News / Rumors on Offshore Evasion (12/13/12)

This page is for news items in roughly reverse chronological order for various aspects of the offshore bank tax evasion issue.  In the past, I have often created separate blog entries for these types of reports, but I will not do so in the future except for the more important items.  Please note that the items on the is page are not intended to be comprehensive, but rather my anecdotal entries.


Giles Broom, Swiss Bankers Fight Against Risks Posed by White-Money Strategy (Bloomberg 12/12/12), here.  Excerpts:
Swiss wealth managers are fighting against government proposals they say will scare off millionaire clients by forcing them to make declarations on the tax status of assets held in private bank accounts. 
Switzerland plans to revise its so-called white-money strategy later this month after proposing in March that banks reject deposits from clients who don’t disclose the origin of their funds and attest they’re tax compliant. That policy should be dropped as it threatens jobs, said Yves Mirabaud, senior partner at Geneva-based wealth manager Mirabaud & Cie. 
“What Switzerland is doing now could be extremely dangerous for the Swiss financial place,” said Mirabaud. “Being the only financial center to impose such a self- declaration on our clients will put us in a very difficult competitive situation.” 
* * * * 
Primary Concern 
Swiss banks have about three years until new international standards treat serious tax crimes as money laundering offenses. To avoid being complicit, the banks will be forced to ask clients to confirm whether their assets have been declared, said Philippe Kenel, a lawyer with Python & Peter in Lausanne. 
“If they demand declarations now, they may scare off older clients and risk losing three years of making profits from them,” said Kenel. 
Switzerland attracted $2.1 trillion to cross-border accounts during an era of undeclared money that started to crumble when the U.S. Department of Justice sued UBS AG (UBSN) for helping Americans dodge taxes three years ago. The Swiss government is still in talks with the U.S. to end a DoJ investigation of at least 11 other private banks.

Robert W. Wood, Is Filing Your First FBAR Admitting To A Crime? (Forbes 12/3/12), here.
Nothing really new, but good refresher.  Filing the first FBAR is not admitting a crime.  But, it may cause the IRS to ask questions that may lead to (i) civil costs (income taxes, income tax penalties, interest on income taxes and income tax penalties and FBAR penalties; and (ii) in really egregious cases perhaps criminal prosecution (but I doubt that many criminal cases would come from good faith compliance for current year filing obligations). 
Conrad De Aenlle, A Long-Distance Relationship With the I.R.S. (NYT 12/2/12), here.  Excepts:

Perhaps the biggest threat from Fatca will be faced by individuals who ignored reporting requirements — not of Fatca itself but of its older cousin Fbar, a form that expatriates often ignore, tax specialists say, because it is somewhat obscure and filed separately from tax returns.
When institutions start reporting for Fatca, the I.R.S. is bound to notice account holders who have fallen behind, accidentally or otherwise, in filing their Fbars. Mr. Calianno advises anyone likely to be in that position to consider the Offshore Voluntary Disclosure Initiative, a program that allows late, even negligent, filers to get straight with the I.R.S. 
“It’s designed to get people who have foreign bank accounts and didn’t report them in the past to come in and get compliant,” he explained. In general, someone who has paid all tax related to income from foreign accounts need only file overdue Fbars to avoid penalties, he said, while those who owe money along with the paperwork will be subject to minimal penalties. 
Mr. Shane likewise encourages expatriates and other Americans with overseas accounts to take the initiative in reconciling discrepancies or oversights that may show up once Fatca is up and running.
“See an accountant or lawyer to see what your options are,” he said. “You always want to be in a position where you’re going to the I.R.S. If the I.R.S comes knocking on your door first, they’re going to take a harder line.”


Marie-Christine Bonzom, Four more years of Swiss-US banking tension? ( 11/22/12), here.  In the article, she quotes three players in this arena:   Heather Lowe, here; Lawrence (Larry) Horn, here; and Scott Michel, here.  Heather Lowe is an unfamiliar player to me.  But Larry and Scott are well known and very good.  Since Larry and Scott are major players, it is not likely they will downplay the importance of the Government initiatives (and, by inference, their own work).  Here are some excerpts (I bold faced certain items I think are interesting):
Yves Rossier, secretary of state at the Swiss foreign ministry, believes the tax dispute “is certainly not at the top of the president’s to-do list”.

Experts in the United States, however, warn that tax evasion in Switzerland will remain a “hot button issue” for Washington. 
* * * * 
According to three US experts involved in the bilateral banking battle, the renewal of the political status quo in the US capital – with the re-election of Obama, a Democrat majority in the Senate and a Republican majority in the House of Representatives – means there won’t be any change in relations with Switzerland. 
 * * * *
Michel said Keneally [Assistant Attorney General of DOJ Tax] “has repeatedly and very clearly expressed gratitude to the Swiss for their cooperation [and] has said that it’s not all about Switzerland”, pointing out that the Department of Justice is also carrying out investigations in Israel, Hong Kong, South Korea and possibly Singapore.

For all that, Michel says he expects the Department of Justice and the IRS to keep the pressure on “in order to get more disclosures from Swiss banks about account holders”.

“There may well be more indictments and more bad press for Switzerland,” he warned.

[JAT Note: indictments of Swiss enablers or taxpayers?  Probably both, but I think the message has already been given to U.S. taxpayers, which is not to say that there won't be more indictments, but is to say that at the margins little will be gained by many more indictments of U.S. taxpayers.]


