to Liechtenstein, rather than by telephone or otherwise from the United States. 
LLB-Vaduz was aware that U.S. taxpayers had a legal duty to report to the IRS, and pay taxes on the basis of, all of their income, including income earned in accounts that these U.S. taxpayers maintained at LLB-Vaduz. Despite being aware of this legal duty, LLB-Vaduz intentionally opened and maintained undeclared accounts for these taxpayers with the knowledge that, by doing so, LLB-Vaduz was helping these U.S. taxpayers violate their legal duties, LLBVaduz was aware that this conduct violated U.S. law.  
LLB-Vaduz's conduct allowed it to increase the undeclared U.S. taxpayer assets that it held, thereby increasing its fees and profits. As shown in the table below, LLB-Vaduz increased the AUM that it held for undeclared U.S. taxpayers from approximately $152.1 million in 2001 to approximately $341.3 million in 2006, its peak year of undeclared AUM. That year, LLBVaduz had approximately 904 undeclared U.S. taxpayer clients, including those who held accounts through structures. From 2001 through 2011, LLB-Vaduz earned approximately $7,700,000 million in profit on approximately $16,316,000 in gross revenues from its undeclared U.S. taxpayer accounts, including accounts held through structures. 
The following table shows the approximate number of U.S. taxpayers who held undeclared accounts at LLB-Vaduz from 2001 through 2011, including accounts held through structures; the approximate total AUM for such undeclared accounts; and total gross fees earned by LLB-Vaduz from undeclared accounts held by U.S. persons. 
[TABLE OMITTED BUT TOTAL FEES FROM UNDECLARED ACCOUNTS IS $16,3 MILLION] 
* * * * 
IV. Cooperation 
The cooperation of LLB-Vaduz, which began in April 2011, was extraordinary. On March 21, 2012, the Parliament of Liechtenstein amended Liechtenstein's national Law on Administrative Assistance in Tax Matters with the United States of America ("the Law on Administrative Assistance") to permit the Department of Justice to request information concerning undeclared accounts held by U.S. taxpayers at LLB-Vaduz. LLB-Vaduz, through contact with the Liechtenstein government, advocated in favor of this change in law, and the change in law occurred, in part, as a result of LLB-Vaduz's efforts. 
Pursuant to the new law, the U.S. Department of Justice, for the first time, was able to request and obtain the bank files of non-compliant U.S. taxpayers from Liechtenstein without having to identify the taxpayers by name. The Department of Justice made such a request on May 11, 2012. Pursuant to this request, from July 2012 to January 2013, Liechtenstein transferred to the Department of Justice over 200 files identifying U.S. taxpayer-clients who held undeclared accounts at LLB-Vaduz, directly or through structures. In addition, LLB-Vaduz has produced to the Department of Justice internal business records relating to its U.S. business.  
In addition, on March 22, 2013, LLB-Vaduz announced that it would close its wholly-owned Swiss subsidiary, LLB-Switzerland. At the same time, LLB-Vaduz announced that it would sell its wholly-owned subsidiary, Jura Trust AG, a Liechtenstein firm that provided services to maintain structures through which certain U.S. taxpayers held undeclared accounts at banks in Liechtenstein, Switzerland, and elsewhere. In March and April 2013, Liechtenstein provided assistance to the Department of Justice to permit the production of records relating to various Liechtenstein firms that have provided such services to U.S. taxpayers.
Forfeiture Complaint, here:

