Between 1995 and 2012, DUNKI helped U.S. taxpayers evade taxes and hide hundreds of millions of dollars in undeclared accounts at Swiss Bank No. 1. DUNKI provided this advice and assistance to U.S. taxpayers in his capacity as a client advisor at Swiss Bank No. 1, where DUNKI was employed until early 2012.
One of DUNKI's co-conspirators was Edgar Paltzer, an attorney based in Zurich, Switzerland, who previously pled guilty in the Southern District of New York for his role in assisting U.S. taxpayers and others to evade taxes. In 1999, DUNKI, Paltzer, and an attorney from Santa Barbara, California ("Attorney 1") began working together in the management of undeclared accounts at Swiss Bank No. 1 for a number of U.S. taxpayers (collectively, the "Dunki/Attorney 1 Clients"). The undeclared assets of the Dunki/Attorney 1 Clients were maintained in accounts held in the names of sham foreign foundations, rather than in the names of the clients individually, to help the clients conceal their ownership of these undeclared accounts from the IRS. Initially, the sham foundations that held the accounts were organized under the laws of Liechtenstein. In December 2008, however, Liechtenstein and the United States signed a Tax Information Exchange Treaty ("TIEA"), under which Liechtenstein agreed to provide the United States with access to certain bank and other information needed to enforce U.S. tax laws. As a result of the TIEA between Liechtenstein and the United States, and to prevent disclosure to the IRS of the undeclared accounts maintained by the Dunki/Attorney 1 Clients, DUNKI and others transferred the undeclared assets of the Dunki/Attorney 1 Clients to new accounts at Swiss Bank No. 1, held by new sham foundations organized under the laws of Panama. Moreover, beginning in August 2009, in response to the investigation of another Swiss bank, UBS AG ("UBS"), for helping U.S. taxpayers maintain undeclared accounts in Switzerland, DUNKI and others helped to further conceal the undeclared accounts of the Dunki/Attorney 1 Clients by using assets in those accounts to purchase gold and other precious metals. The gold and precious metals, which amounted to tens of millions of dollars, were then transferred to escrow accounts opened at Swiss Bank No. 1 and hidden, along with substantial sums of cash, in a vault in Switzerland for the benefit of the Dunki/Attorney 1 Clients.
In addition to opening, maintaining, and managing undeclared accounts at Swiss Bank No. 1 for the Dunki/Attorney 1 Clients, DUNKI opened, maintained, and managed undeclared accounts at Swiss Bank No. 1 for other U.S. taxpayers. For instance, between 2000 and 2012, DUNKI helped one U.S. taxpayer hide nearly $300 million in assets at Swiss Bank No. 1, in undeclared accounts held in the names of sham Liberian corporations. Further, between 1995 and 2008, DUNKI helped another U.S. taxpayer maintain approximately $70 million in an undeclared account at Swiss Bank No. 1. When DUNKI met with this taxpayer in the United States, the account statements that DUNKI brought with him were deliberately cut off at the top, to omit the account number and the name of Swiss Bank No. 1, because -- as DUNKI himself acknowledged to the taxpayer -- DUNKI had to be careful not to leave a trace when going through U.S. customs.
DUNKI also helped U.S. taxpayers bring funds back to the United States in ways designed to ensure that U.S. authorities would not discover the existence of the taxpayers' undeclared accounts at Swiss Bank No. 1. For example, on at least one occasion, DUNKI met a U.S. taxpayer in the United States and provided the taxpayer with an envelope containing approximately $10,000 in cash, which represented a cash withdrawal from the taxpayer's undeclared account at Swiss Bank No. 1. On other occasions, DUNKI helped send money from a U.S. taxpayer's undeclared account at Swiss Bank No. 1 to another account in Geneva, Switzerland and, from there, to a diamond dealer in Manhattan. Once the money was received by the diamond dealer, the U.S. taxpayer would pick it up and give the diamond dealer a fraction of the money as a commission.
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DUNKI, 66, a Swiss citizen, resides in Switzerland and has not been arrested. DUNKI is charged with one count of conspiracy to defraud the IRS, which carries a maximum sentence of five years in prison.JAT Comments:
- This is more or less standard fare for this type of enabler.
- As charged, Dunki appears to have been more hands on in the skulduggery than was Raoul Weil.
- The announcement says that it the charge is for conspiracy to defraud. As I read the indictment (specifically paragraphs 97 and 98 excerpted below), it appears to charge the conspiracy as being one combined conspiracy to defraud and to commit U.S. tax offenses.