Landon Thomas Jr., Greece Takes Aim at Tax Evasion Among Wealthy (NYT 11/11/12), here.  Here are some excerpts:
In recent weeks, tax experts at Greece’s finance ministry have been scrutinizing the finances of about 15,000 Greeks to see if money they have sent abroad in the past three years — about $5 billion in all — exceeds the declared wealth on their tax returns, government officials say. 
The government of Prime Minister Antonis Samaras is intent on cracking down on wealthy tax evaders as it tries to quell mounting public anger over a slate of austerity measures that the Greek Parliament last week passed by a thin margin. On Sunday, the government won approval for its 2013 budget, which, due in part to persistent tax evasion, must rely on a punishing mix of spending cuts and indirect tax increases to meet targets set by the country’s creditors. 
* * * * 
At the root of the decline in tax collection has been the capital flight of Greece’s tax base. 
Friedrich Schneider, an economics professor at Johannes Kepler University in Linz, Austria, estimates that about 120 billion euros in Greek assets lie outside the country, representing an extraordinary 65 percent of the country’s overall economic output. The assets abroad include bank deposits, real estate holdings and untaxed business income.A frequent adviser to European governments and international financial institutions, Mr. Schneider says that 70 billion euros is in Switzerland, about 20 billion euros is in Britain, with the rest spread out in other places like the United States, Singapore and offshore tax havens like the Cayman Islands.

Lou Kilzer and Andrew Conte, U.S. ranks among top financial  secrecy havens (TribLive News 11/11/12), here.
This is an interesting article on the U.S. as a tax haven of the type it condemns in others.    The applicable word is hypocrisy; the U.S. will have to become more transparent as it insists other jurisdictions in being transparent.

The article is pretty good, so I recommend it. 
One of the broader problems with lack of transparency is that it is harder to get a fix on wealth and income distribution patterns that must be known in order to assess the effect of wealth and income distribution patterns on national priorities.  For example, if the wealth and income we can see is distributed 40% to the top 1@ of citizens is determined without considering offshore "secret" accounts more likely to be held by the 1%, the actual wealth and income of the 1% might be much higher.  How that might and should enter into the dialog of any nation's priorities for implementing a civilized society that is in all citizens' interest is the next question, but without good data accessible to the various nations' involved, then good decisions cannot be made.


U.S. Treasury Dept., U.S. Engaging with More than 50 Jurisdictions to Curtail Offshore Tax Evasion (11/8/2012), here.
A promo piece on the FATCA initiative.


Simon Bradley, US election unlikely to ease strained relations ( 11/5/12), here.  More Swiss whining and wishful thinking..

Robert Barr, HSBC money laundering fines could top $1.5B (Christian Science Monitor 11/5/12), here.  This is not related to the major IRS offshore account initiative, but here is an excerpt:  "HSBC says it is also likely to face criminal charges in the money laundering case."  This problem does reinforce the point that the Swiss have been so greedy over the years as they helped money launderers and tax evaders.  It is not pay back time.


Robert W. Wood, Undisclosed Foreign Bank Accounts? They're Even More Explosive Now (Forbes 11/4/12), here.  Synthesizes the obligations and risks for those with foreign accounts and other types of assets.  Nothing new here, just a succinct synthesis.


Robert W. Wood, Should U.S. Citizens Abroad Pick Streamlined IRS Program Or OVDP? (Forbes 10/26/12), here.  Excerpts:
To join it [the streamlined procedure], you must be a U.S. citizen (including dual citizens) residing outside the U.S. since January 1, 2009 who has not filed a U.S. tax return during that period, and you must be low risk. Take a look at this questionnaire to evaluate your risk. See Newest Offshore IRS Amnesty Not For Everyone. With these preconditions, most people don’t qualify.  
* * * * 
You can’t complete the streamlined program, but are ineligible for the OVDP! What’s left could be a full civil audit and high fines or even prosecution. Newest Offshore IRS Amnesty Not For Everyone. That seems unfair, but the IRS hasn’t said what could happen to people caught in the gulf between its programs.


Jeremiah Coder, Some Offshore Account Information Uncovered by DOJ Not Yet Made Public, 2012 TNT 205-1 (10/23/12).  The article quotes and paraphrases statements from Kathryn Keneally, assistant attorney general for the Justice Department Tax Division, said at the New York University School of Continuing and Professional Studies' annual Institute on Federal Taxation.
The government is collecting significant information about offshore account holders that has not been made public, making discovery of the accounts more likely even without the added pressure to come forward that has been created by the Foreign Account Tax Compliance Act, a senior Justice Department official said October 21 in New York. 
Keneally cautioned taxpayers against thinking that the prosecution of Swiss bank UBS will serve as a model or expecting that the United States will alert account holders ahead of time that their information might be handed over to it. "That's not something anybody should take comfort from. We have sources of information that are diverse; we are getting account holder information in ways that are not public," she warned. 
"There will be cases brought where there was no indication in the press that our investigations were going that way prior to when you see prosecutions," Keneally said. "We have a number of interesting initiatives that I cannot discuss, but we are every day developing information and getting account holder information. Failure to come into the offshore disclosure initiative is getting increasingly dangerous." 
Although the special offshore voluntary disclosure programs are administered by the IRS, taxpayers should enter them as soon as possible rather than face the consequences from the DOJ, Keneally said. Treasury is receiving a significant response from countries worldwide in implementing FATCA, she said, noting the Swiss-U.S. joint statement in June. "My view of FATCA's power is that bank secrecy" is ending, she added.