The following is from the complaint for forfeiture.  United States v. 15,899,000 in United States Currency (SDNY No. 13 cv  5296):
7. At all times relevant to this Complaint, LLB-Vaduz provided private banking and asset management services to individuals and entities outside Liechtenstein, including citizens and residents of the United States ("U.S. taxpayers"). LLB-Vaduz provided these services principally through private bankers based in Vaduz. LLB-Vaduz also acted as a custodian of assets that were managed by third-party investment advisers based in Europe, including assets beneficially owned and controlled by U.S. taxpayers. 
8. From at least 2001 through 2011, LLB-Vaduz assisted certain U.S. taxpayers, including one or more taxpayers who lived in the Southern District of New York, in evading their U.S. tax obligations, file false federal tax returns with the IRS, and otherwise hiding undeclared accounts held at LLB-Vaduz from the IRS. LLB-Vaduz did so by opening and maintaining undeclared accounts for U.S. taxpayers and by allowing third-party independent investment advisers to open undeclared accounts for U.S. taxpayers at LLB-Vaduz. 
9. Among the means and methods by which LLB-Vaduz and its co-conspirators carried out the scheme to help U.S. taxpayers hide assets from the IRS and evade taxes were the following: 
  • LLB-Vaduz entered into "code word agreements" with U.S. taxpayers under which the bank agreed not to identify the U.S. taxpayers by name within the bank or on bank documents, but rather to identify the U.S. taxpayers by code name or number, thus reducing the risk that U.S. tax authorities would learn the identities of the U.S. taxpayers. 
  • LLB-Vaduz permitted many U.S. taxpayers to open accounts held in the name of non-U.S. corporations, foundations, trusts, or other legal entities (collectively, "structures"), thereby helping such U.S. taxpayers conceal their beneficial ownership of the accounts.
  • LLB-Vaduz agreed to hold bank statements and other mail relating to the accounts at LLB-Vaduz's offices in Liechtenstein, rather than send them to the U.S. taxpayers in the United States, to ensure that documents reflecting the existence of the accounts remained outside the United States and beyond the reach of U.S. tax authorities, given Liechtenstein's bank secrecy laws.
  • LLB-Vaduz maintained records in its files in which many U.S. taxpayers expressly instructed LLB-Vaduz not to disclose their names to the IRS.
  • One or more U.S. taxpayer-clients of LLB-Vaduz, including one or more individuals who lived in the Southern District of New York, used the U.S. mails, private and commercial interstate carriers, and interstate wire communications to submit tax returns that were materially false and fraudulent in that these returns failed to disclose the existence of such taxpayers' undeclared accounts or the income earned in such accounts.
10. At all relevant times, LLB-Vaduz knew that certain U.S. taxpayers were maintaining undeclared accounts at LLB-Vaduz in order to evade their U.S. tax obligations, in violation of U.S. law. LLB-Vaduz knew that these U.S. taxpayers wanted to conceal the undeclared accounts based on, among other things, correspondence with certain U.S. taxpayer-clients, including requests from U.S. taxpayers instructing LLB-Vaduz not to disclose the identity of the taxpayer to the IRS. 
11. At all relevant times, LLB-Vaduz knew that certain U.S. taxpayers were maintaining undeclared accounts at LLB-Vaduz in order to evade their U.S. tax obligations, in violation of U.S. law. LLB-Vaduz knew this from, among other things, its correspondence with certain U.S. taxpayer-clients. 
12. In addition, LLB-Vaduz knew of the high probability that other U.S. taxpayers who held undeclared accounts at LLB-Vaduz also did so for the same unlawful purpose. LLB-Vaduz knew this because significant numbers of U.S. taxpayers employed sham structures to hold their accounts, entered into code word agreements and hold mail agreements when they opened their accounts, expressly instructed LLB-Vaduz not to disclose their identity to the IRS, and/or conducted business with respect to their accounts through in-person visits to Liechtenstein, rather than by telephone or otherwise from the United States. 
13. LLB-Vaduz was aware that U.S. taxpayers had a legal duty to report to the IRS, and pay taxes on the basis of, all of their income, including income earned in accounts that these U.S. taxpayers maintained at LLB-Vaduz. Despite being aware of this legal duty, LLB-Vaduz intentionally opened and maintained undeclared accounts for these taxpayers with the knowledge that, by doing so, LLB-Vaduz was helping these U.S. taxpayers violate their legal duties. LLB-Vaduz was aware that this conduct violated U.S. law.

Comments from Others:

Key points from Kristin A. Parillo and Stephanie Soong Johnston, Liechtenstein Bank Settles U.S. Tax Dispute for $24 Million, 2013 TNT 147-5 (7/31/13)

-  LLB is the first bank to get an NPA (nonprosecution agreement).  One attorney speculates that the NPA was given because LLB is partially owned by the government.