- The charge drones on for 42 pages. For background on this type of conspiracy so common in offshore account indictments of taxpayers and enablers and in tax crimes generally, I offer the following from my book (footnotes omitted):
Conspiracy charges are frequent “add-ons” in charging traditional tax crimes to permit the Government to increase its chances of obtaining a conviction. Even beyond the considerable elasticity of the conspiracy concept from a substantive perspective, the conspiracy charge offers the Government great advantages. The mere charge of “conspiracy” connotes something sinister, and the law treats a conspiracy as a serious criminal act independent of any offense which might be the object of the conspiracy. Moreover, herding a gaggle of defendants into a single case with an overarching conspiracy charge may make it difficult for the jury to assess independently the guilt or innocence of each defendant and invite a finding of guilt by association. Conspiracy cases tend to be more complex as the Government mounts extensive evidence to connect the dots – real or imagined – among the alleged conspirators, particularly in allegedly large conspiracies such as some of the tax shelter recent tax shelter, with the poster child being Stein. Furthermore, the Government gets vicarious Pinkerton liability for offenses committed by others in furtherance of the conspiracy, ability to admit statements that would otherwise be inadmissible hearsay, relaxed standard of proof and relevancy, tolling or refreshing of the statute of limitations by remote participants, and venue in remote judicial forums of the Government’s choosing. With all of these benefits and more, Judge Learned Hand long ago noted, correctly, that conspiracy is “the darling of the modern prosecutor's nursery.”
Not surprisingly, therefore, the Government trots out the conspiracy charge whenever it can imagine more than one bad guy behind the tree – it is so easy to do. The conspiracy count allegations are framed as a cascade of allegations telling a damning story (if true and, although literally true, not misleading), but sometimes producing more heat than light. This contrasts with counts for the tax offenses which are dry, sparse, boring, and usually not even flowered up for dramatic effect. The benefits for the Government are great, and the downsides are few; after all, the prosecutors’ life and liberty are not at stake. This means, of course, that the Government’s power to tack on conspiracy charges can be abused, particularly with a weapon as potent and elastic as conspiracy. The Supreme Court has cautioned that:
We agree that indictments under the broad language of the general conspiracy statute must be scrutinized carefully as to each of the charged defendants because of the possibility, inherent in a criminal conspiracy charge, that its wide net may ensnare the innocent as well as the culpable.Some news reports on the indictment are:
- Nate Raymond, Ex-banker at Switzerland's Rahn & Bodmer charged in U.S. for tax scheme (Reuters 11/14/14), here.
- Bob Van Voris, Rahn & Bodmer Retiree Said to Be Banker in U.S. Tax Case (Bloomberg 11/13/14), here.
I will offer some comments and some of the interesting allegations in the indictment. The paragraph numbers are the same as in the indictment. All are exact quotes; I put my own summary or comments in brackets [ ]:
1. [The bank is identified in the indictment as Swiss Bank No. 1. As noted above, this apparently in Rahn & Bodmer. Prior to retiring "in or about" January 2012, Dunki was Senior Vice President at Swiss Bank No. l.]
2. At all times relevant to this Indictment, MARTIN DUNKI, the defendant, in his capacity as a client advisor at Swiss Bank No. l, provided advice and assistance to U.S. taxpayers in maintaining undeclared accounts at Swiss Bank No. l.
4. [Identifies Edgar Paltzer, a Swiss attorney, who "served as a financial intermediary for U.S. taxpayers who maintained undeclared accounts in Switzerland, including U.S. taxpayers who maintained undeclared accounts at Swiss Bank No. 1. See my blogs on Paltzer: Bank Frey Executive and Swiss Lawyer Indicted (Federal Tax Crimes Blog 4/18/13), here; Swiss Lawyer Pleads Guilty to U.S. Tax Crimes (Federal Tax Crimes 8/16/13), here; and Another Swiss Bank Enabler Indicted in SDNY (Federal Tax Crimes 2/6/14; 2/10/14), here; U.S. Seeks to Forfeit Proceeds of Secret Swiss Account; the Enabler Turns on the Client (Federal Tax Crimes 4/15/14), here]
9. From at least in or about 1995 through in or about at least 2012, MARTIN DUNKI, the defendant, conspired with various U.S. taxpayers, including U.S. taxpayers in the Southern District of New York, and others known and unknown, to enable his U.S. taxpayer clients to establish and maintain secret Swiss bank accounts, and to hide those accounts and the income generated in those accounts, from the taxation authority of the United States, the IRS, via false and fraudulent federal income tax returns.