Jeremiah Coder, IRS Criminal Investigation Division Expands Overseas Operations, 2012 TNT 203-3 (10/19/12) (no link available).  This article reports on the UCLA Tax Institute regarding CI's Oversees Operations and also a talk by Richard Weber, head of CI, at another conference.  Here are excerpts from that Institute:
Asked where CI might next focus its search for unreported offshore accounts, Haynes [Patricia Haynes, CI Executive Director of Operations:] said, "It's silly to think that only European banks were used to hide money." Although CI must make strategic decisions about where to put resources, it is willing to explore all parts of the world, she said. 
Nathan J. Hochman of Bingham McCutchen LLP, former assistant attorney general of the DOJ Tax Division, said the government has had great success in going after the low-hanging fruit of offshore tax evasion, as seen by its offshore voluntary disclosure programs. As those kinds of cases disappear, the government will have to spend more resources to pursue activity that is harder to detect, he said. In the next few years, the government's litigation success in cases involving voluntary disclosure opt-outs, quiet disclosures, and grand jury criminal proceedings will be critical in continuing to provide a deterrent effect, he said. 
Scott D. Michel of Caplin & Drysdale said the right approach by the U.S. government to implement the Foreign Account Tax Compliance Act "could really leverage the resources of the IRS." Most foreign financial institutions are likely to comply with FATCA, because few will want -- or be able -- to avoid investing in the United States, he said. Michel predicted that FATCA will create an overwhelming amount of data for the government to use, saying, "FATCA is like a jet engine; information exchange is like a horse and buggy." 
  CI Chief Richard Weber said at a different event October 18 that he hoped to soon announce the results of some international tax cases related to countries besides Switzerland. "We have some pending cases now that hopefully will be announced soon that will show some additional progress in this area," Weber said at the New York State Society of CPA's annual Anti-Money Laundering Conference. "If anybody out there thinks that we are done because we have had some great success in Switzerland, I guess what I'm saying is we're not done."
Former Swiss Banker Helping IRS Tax Probe of Swiss Banks (The Tax Times Blog 10/19/12), here.  Excerpts from that blog, apparently quoting a BNA article that I have not been able to find on the internet via Google, are:
According to BNA —Officials at the Internal Revenue Service have made it a priority to expand its continuing investigations into offshore tax evasion to countries beyond Switzerland, the chief of the IRS Criminal Investigation division said Oct. 18.  
Richard Weber, a career prosecutor who assumed his IRS post in May, said that in the near future officials hope to announce charges in pending cases that will allege schemes to hide offshore assets in countries other than Switzerland and Liechtenstein, which so far have been the primary focus.  
 * * * * 
“We’ve made it a significant priority to expand to other countries, and we have agents doing that now,” 


Lynnley Browning, UPDATE 1-Ex-Swiss banker may be helping US in tax probe-lawyers (Reuters 10/17/12), here.  Key excerpts:
The new charges against Bagios assert that he told one U.S. client to sign UBS documents falsely declaring that the client was a Malaysian national, not a U.S. citizen.\ 
Bagios and his co-conspirators, court papers alleged, also told some UBS clients wishing to sneak hidden money back into the United States that they needed to "wash" their undisclosed assets back into the banking system, by transferring small, undetectable amounts into their declared UBS accounts. 
The fresh charges asserted that Bagios worked with a group of co-conspirators. They include Hansruedi Schumacher, a former top UBS private banker who later worked at Neue Zurcher Bank and was indicted in the United States in 2009; Renzo Gadola, a former top UBS private banker who pleaded guilty to charges of fraud and conspiracy in December 2010; and Martin Lack, a former top UBS private banker who was indicted in August 2011.


David Voreacos and Susannah Nesmith, Ex-UBS, Credit Suisse Banker Bagios Set to Change Plea (Bloomberg 10/16/12), here.  Here are some exerpts:

He was charged yesterday in federal court in Fort Lauderdale, Florida, in a document known as a criminal information, which typically precedes a guilty plea. Bagios is scheduled for an arraignment on the conspiracy charge today in Fort Lauderdale and to enter an initial plea. He is scheduled to return to court in West Palm Beach, Florida, for a change-of- plea hearing on Oct. 26. 
Bagios and other Swiss bankers conspired to “assist U.S. customers in concealing assets and income from the U.S. government, including the IRS,” according to the charge filed today. 
* * * * 
Travel Denied 
Last month, a U.S. magistrate judge denied a bid by Bagios to modify his bail and visit his family in Switzerland and his ailing mother in Greece. Lawyers for Bagios, who is free on $650,000 bail, said he has an “impeccable record” of complying with terms of his release, and he would return. 
Prosecutors argued that Bagios faces five years in prison and he might flee because he has no incentive to return to Florida.\ 
“Permitting the defendant to travel to his country of origin or residence would be an invitation to flee,” U.S. Magistrate Judge Lurana S. Snow ruled. 
* * * * 
In opposing Bagios’s motion to leave Florida, prosecutors said they have “unearthed substantial evidence” of his role in a conspiracy to defraud the U.S. through secret Swiss accounts. The IRS had interviewed seven of his former UBS customers who failed to declare accounts to the agency, according to the government’s court filing on Aug. 20. 
Prosecutors have said that a former UBS banker who pleaded guilty, Renzo Gadola, gave the U.S. information that led to the arrest of Bagios and another former UBS banker, Martin Lack.


Sarah Ryley, Noreen O’Donnell, Sergio Hernandez and Willem Marx, A peek inside the shadowy world of offshore tax havens (The Daily 9/22/12), here.  Excerpts:
ISLE OF MAN — Two of Uncle Sam’s largest active tax claims are against a pair of shadowy, defunct corporations tied to a single post office box in this picturesque tax haven off England’s northwestern coast. 
IRS documents obtained exclusively by The Daily reveal that the two companies, Aspen Parent Corp. and Birch Parent Corp., together owe the federal government at least $202 million. The documents, which list the agency’s tax liens against corporations, were provided in response to a Freedom of Information Act request. 
Today, Birch and Aspen have been dissolved, leaving few footprints on the public record. But when they were operating, both used “P.O. Box 398, Douglas, British Isles, Isle of Man” as one of their addresses. And both had the same two British nationals as officers: Douglas Mullins as president and Julian Trinder as secretary. 
Despite their lofty titles, Mullins and Trinder seem to have been nothing more than low-level operators — the paid signatories for several vast, international tax-sheltering operations in which huge sums of taxable money were shuttled among shell corporations in a bid to escape the IRS’ reach.


Katherina Bart, Credit Suisse to reveal more data, staff names in U.S. tax probe (Reuters 12/17/12), here.  Excerpts:
Credit Suisse said it would transfer more information on its money management arm for wealthy Americans to U.S. officials, including more names of its own employees, as part of an effort to settle a tax evasion probe.
The handover * * * does not include names of clients. 
Swiss officials have said U.S. elections in November could complicate a settlement - initially expected by the end of 2012 - of the dispute. Switzerland's finance minister said a victory by presidential challenger Mitt Romney would not necessarily ease the talks. 
The mood among Swiss bankers, many of whom have shelved travel plans outside Switzerland for fear of being arrested in connection with the U.S. probe, has become more tense as negotiations drag on.

