Credit Suisse Banker Pleads Guilty to Tax Conspiracy (3/12/14; 3/13/14)

Andreas Bachmann, a Credit Suisse Banker, pled guilty today to one count of conspiracy.  See DOJ Tax press release, here.  The Statement of Facts is here.  I excerpt portions of the Statement of Facts below.

Key excerpts (bold face added by JAT):

In a statement of facts filed with the plea agreement, Bachmann admitted that between 1994 and 2006, while working as a relationship manager in Switzerland for a subsidiary of an international bank, he engaged in a wide-ranging conspiracy to aid and assist U.S. customers in evading their income taxes by concealing assets and income in secret Swiss bank accounts.

As part of that conspiracy, Bachmann traveled to the United States twice each year to provide banking services and investment advice to his U.S. customers.  As a matter of practice, prior to traveling to the United States, Bachmann notified his executive management, including the head of the subsidiary’s private bank in Zurich and the chief executive officer of the subsidiary, of the planned trip and its objectives.

Although Bachmann had been informed of limitations under U.S. law on his ability to provide investment advice to U.S. account holders regarding U.S. securities, the highest ranking executive at the subsidiary was aware that Bachmann was violating U.S. law.  According to the statement of facts, Bachmann was effectively told by the chief executive officer for the subsidiary, “Mr. Bachmann, you know what we expect of you, don’t get caught.”

According to the statement of facts, Bachmann also engaged in cash transactions while traveling in the United States.  In the course of arranging meetings with U.S. customers, some clients would request that Bachmann either provide them with cash as withdrawals from their undeclared accounts or take cash from them as a deposit to their undeclared accounts.  As part of that process, Bachmann agreed to receive cash from U.S. customers and used that cash to pay withdrawals to other U.S. clients.  In one instance, Bachmann received $50,000 in cash from one U.S. customer in New York City and intended to deliver the money to another U.S. client in Southern Florida.  Airport officials in New York discovered the cash but let Bachmann keep the money after questioning him.  The client in Florida refused to take the money after the client learned about the questioning by New York airport officials, and Bachmann returned to Switzerland with the $50,000 in cash in his checked baggage.  Bachmann advised the executive management of the subsidiary about the incident with the cash.

Bachmann also understood that a number of his U.S. customers concealed their ownership and control of foreign financial accounts by holding those accounts in the names of nominee tax haven entities, or structures, which were frequently created in the form of foreign partnerships, trusts, corporations or foundations.

Bachmann dealt with Josef Dӧrig, a co-defendant, regarding the formation and/or maintenance of structures for U.S. customers, among others.  In approximately 1997, the international bank instructed Dӧrig to form his own company specializing in the formation and management of nominee tax haven entities because it was “too risky” to have Dörig perform that work from inside the international bank.  The international bank then directed the subsidiary and others to use Dӧrig and his Swiss trust company, Dӧrig Partner AG, as the preferred choice for the formation and management of structures.

JAT Comments:

The real target of this plea and the wording of the press release is, of course, Credit Suisse.  Perhaps even the testimony of the CEO at the recent PSI hearing.

Addendum 3/12/14 6:32 PM:

Evan Perez, Ex-Credit Suisse banker pleads guilty to fraud, set to aid tax inquiry (CNN 3/12/14), here.  Excerpts:

A former Credit Suisse banker pleaded guilty on Tuesday to fraud charges, setting the stage for prosecutors to challenge claims by the Swiss bank that helping wealthy Americans evade taxes was the work of a few rogue bankers. 

* * * * 

As part of his plea deal, Bachmann is expected to cooperate with an ongoing Justice Department investigation of Credit Suisse.

His cooperation is expected to increase the scrutiny of assertions made by Credit Suisse CEO Brady Dougan, who two weeks ago expressed regret at a Senate hearing that the bank helped rich U.S. clients hide billions of dollars in assets from the IRS. 

He claimed that the wrongdoing was limited to a few bankers who are indicted and was not activity encouraged by Credit Suisse.

Seems like Mr. Dougan may have dug Credit Suisse a deeper hole. Perhaps the Credit Suisse and its representatives should try some contrition.  Contrition is good for the soul.  To use a more technical term -- good in a lot of contexts -- acceptance of responsibility.