Means and Methods of the Conspiracy
10. Among the means and methods by which MARTIN DUNKI, the defendant, and his co-conspirators would and did carry out the conspiracy were the following:
a. DUNKI and his co-conspirators opened, maintained, and/or managed undeclared accounts on behalf of U.S. taxpayers at Swiss Bank No. 1.
b. DUNKI and his co-conspirators used sham "foundations" and other entities formed under the laws of countries such as Liechtenstein and Panama to conceal, from the IRS and others, the ownership by U.S. taxpayers of accounts established at Swiss Bank No. 1, as well as the income generated in those accounts.
c. U.S. taxpayers who conspired with DUNKI filed false and fraudulent Forms 1040, which, among other things, failed to report their interest in their undeclared accounts and the income generated in their undeclared accounts.
d. U.S. taxpayers who conspired with DUNKI failed to file FBARs identifying their undeclared accounts.
e. Beginning in or about August 2009, following the deferred prosecution agreement between UBS and the United States Department of Justice, DUNKI and his co-conspirators further concealed the undeclared accounts of certain U.S. taxpayer-clients at Swiss Bank No. 1 by using the assets in their accounts to purchase gold and other precious metals. DUNKI and his co-conspirators then transferred the gold, other precious metals, and cash to escrow accounts at Swiss Bank No. 1, and deposited the gold, precious metals, and cash into a vault rented at UBS, where they were kept for the benefit of the U.S. taxpayer-clients.
f. DUNKI traveled to the United States, and caused his U.S. taxpayer-clients to travel to Switzerland, in order to conduct business relating to the undeclared accounts, including reviewing account statements, which were deliberately not sent to the U.S. taxpayers in the United States.
g. DUNKI and his co-conspirators helped U.S. taxpayers repatriate funds to the United States from their undeclared accounts in Switzerland in a manner designed to ensure that U.S. authorities did not discover these undeclared accounts.
[There follows for many paragraphs and pages allegations about certain of Dunki's U.S. taxpayer clients; I address only certain of the allegations]
The DUNKI/Attorney 1 Clients
12. In or about 1999, Paltzer was introduced to a U.S. lawyer ("Attorney 1"), a co-conspirator not named as a defendant herein, who resided in Santa Barbara, California and who wished to set up undeclared accounts for U.S. taxpayers at Swiss Bank No. 1. Attorney l's point of contact at Swiss Bank No. 1 was MARTIN DUNKI, the defendant, who was employed at Swiss Bank No. 1 as a client advisor. Attorney 1 requested that Paltzer establish sham foundations, organized under the laws of non-U.S. countries such as Liechtenstein, so that the assets of the U.S. taxpayers could be maintained at Swiss Bank No. 1 in accounts held in the names of these foreign foundations, rather than in the names of the clients themselves. Attorney 1 made this request in order to help conceal from the IRS the existence of Attorney l's U.S. taxpayer-clients' undeclared accounts in Switzerland.
13. In or about 1999 and 2000, Attorney 1 opened multiple undeclared accounts at Swiss Bank No. 1 for the benefit of different U.S. taxpayers. These accounts were held in the names of sham Liechtenstein foundations, all of which had been created by Paltzer at Attorney l's request. Paltzer sat on the boards of these sham foundations and, in that capacity, received instructions from Attorney 1 regarding the management and distribution of the assets from the accounts at Swiss Bank No. 1. Paltzer passed these instructions on to MARTIN DUNKI, the defendant, who was the client advisor for these accounts at Swiss Bank No. 1 and had the authority to implement the
instructions on behalf of Swiss Bank No. 1.
14. In or about 2008, Attorney 1 passed away, and left the responsibility for managing the undeclared accounts that Attorney l had opened at Swiss Bank No. 1 to three other U.S.-based attorneys ("Attorney 2," "Attorney 3," and "Attorney 4") (collectively, "Attorney l's Successors"), who are coconspirators not named as defendants herein. After Attorney 1 passed away, MARTIN DUNKI, the defendant, continued to be the client advisor for these undeclared accounts at Swiss Bank No. 1, and continued to implement the instructions passed on through Paltzer.