Tax Notes published a new article yesterday, Shamik Trivedi, 1 Year Later, Frustrations Remain for OVDI Participants, 136 Tax Notes 1242 (Sept. 10, 2012).  The key fresh points of the article that might interest readers of this blog.
Many taxpayers were unnecessarily burdened, National Taxpayer Advocate Nina Olson told Tax Analysts. They had to opt into and then out of the program and were discouraged by the threat of disproportionate penalties, she said. 
Olson said that to make matters worse, OVDI processing times are longest for those who opted out. Further, the IRS is feeling the consequences of its approach as its employees strain to keep up with the demand, she said, adding, "Our initial review indicates that the IRS has yet to process even 10 percent of the applications to the 2011 OVDI." Practitioners who spoke with Tax Analysts generally had the same complaints. 
The IRS disagrees. In a statement, it said that "to date, a majority of the 2011 disclosures have been assigned or are in the process of assignment to revenue agents."
The article quotes practitioners as to delays.  The 2009 OVDP is pretty much petering out, but there are a lot of delays in the 2011 OVDI.  Overall, the pace is faster in 2011 OVDI than in 2009 OVDP, but the IRS had a learning curve to deal with in 2009 OVDP.
The Treasury Inspector General for Tax Administration is considering auditing the costs of, and revenue generated by, the 2009 OVDP but has not made a final decision, a TIGTA spokesman said. 
* * * * 
[A]s the IRS receives more information from financial institutions that enables it to identify more FBAR noncompliance, "it will increasingly face the choice of whether to devote more enforcement resources to address it, expand its outreach and self-correction options for benign actors, or ignore the noncompliance altogether," Olson said.

Stephanie Soong Johnston, Swiss Miffed by Tax Evasion Innuendo in Obama Campagn Ads, 2012 TNT 168-2 (8/29/12)
"The Embassy of Switzerland confirms that it has communicated with the Obama campaign headquarters to object to the ads giving the impression that simply having a Swiss bank account means that the accountholder is trying to hide money from the IRS," Ramseier told Tax Analysts.
* * * * 
Ramseier declined to divulge whether the Swiss Embassy had heard back from the Obama campaign. But Switzerland's objection is not likely to produce any negative press for the Democrats, nor yield any real results, according to George C. Edwards III, a political science professor at Texas A&M University's Bush School of Government and Public Service. 
"There may be a lot of symbolism going on here, just the same way that Obama is using the symbolism of a Swiss bank account," Edwards told Tax Analysts. Edwards suggested that the Swiss might be sending a message of support to those who hold Swiss bank accounts by publicly declaring that having a Swiss bank account isn't a bad thing. 
"They know that nothing's going to happen as the result of their complaints," Edwards said, adding that the Swiss probably would have raised the same objections if the script were flipped and Obama was in the hot seat. "We're operating at a symbolic level here," he said. 
Daniel J. Mitchell, a senior fellow at the Cato Institute, said that the Swiss are justified in standing their ground against the attack ads. 
"They definitely have good reason to be irked because they're being smeared," Mitchell said. "Whether it's the demagoguery of Switzerland or the demagoguery of the Cayman Islands, some of the big financial centers are just getting a completely unfair rap." However, publicly objecting may not have been the best move, he said. 
"The fact that they're complaining about it, they're bringing more attention to it," Mitchell said. "It would have been in their best interest to grit their teeth and let it pass." 

Len Boselovic, Heard Off the Street: Investors sue UBS over penalties (, here.  Opening excerpts to tweak your interest are:
Now some investors who owned those accounts are trying to make UBS liable for the tax penalties they had to pay on their undisclosed income, alleging that bank officials assured them the accounts were legal and not subject to U.S. taxes. 
Among those suing are Riwall and Cristina Le Bars, a couple in their 60s who live in Aliquippa. They do not conform to common perceptions about the types of people who have Swiss bank accounts, according to one of the lawyers representing them. 
"Everyone assumes that if you have a Swiss account or an offshore account, you're a multimillionaire. That's not true," says Alice Stewart [here], the University of Pittsburgh law professor who filed the Le Bars' lawsuit in federal court, Downtown, in April. 
The Le Bars are seeking more than $750,000 in damages. The claim is based on the more than $275,000 penalty they paid to the IRS after they took advantage of an IRS offer for offshore investors to come clean, $200,000 in losses they incurred after UBS forced them to close their accounts, and a loan the couple took out on the advice of a UBS representative who they say told them adding the loan proceeds to their account would given them a better deal.


Manuel Altozano, Billion-euro whistleblower (Press Europe 8/24/12), here
This is a well-written article on Hervé Falciani's alleged theft of data from HSBC, his alleged use of the data and the Swiss Government's attempts to bring him to justice, including his recent arrest for possible extradition to Switzerland.  Here is a teaser from the article: 
An international arrest warrant was issued for Falciani, who is a citizen of Monaco with dual French and Italian citizenship, is married and has a child. Despite the fact his actions revealed thousands of cases of tax evasion all over Europe and some €10 billion in lost taxes were recovered, Bern considers him a criminal, a thief. 
He has been arrested and, now, the Bellinzona Federal Tribunal eagerly awaits his return in order to prosecute him for theft of private data as well as for violation of the commercial secrets and banking secrecy laws. But first of all, Spain has to decide to extradite him. 
Six intense years have passed between Falciani's incredible discovery and his arrest in Barcelona. During this time the computer programmer became a fugitive whose worth is measured by the value of the information he has at his disposal. He is a criminal who must be tried and incarcerated, according to those who want to destroy the data. But he is seen a sort of hero, a Robin Hood needing protection, according to those who would like to obtain it. Here is what happened in those six years.