-  The LLB NPA has implications on the Swiss banks.  Many U.S. taxpayers use Swiss banks to cheat also used Liechtenstein to add some complexity -- meaning obscurity.  For example many Swiss bank accounts were owned by Liechtenstein Foundations that may have been enabled by LLB and other Liechtenstein financial institutions.  Cooperation from LLB (and, later other Liechtenstein Foundations) will offer an important window into the Swiss banks.  In this regard, the article quotes Jeff Neiman, here, as follows:
"If [LLB] is providing the information it appears to be providing, the Swiss bankers and the banks who had Liechtenstein foundations that held accounts for U.S. taxpayers -- which I would venture to say are all Swiss banks -- now find themselves susceptible to their information or their account information ending up ultimately in the hands of the U.S. authorities," * * * "And that should give the Swiss a greater incentive to try to reach some sort of agreement whereby its banks and bankers can survive U.S. prosecution."
- The LLB agreement covers only LLB and not its employees or related implementers and not other entities in the LLB chain (such as LLB's Swiss entity).  Milan K. Patel, here, is quoted:  "Employees are still exposed, which is not good news. I think there's a lot of resentment here in Switzerland and Liechtenstein that employees have been thrown under the bus."

JAT Comments:

My one comment is that the amount seems very low.  Perhaps this was a sweet-heart deal to get a DPA done and a message sent to others whose deal will not be so sweer.  And, as the wave of other banks -- particularly Swiss banks -- decide that they had better get in line, perhaps their deals will ratchet up in cost.  The message, the early bird gets the worm!  (See here.)

Also, what does the payment for "restitution" mean?  I will have more to speak on that subject soon.  What are the consequences for the taxpayers whose taxes are being "restituted."  (I just made up that word, but you know what I mean.)

3 comments:

  1. LLB is forfeiting its gross revenues plus the estimated tax loss to the US. The fine was limited to this because the bank "implemented remedial measures before investigation of its conduct began." This is exactly what most of those in OVDI have done (with the exception of those who joined OVDI only when notified that their bank was getting ready to turn over their data.) If OVDI participants' fines were calculated the same way, they would be paying 100% of their previously undeclared income plus the tax loss. For most, this would be far, far less than 27.5% of the high balance. This is extremely disproportionate treatment and runs counter to the statement that the IRS wants people to pay their "fair share of taxes," since a penalty based on high balance and not on taxes due is not proportional to the conduct that took place.

    Total deposits of $340 million on 900 accounts works out to an average of about $380K per account (I'm doing the calculation in my head.)

    Jack, you said that "the early bird gets the worm." True, but the early worm gets eaten by the bird!

    ReplyDelete
  2. I also had a question in my mind about the implications of the bank paying the taxes that the accountholders ought to have paid. The logical and fair way to handle this would be for this to be a loan from the bank to the IRS, to be reimbursed to the extent that the individuals involved would pay back taxes. Whether this will be the case, or the IRS will simply collect twice, is something I don't know. I suppose that the account holders could argue that since the bank paid the tax they should not pay it, though I don't know how successful that argument would be.

    And could the holders of smaller accounts, those whose identities were not disclosed, (though I would presume their taxes were paid by the bank as well) argue that this is an IRS-sanctioned QD and there ought to be no accuracy or FBAR penalties?

    But I do have a question about the NPA guaranteeing no prosecution in exchange for payment of money. Is this legal? I thought that such a contract would be illegal since it would be considered blackmail and/or extortion.

    ReplyDelete
  3. There is some really intriguing facets of the particular issue of how the restitution plays out. I don't know that I could bring any certainty, but suffice it to say that I have that issue involved in a matter I am handling. Don't know that it would be prudent to get into it much beyond that. Your thoughts are creative.

    NPAs usually require some quid pro quo from the beneficiary of the NPA (or DPA for that matter). I do have a link below on the right to a great website collection of DPAs and NPAs. I post the link here as well: http://lib.law.virginia.edu/Garrett/prosecution_agreements/home.suphp

    Best regards,

    Jack Townsend

    ReplyDelete

Please make sure that your comment is relevant to the blog entry. For those regular commenters on the blog who otherwise do not want to identify by name, readers would find it helpful if you would choose a unique anonymous indentifier other than just Anonymous. This will help readers identify other comments from a trusted source, so to speak.