15. In or about May and June 2008, it became publicly known that UBS was being investigated by United States law enforcement for helping U.S. taxpayers maintain undeclared accounts. Thereafter, on or about December 8, 2008, Liechtenstein and the United States signed a Tax Information Exchange Treaty ("TIEA"), under which Liechtenstein agreed to provide the United States with access to bank and other information needed to enforce U.S. tax laws. As a result of the TIEA between Liechtenstein and the United States, and to prevent disclosure to the U.S. government of their U.S. taxpayer clients' undeclared accounts at Swiss Bank No. 1, Paltzer and Attorney l's Successors determined to transfer their clients' undeclared assets from the accounts at Swiss Bank No. 1 held by sham foundations organized under the laws of Liechtenstein to new accounts at Swiss Bank No. 1 held by sham foundations organized under the laws of Panama. In or about mid-December 2008, MARTIN DUNKI, the defendant, transferred the clients' undeclared assets to these sham Panamanian foundations. Paltzer created the sham Panamanian foundations and served on the boards of these foundations, which, like the sham Liechtenstein foundations, existed solely for the purpose of concealing the U.S. taxpayer-clients' interest in the accounts.
16. As part of the account opening process for the new sham Panamanian foundations, MARTIN DUNKI, the defendant, helped compile and execute certain account opening documentation at Swiss Bank No. 1. This account opening documentation included a "Form A," which identified the name of the true beneficial owner of the account, that client's address in the United States, and that client's status as a U.S. citizen or permanent resident alien.
17. In or about August 2009, as a result of the investigation of UBS, MARTIN DUNKI, the defendant, Paltzer, and Attorney 1's Successors determined to further conceal the undeclared assets of their U.S. taxpayer-clients at Swiss Bank No. 1 by using these assets, which had previously been hidden in the manner described above, to purchase gold and other precious metals, which would ultimately be hidden in a vault rented at UBS. To accomplish this, Paltzer opened multiple escrow accounts in his own name at Swiss Bank No. 1 (the "Escrow Accounts") . Each of the Escrow Accounts corresponded to the undeclared account of a U.S. taxpayer-client that was held in the name of a sham Panamanian foundation, and each of the Escrow Accounts was given, as a reference code, the initials of the sham Panamanian foundation account to which it corresponded. DUNKI and Attorney 1's Successors then used their U.S. taxpayer-clients' undeclared assets to purchase gold and other precious metals, which they caused to be transferred to the Escrow Accounts, and then deposited into a vault at UBS (the "Vault"). The gold and precious metals, which amounted to tens of millions of dollars, were then maintained in the Vault, along with substantial sums of cash, for the benefit of the U.S. taxpayerclients. Attorney 1's Successors instructed that the assets should remain in the Vault for approximately six years, when Attorney l's Successors believed that the statute of limitations would expire for any applicable U.S. tax prosecutions.
18. The clients with undeclared accounts at Swiss Bank No. 1, whose assets were ultimately concealed in the Vault with the assistance of MARTIN DUNKI, the defendant, included the following U.S. taxpayer-clients, whose accounts are discussed in further detail below.
[Thereafter specific clients, pseudonymously named, are discussed. These include both clients of Attorney and his successors and other clients. The number of clients discussed is 9 in total]
95. From at least in or about 1995 through at least in or about 2012, in the Southern District of New York and elsewhere, MARTIN DUNKI, the defendant, together with others known and unknown, willfully and knowingly did combine, conspire, confederate, and agree together and with each other to defraud the United States of America and an agency thereof, to wit, the IRS, and to commit offenses against the United States, to wit, violations of Title 26, United States Code, Sections 7201 and 7206(1).
96. It was a part and an object of the conspiracy that MARTIN DUNKI, the defendant, together with others known and unknown, willfully and knowingly would and did defraud the United States of America and the IRS for the purpose of impeding, impairing, obstructing, and defeating the lawful governmental functions of the IRS in the ascertainment, computation, assessment, and collection of revenue, to wit, federal income taxes.
97. It was further a part and an object of the conspiracy that MARTIN DUNKI, the defendant, together with others known and unknown, willfully and knowingly would and did attempt to evade and defeat a substantial part of the income tax due and owing to the United States of America from clients of DUNKI's who were U.S. taxpayers, in violation of Title 26, United States Code, Section 7201.
98. It was further a part and an object of the conspiracy that MARTIN DUNKI, the defendant, together with others known and unknown, willfully and knowingly would and did make and subscribe returns, statements, and other documents, which contained and were verified by written declarations that they were made under the penalties of perjury, and which DUNKI, together with others known and unknown, did not believe to be true and correct as to every material matter, in violation of Title 26, United States Code, Section 7206(1).