Janet Novack, UBS Sues Billionaire Olenicoff In Offshore Tax Cheating Case (Forbes 8/13/12), here.
A UBS client, Igor Olenicoff, who pleaded guilty to tax crimes and was a major player in the early stages of the UBS / U.S. tax affair has sued Mr. Olenicoff, a related entity, and two of Mr. Olenicoff's lawyers for filing a meritless law suit.  Read the article, but it seems like nothing more than a pissing match -- the pot calling the kettle black.  The article notes the difficult problems usually encountered in bring suit claims of meritless law suits.  The article notes various intrigues regarding Mr. Olenicoff's Russian connection.

Katharina Bart, Apologetic Swiss banks sweat it out as U.S., Europe mull redress (Reuters 8/12/12), here.  An excerpt from the article:
Swiss banks hoping to atone for decades of complicity in tax evasion may be left to sweat it out for months as the United States and Germany ponder the right level of punishment. 
Switzerland has long dodged U.S. accusations of hiding money for wealthy Americans. But now eleven Swiss banks are under investigation in the United States and there is pressure too from Europe where burdened taxpayers want scalps after numerous banking scandals. The Swiss need a deal to remove the taint from their financial industry. 
However, Washington must factor forthcoming elections into its thinking, and Germany is delaying ratification of a tax deal key to Switzerland's efforts to strike similar agreements elsewhere in Europe. So the Swiss may be in limbo for a while. 
The wait is painful for a country which counts on banking for 7 percent of its economic output: until Swiss banks know how much information they need to share with foreign tax authorities they will struggle to attract new clients. 
As a result the share prices of its top banks -- Credit Suisse (CSGN.VX) and Julius Baer (BAER.VX) are among those being investigated -- are falling as investors fret about earnings.

Jean Eaglesham and Joe Palazzoloj, Ex-UBS traders offered deal in U.S. probe (WSJ Market Watch 8/9/12), here.

U.S. prosecutors agreed to shield several former UBS AG employees from criminal charges in return for their cooperation with the escalating investigation of suspected interest-rate manipulation, according to a person close to the probe. 
The leniency deal was offered to former traders and other employees who had relatively junior-level jobs at the Swiss bank, the person said.


Laura Saunders, UBS Whistleblower Released From Prison (WSJ 8/1/12), here.
The release is short.  Bradley Birkenfeld is released to a halfway house after almost 30 months improsonment.  Birkenfeld was the former UBS skulldugger who served up UBS to DOJ Tax CES, but then ran afoul of DOJ Tax CES, at least allegedly by not coming completely clean.


Deborah L. Jacobs, Most Foreign Banks Don't Want U.S. Clients; How To Find One That Does (Forbes (7/31/12), here.
This is a guest blog by  Jochen Vogler, CFP, an executive director at Bellecapital International AG, an SEC-registered Zurich, Switzerland-based independent asset manager.  So look for biases, but it seems to have some good tips on doing it right.

David Segal, Swiss Freeports Are Home for a Growing Treasury of Art (NYT 7/21/12), here.

The article describes the freeport concept whereby valuables stored at certain supposedly secure locations kind of go into a tax black hole.  (Sort of like Swiss bank accounts formerly were imagined.)  The focus on the article is on art works, but it can apply to any valuable property (the article mentions gold and wine also).
They come for the security and stay for the tax treatment. For as long as goods are stored here, owners pay no import taxes or duties, in the range of 5 to 15 percent in many countries. If the work is sold at the Freeport, the owner pays no transaction tax, either. 
Once it exits the premises — either because it’s been sold or because the original owner has moved it — taxes are owed in the country where it winds up. But for as long as a work is in the Freeport, it’s as if it resides in a no-man’s land where there is no Caesar to render unto. 
Only a few years ago, in fact, the Freeport was officially not part of Switzerland. The buildings have since been patriated, but they and a handful of lesser-known freeports in different parts of Switzerland remain the closest thing to the Cayman Islands that the art world has to offer. It’s a haven where the climate — financial and otherwise — is ideal for high-net-worth individuals and their assets.
The article does not discuss how the concept can be used to skate on home country taxes -- just how Swiss taxes are avoided during the period the assets are on deposit/storage.


Bob Drummond, Top Court Rejects Appeal on Foreign Bank Account Subpoena (Bloomsberg Businessweek 6/25/12), here.
The issue relates to the required records subpoena.  See Federal Tax Crimes blogs on that issue here.  For the discussion of the specific Ninth Circuit opinion for which the taxpayer sought certiorari, my prior blog 9th Circuit Applies Required Records Doctrine to Defeat 5th Amendment Claim for FBAR Recordkeeping (8/19/11), here.

New Taxes for 'Renouncers'?  (WSJ Tax Report 5/25/12), here.
This article discusses various proposals to the political uproar surrounding several prominent recent citizenship renunciations that have an aura of tax motivation.   
One proposl calls for strenthening -- i.e., increasing -- the so-called exit tax which it describes as follows: 
"That levy has changed over the years, but it currently is 15% and applies to untaxed appreciation on all assets (net of losses) for people who have a net worth of more than $2 million or meet other conditions. There also is an exemption, which this year is $651,000 of appreciation." 
That proposal is to tax all future U.S. investment gains at 30% unless the taxpayer proves that citizenship renunciation is not tax motivated. 
Another proposal, not directed at the renunciators, is to allow revokation or denial of passports to U.S. citizens owing tax of $50,000.  This proposal passed the Senate and is now before the House.  The sweetener for the proposal is that the revenues it generates will be use to fund highway transportation projects.

Reed Albergotti, When a Swiss Bank Is on the Run (WSJ Law Blog 5/23/12), here.
This is an article on Wegelin's dodging of the bullet - a sort of catch me if you can, gambit.  Looks like Wegelin is hiding behind Swiss bank friendly laws that, Wegelin claims, makes it illegal for it to comply with other countries laws.  How convenient for Swiss banks..

