Monday, March 24, 2014

Article Regarding Representing Swiss Banks (3/24/14)

I received an email today about an article that he and two other prominent tax practitioners published in February.  Alan Granwell, Bob Katzberg and William Sharp, The US DOJ Voluntary Disclosure Program for Swiss banks: What the Umbrella Man can teach bank counsel about criminal intent (International Tax Review 2/13/14), here.

The key contents of the article are probably well known to readers of this blog.  The authors do analogize to the infamous "Umbrella Man" who surfaced in connection with the John F. Kennedy Assassination.  The  Wikipedia entry on the Umbrella Man is here.  I do think  that anecdote is useful in thinking about the situation addressed.

From the legal perspective, however, I do have a couple of quibbles.

  • Readers should remember that, in a legal setting, the level of mens rea is the Cheek definition for willfulness -- the voluntary intentional violation of a known legal duty.  Even where willfulness is not a specific statutory requirement, the crimes that could be marshaled against the enablers have similar levels of intent.  See  John A. Townsend, Tax Obstruction Crimes: Is Making the IRS's Job Harder Enough, 9 Hous. Bus. & Tax. L.J. 255, 277-314 (2009), here.  Of course, those assisting the bank should be keenly aware of that standard and deploy it in assessing the conduct of the bank personnel.
  • As for deliberate ignorance (which I usually call conscious avoidance), I have spoken often on that subject on this blog.  The law is not settled, but I think when it is, the concept of willful ignorance will not be a substitute for the express intent to violate a known legal duty, but a device to permit the trier of fact to infer in the context of all the facts and find, beyond a reasonable doubt, that the defendant had the specific intent to violate a known legal duty.  That may not sound important, but I think it is.
  • I continue to be concerned about the ease with which the aiding and abetting concept is used.  I have ranted on that subject before and won't do it again.  Follow the links below to read more about it.  See also John A. Townsend, Theories of Criminal Liability for Tax Evasion (5/15/12), here.  As to the charge of tax evasion and the obstruction charges (tax obstruction under Section 7212(a) or defraud / Klein conspiracy under 18 USC 371), the bank employees can be directly guilty of the crime, so aiding and abetting does not add anything other than extra and meaningless jury instructions.  I  suppose that, since tax perjury is a status crime and bank employees do not satisfy the required status (the taxpayer signing the return), the aiding and abetting concept might be marshaled for them, but they probably would be directly guilty under 7206(1), aiding and assisting.  Oh, well.

The key point the authors make is that, as in all of life, there is no substitute for hard work and experience in making the decisions that are so important to the Swiss banks assessing their exposure and participation in the program.


  1. Thank you for sharing valuable information. Nice post. I enjoyed reading this post. The whole blog is very nice found some good stuff and good information here Thanks..Also visit my page Affordable Accountants Auckland

  2. Lessons learned from the "Umbrella Man".... DOJ are you listening ??
    Jack, if you go back to my e-mails to you from last year you will find already many of the now public arguments regarding this subject of criminal intent.......
    Amongst many other things I failed to explain to you that it is inappropriate and highly questionable to review conduct and try to establish criminal intent reflected in bank records or cryptic file notes all through the prism of US criminal law, despite the fact that such conduct occurred in a private banking culture, whose practices and operations were substantially different from those in the US.
    The question remains what constitutes conclusive evidence of the knowledge and intentions of a swiss banker ? I continue to argue that the existence of possible badges of fraud in a bank file is by far not enough.
    btw. William Sharp has a working permit in CH and lives 3 out of 4 weeks in ZH .

  3. GolbalCapitalism, your comments are well taken. One nuance. Our legal system does not require conclusive evidence for criminal conviction. (I doubt that any legal system requires that level of proof; or, if it is required in name, it is in name only.) Our system requires proof beyond a reasonable doubt. Just what is reasonable doubt? No one has a perfect definition of it and, basically, it is left for the trier-of-fact -- usually a jury -- to decide what it means in the context of the case.

    A person's criminal intent is usually particularly difficult to prove. In our system (and, I suspect in most systems), circumstantial evidence of intent is permissible and, depending on the evidence, can permit the trier-of-fact to infer guilt beyond a reasonable doubt. If that were not the case, no one could be convicted. So, bits and pieces from the bank's files could, in the context of a host of other facts relating to context and meaning, permit a finding of guilt.

    All of that is to say that the seasoned U.S. criminal practitioners engaged by the banks certainly know that isolated bits of evidence are not likely to be criminal. But enough evidence to show a pattern can be criminal. That pattern is what these lawyers will be looking at when sifting through the banks files related to the U.S. depositors.


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.