Addendum 3/13/14 1:00 AM:

The following are excerpts from the Statement of Facts, here, filed contemporaneous with the plea.  I omit the portions that describe the more or less standard fare for the aggressive Swiss bank enablers (sham structures, traveling to U.S., and other aggressive activity) and focus on the portions of the Statement of Facts related to management which show broader culpability than the CEO of Credit Suisse admitted in his PSI testimony.

6. From in or about 2009 through the present, Bachmann has been employed by Asset Management Firm #2 ("AMF#2"), as an asset manager where he continued to open and manage a number of undeclared financial accounts for U.S. customers.  Beginning in approximately 2009, Bachmann began to encourage his U.S. customers with undeclared accounts to participate in the IRS's Voluntary Disclosure Program and declare their offshore financial accounts. However, Bachmann continued to service undeclared accounts of U.S. persons who refused to follow his advice and declare their financial accounts to the IRS. 

7. Between in or about 1994 and in or about 2006, Bachmann worked in Zurich, Switzerland as an asset manager I relationship manager for Subsidiary. Bachmann reported directly to Swiss Bank Executive I, the Head of the Private Bank in Zurich for Subsidiary. Swiss Bank Executive I reported to Swiss Bank Executive 2, the Chief Executive Officer of Subsidiary. 

* * * * 

15. Bachmann most frequently dealt with Josef Dorig ("Dorig") in regard to the formation and/or maintenance of structures on behalf of clients, including U.S. customers. While Bachmann did not advise U.S. customers to form structures for their financial accounts, Bachmann knew that Dorig assisted a number of Bachmann's U.S. customers and others with forming and maintaining structures for the purpose of concealing the true ownership of the financial accounts. 

16. An internal division of Subsidiary originally employed Dorig as part of its senior management. In approximately 1997, a representative of International Bank informed employees of Subsidiary that it was too risky for International Bank to have Dorig form and manage nominee tax haven entities for U.S. customers from within International Bank. Instead, International Bank announced that the formation and management of nominee tax havens should be done from outside International Bank. International Bank instructed Dorig to form his own company that specialized in the formation and management of nominee tax haven entities. 

* * * * 

24. Asset managers at Subsidiary did not broadly comply with International Bank's directive against advising U.S. accountholders regarding investments in U.S. securities. The management of Subsidiary condoned the violation of U.S. law and the Q.l. Agreement. For example, Bachmann complained to Swiss Bank Executive 2, the Chief Executive Officer for Subsidiary, about the QI Agreement and the limits it placed on activities in the United States. Swiss Bank Executive 2 instructed him with words to the following effect: ''Mr. Bachmann: You know what we expect of you- don't get caught." Bachmann continued his discussions of U.S. securities with U.S. accountholders and continued to reference such discussions in the travel reports he prepared and distributed to his superiors and peers at Subsidiary. 

25. International Bank's compliance representatives did nothing to assure compliance with the directive and no one was ultimately disciplined for continuing to discuss U.S. securities investments with U.S. customers. 

26. Subsidiary's management had first-hand knowledge that asset managers were providing investment advice in the United States in violation of U.S. law and in contravention of the Ql Agreement. For example, Swiss Bank Executive I accompanied Bachmann on a trip to the United States in or about 2004 and joined Bachmann in meetings with U.S. clients where investment advice was dispensed and banking transacted.  

27. Bachman routinely prepared a written report of his travels upon his return from the United States. Bachman widely distributed these travel reports within Subsidiary, to Swiss Bank Executive I, Swiss Bank Executive 2 and to other asset managers and/or relationship managers employed by Subsidiary. The travel reports detailed the cities and customers Bachmann visited, a summary of the business conducted on behalf of his clients, and general information Bachmann learned during his travels, including Bachmann's personal observations concerning the U.S. economy. The travel reports also usually included a description of the types of U.S. securities in which the clients invested. 

* * * * 

31. The management of Subsidiary was aware that Bachmann was dealing in cash in the United States. Upon his return to Switzerland, Bachmann informed Swiss Bank Executive I and Swiss Bank Executive 2 about the incident with the cash. Swiss Bank Executive I responded that he/she was glad nothing else happened. Bachmann continued his routine travels to the United States subsequent to the incident involving the $50,000 in U.S. currency.

I will update the spreadsheet in a few days.  As of now, this plea is the only change since the last posting of the spreadsheet.