Brian Knowlton, Many Americans Abroad Surprised by Tax Code's Nasty Bite (NYT 5/10/12), here.
The opening: 
As Americans abroad chafe under sharply increased U.S. pressure to declare foreign holdings and catch up on back tax filings, one group with tenuous ties to America and the benefits of citizenship is feeling particular pain and unease. 
They might be called “accidental” Americans, born during their foreign parents’ brief stay on U.S. soil, or born abroad to American parents who long ago settled elsewhere. 
After lifetimes abroad, many in this group, whose total size is impossible to estimate, had believed that because exemptions left them owing no U.S. income tax they had no obligation to file returns; many have been tripped up by a requirement that they still declare their foreign bank and financial accounts.

Bruce Bartlett, Will Rich People Desert the U.S. if Their Taxes Are Raised? (NYT Economix 5/8/12), here.
The author questions the impact of tax increases on wealthy U.S. citizens' renunciation of citizenship.  This is not directly related to the issue of offshore accounts.  The offshore account issue is similar.  Obviously, requiring wealthy U.S. citizens to pay tax on their offshore accounts might be viewed as a form of tax increase (not really, but it does increase the tax cost) and be a factor in the renunciation of citizenship.

Lee A. Sheppard, Whistleblower Officials Talk to Tax Haven Professionals, 2012 TNT 89-1 (5/8/12).
The article focuses on Whistleblowers in all contexts, but has this blurb about the subject of Mr. Morgenthau's article linked below: 
[Senator] Grassley is doing his bit to prevent offshore abuses by cosponsoring the Incorporation Transparency and Law Enforcement Assistance Act (S. 1483), which would require states to collect beneficial ownership information for corporations and limited liability companies. Secret entities are not just used for tax evasion. They are also used for Medicare fraud, which is thought to cost $80 billion annually. (For S. 1483, see Doc 2011-16839  or 2011 TNT 149-16 .) 
The bill is opposed by the American Bar Association, the American Bankers Association, and the U.S. Chamber of Commerce. Publicly traded companies and broker-dealers would be exempt. Corporate formation agents would have to comply with money laundering rules. The introduced bill has no set sanctions for states that do not comply -- Congress will decide later which federal funds would be withheld.
[JAT comment:  Of course, all of the organizations opposing the bill are lobbying firms for the interests of their members.  Self-interest and not public interest drives their opposition.  Congress of course often responds to the self-interest of the rich and the powerful, but hopefully Congress can restrain itself from doing so this time.]

Robert M. Morganthau, These Islands Aren't Just a Shelter From Taxes (NYT 5/5/12), here.
Robert M. Morgenthau is a lawyer who was the Manhattan district attorney from 1975 to 2009.  He knows whereof he speaks.  Highly recommended reading.  Banks that will promote their services as aiders and abettors of tax evaders will provide similar services for all sorts of less savory characters.  The United States should be the shining light on the hill.

Susan C. Morse. Tax Compliance and Norm Formation Under High-Penalty Regimes,  44 Conn. L. Rev. 675 (2012), here.  The article discusses theories of penalties and uses the offshore account compliance problem to illustrate the concepts.  The offshore account example begins on p. 700 of the article (p. 26 of the pdf), with the FBAR discussion starting on p. 708 of the article (p.  34 of the pdf):  The following is the introductory description of the article.
Skepticism about the potential of moral appeals relating to tax compliance-for example, as applied to large groups of individual taxpayers outside a wartime context-has resulted in the absence of a theory about how government communication can further tax compliance. This Article fills that gap. It provides a theory of tax compliance and norm formation under high-penalty regimes from the starting point of a noncompliance norm. 
The theory explains the roles of, and mutually reinforcing relationships between, the compliance mechanisms of deterrence, separation, and reputation signaling. The success of these mechanisms depends on the presence of (i) taxpayer perception of penalty imposition, (ii) taxpayer perception of detection efficacy, and (iii) an absence of close substitutes. Either government enforcement or a reputation market can provide penalty imposition and detection efficacy. This Article offers the U.S. requirement of self-reporting of offshore bank account information as an example of a potentially effective high-penalty regime founded on aggressive and creative government enforcement efforts. 
The theory also defines an appropriate role for expressive law in advancing tax compliance. This role has relevance, at least, when resources have been committed and government enforcement is not practical. The theory suggests that using law to define good-reputation indicators has particular promise when applied to reputation- sensitive taxpayers such as large intermediaries. This Article identifies four expressive law tax compliance tactics: reputation referencing, salience, management targeting, and incrementalism. It illustrates the expressive law portion of the theory with the example of FATCA, a law passed in 2010 that will require non-U.S. banks to identify U.S. account holders or face withholding on certain U.S. investment returns.

Giles Broom, Wealthy Americans Queue to Give Up Their Passports (Bloomberg 5/1/12), here.
The opening:  "Rich Americans renouncing U.S. citizenship rose sevenfold since UBS AG (UBSN) whistle-blower Bradley Birkenfeld triggered a crackdown on tax evasion four years ago."  Reports the Swiss polemics at being denied their "right" to assist taxpayers steal  from the U.S. fisc.

David Voreacos and Richard Rubin, Rand Paul Seeks to Block Tax Treaty Change on Swiss Accounts (Bloomberg 4/29/12), here.
Senator Rand Paul is blocking Senate approval of the U.S. Swiss Treaty protocol recently negotiated to offer the IRS greater access to Swiss bank account  information.  He can't block forever so that it is at best a quixotic delaying adventure.  From a legal perspective as I understand the law, his articulated constitutional basis for the action is frivolous.  No court has ever held that there is a right of privacy to banking records.  (At least Paul is admitting that there is a right of privacy that he wants to stretch in a new way to include banking records.)  At worst, his conduct is unprosecutable tax obstruction, under the cloak and protection of congressional privilege, because it will delay and impair the IRS's ability to administer the tax laws.  I am sure he knows that.  Does he really want to expand the living Constitution to give a right of privacy to banking records?  Or is his gambit is to permit some statutes of limitation to close for some of his constituents (voters or contributors) while he delays (and obstructs) the implementation of the protocol?
Joseph Septimus, Bank Leumi Sends Thousands Of Notices To US Clients & Credit Suisse Confirms That Names Were Handed Over  (Yeshiva World 4/30/12), here.

Charles Duhigg and David Kocieniewski, How Apple Sidesteps Billions in Taxes (NYT 4/28/12), here.


European Parliament resolution on combating tax fraud and evasion, here, as passed on 3/19/12.
See KPMG Euro Tax Flash Report of the Motion, here.  KPMG's EU Tax Centre Comment 
The  Resolution mentions a number of Commission initiatives which the European Parliament supports, such as: extending the scope of the Savings Directive to end bank secrecy, the country-by-country reporting requirements within the Accounting and Transparency Directive, addressing the issue of hybrid financial instruments. Also, the European Parliament asks the Commission to report on the possibility of bringing Member States’ bilateral agreements into line with the objectives of the internal market. It is clear from the number of EU initiatives in this area, combined with developments at other levels (e.g. the OECD), that coordination and cooperation will increase in the future.


David Jolly, Americans, the Tax Man Cometh (International Herald Tribue 4/16/12), here.
Lamentations about the new Form 8938 and FATCA in general.
Atossa Araxia Abrahamian, Special Report: Tax time pushes some Americans to take a hike (Reuters 4/16/12), here.

Kirk Semple, Many U.S. Immigrants’ Children Seek American Dream Abroad (NYT 4/15/12), here.


Kate Murphy, Leisure Time with Douglas Shulman (NYT 4/14/12), here.


Sebastien Chain and Tamara Woods, Form 8938 – Foreign Reporting Trap for the Unwary (Tax Blawg 4/11/12), here.

David Voreacos and Maurice Possley , UBS Wins Dismissal of Billionaire Olenicoff’s Tax Lawsuit (Bloomberg 4/10/12), here.


Sam Stein, Barack Obama Campaign Attacks Mitt Romney Over Swiss Bank Account  (Huffington Post 4/9/12), here.
"I asked Warren Buffet in a meeting we had recently, 'Have you ever had a Swiss bank account?' He said, 'No, there are plenty of good banks in the United States,'" Durbin said. 
"So I started asking people: 'Why do you have Swiss bank account?' One, you believe the Swiss Franc is a stronger currency than the United States dollar. And that is apparently the decision the Romney family made during the Bush presidency. And secondly, you want to conceal something. You want to hide something. Why would you have a Swiss bank account instead of one in the United States? I would like to ... ask the press to really press some of these questions, the obvious questions. When is the last time a presidential candidate for the United States had a Swiss bank account? I think the answer is never."
David Jolly, Germans and Swiss Reach Stricter Deal on Tax Cheats (NYT 4/5/12), here.
Discusses the German approach to the Swiss banks to pay 21 to 41% of the amount in the secret accounts, future withholding and tax on inheritance.  "Crucially, from the point of view of maintaining Swiss banking secrecy, account holders’ names will not be revealed to Berlin, and the Swiss authorities will be responsible for ensuring that taxes are paid on behalf of the account holder, who can remain anonymous if desired."  The estimate is a one-time payment of $10-15 billion and annual withholding of $750 million.


Leslie Book: Offshore Accounts, Corporate Income Shifting, and Executive Compensation, 57 Vill. L. Rev. ___ (2012), at SSRN, here.

In this essay, Professor Book introduces articles that arose out of the Villanova Law Review Norman J. Shachoy Symposium hosted at Villanova Law School on September 23, 2011. The symposium brought together some of the nation’s leading academics, practitioners, and journalists to discuss issues relating to the taxation of offshore individual offshore accounts and offshore operations of multinational corporations (MNCs), and the role of the tax laws in regulating executive compensation. As I discuss in this introductory essay, the articles at some level implicate essential questions of fairness, including questions of both vertical and horizontal equity. The image of millionaires hiding money in undeclared offshore bank accounts has triggered unprecedented administrative and legislative reactions to detect those accounts and deter that type of evasion; some of the largest American MNCs paying no or little tax raises questions about our corporate and international tax policy; executives’ high pay, at companies implicated in highly publicized corporate scandals and the near meltdown of the financial sector, has contributed to federal legislation meant to influence corporate governance. 
That those in positions of power, through legal or other means, can continue to perpetuate advantages not generally available contributes to dissatisfaction with institutions. When institutions that should be among our most respected can exacerbate and perpetuate inequalities, especially at times of economic uncertainty, there is bound to be both a public and legislative backlash. While there is a great deal of disagreement about how to calibrate the tradeoff between limiting incentives to create wealth on the one hand, and the ill-effects of income and wealth inequality on the other, there is general agreement that those with positions of power should not abuse that power by extracting rents from the market or hiding assets by secreting them away in undeclared bank accounts. Likewise, when some of our most profitable MNC’s or richest Americans have an effective tax rate below that of many with modest incomes, those trade-offs inherent in the discussion about the degree of vertical equity become more visible, and likely to generate political and popular attention. How our tax system will address these questions remains to be seen. There is no doubt, however, that policymakers and academics interested in issues of offshore evasion, international income-shifting and executive compensation will find this symposium’s articles essential reading.

David Voreacos , UBS Faces Billionaire Olenicoff in Lawsuit Over His Tax Felony (Bloomberg 4/8/12), here.
A person who pleaded guilty to a tax crime alleges the devil made him to it and the deviil should pay.

Robert W. Wood, Is Closing Foreign Bank Accounts An Alternative To Disclosure? (Forbes 4/7/12), here.

At tax return filing time, should you check the box on Schedule B noting that you have a foreign bank account? Should you report all of the income from your foreign accounts or assets? Should you file Form 8938? Should you file a Report of Foreign Bank and Financial Accounts (FBAR), Treasury Form TD F 90-22.1? Yes, yes, yes and yes. 
* * * * 
Not wanting to be discovered is a poor excuse for continuing to ignore the rules.  You should start filing correctly, but you should also correct the past, and the best way to do so is a voluntary disclosure. 
[JAT Comment:  As readers will recall from past blogs and comments, I emphatically agree that taxpayers with foreign accounts must start filing correctly and, as of this point, not filing correct 2011 and future 1040s (including Form 8938) and not filing the 2011 and future FBARs is not an option; I do think, however, the issue of whether a taxpayer should correct the past and do a voluntary disclosure is more nuanced and requires careful consideration with, preferably, the advice of counsel.]

Lynnley Browning, Lawsuits test UBS advice on offshore bank accounts (Reuters 3/30/12), here.


Mary Jacoby, Tax Division Farms Out Lawyers, Raising Questions About Focus (Main Justice Blog 3/27/12), here.
More of the same on the article discussed below.

David Voreacos, U.S. Tax-Evasion Probes Said to Slow as Prosecutors Transfer (Bloomberg 3/26/12), here.
The article discusses DOJ Tax CES's recent loss of 95 prosecutors, representing almost 30% of its criminal enforcement attorneys.  DOJ Tax's CES is responsible for gatekeeping and, in many and perhaps most cases, prosecuting tax offenses, including offenses related to offshore accounts. According to the article, 25 of the attorneys are being transferred to U.S. Attorneys offices to relieve pressures caused by the hiring freezes.  The aggregate transfers, the article suggests, will impede DOJ Tax's enforcement efforts, including its criminal initiatives related to offshore accounts. 
I will quibble about one  point.  The article says:  "The IRS said 30,000 U.S. taxpayers with offshore accounts have avoided prosecution since 2009 by entering a limited amnesty program, paying back taxes and saying who helped them hide their accounts from authorities."  I don't know whether the IRS said that or not, but I am sure that the IRS really did not mean to imply that it would have tried 30,000 U.S. taxpayers except for their entry into the program.  From my perspective, most of the persons who actually entered the programs did not have material criminal prosecution risk and many are opting out and avoiding the type of civil penalties that might have applied had they had serious criminal prosecution risk.  The program was really designed to give the most incentive to those who had serious criminal prosecution risk, but unfortunately was not designed for those without serious criminal prosecution risk because they did not need a pass on criminal prosecution and should not be subject to the major penalties inside the program.  But that's another story that is fleshed out in the blogs and the comments.


Terri Langford, Witness: Stanford victims' money went to mistress, luxury homes (Houston Chronicle 3/7/12), here.
R. Allen Stanford, Wikipedia entry here, committed crimes far more serious than merely hiding money in foreign bank accounts.  But he did use foreign bank accounts to hide money and therefore further the more serious crimes for which he was charged and convicted.  This article summarizes testimony in the forfeiture phase of the legal proceedings after his conviction.

Stephanie Soong Johnston, Swiss Parliament Amends Protocol to Treaty with U.S., 2012 TNT 45-5 (3/7/12)
This article reports that "In an apparent move to resolve Switzerland's long-standing bank secrecy dispute with the United States, the lower house of the Swiss parliament on March 5 amended the resolution ratifying the 2009 protocol to the Switzerland-U.S. income tax treaty to simplify the identification of potential tax evaders holding secret Swiss bank accounts."  Key points in the article are:
  1. The amendment will permit the IRS to make "behavioral pattern" information requests under information exchange provision of the Swiss / U.S. double tax treaty.  
  2. The behavioral pattern request must include:  (i) "the reason the data is necessary and relevant;" (ii) "a detailed description of the behavioral pattern in question;" (iii) "the reason for assuming that the taxpayer identified in the request has failed to meet his legal obligations;" and (iv) "a credible demonstration of fraudulent behavior on the part of the Swiss bank or its employees."
  3. The protocol still must be approved by the U.S.
Note that the use of "and" after (iii) suggests that these requirements are in the conjunctive -- i.e., all must be present.  The wording of 2(iv) seems odd to me. I would think that the IRS wants information on U.S. taxpayers whether or not it necessarily involves fraudulent behavior of a Swiss bank or its employees.  Indeed, the principal operation of the double tax treaty information exchange is to gather data on the taxpayer without regard to potential fraud by the requested countries citizens.  The IRS may want information about the enablers as well, but in many cases it may not be able to make the "credible demonstration" about the enablers.  Maybe the issue will be in interpretation.  What is a credible demonstration?  Credible to whom - the Swiss?  Presumably.  Would that make the IRS feel warm and fuzzy?
Americans in Sweden suffer US tax crackdown (The Local 3/6/12), here.
More on the unintended consequences of OVDP / OVDI and the angst to minnows caught in the trap.  Thanks to Anon5% for bringing the article to my attention.


HSBC provides info on clients having accounts in India to US (Deccan Herald 2/28/2012), here.
In April last year, HSBC Bank USA received summons from the US Internal Revenue Service (IRS) asking the entity to produce records with respect to US-based clients of an HSBC group company in India, the banking giant has said. 
"While the summons was withdrawn voluntarily, HSBC Bank USA has cooperated fully by providing responsive documents in its possession in the US to the US Internal Revenue Service, and engaging in efforts to resolve these matters," HSBC said on Monday while announcing its annual results.\ 
According to HSBC, it continues to co-operate in ongoing investigations by the US Department of Justice (DoJ) and IRS regarding whether certain "group companies acted appropriately in relation to certain customers who had US tax reporting requirements".


Hale Sheppard, When Bygones Aren’t Bygones: Exploring Tax Solutions for U.S. Persons with Undeclared Canadian Retirement Plans and Accounts (Tax Blawg 2/24/12), here.
This blog provides a link to the following article:  Hale Sheppard, When Bygones Aren’t Bygones:  Exploring Tax Solutions for U.S.  Persons with Undeclared Canadian  Retirement Plans and Accounts  (International Tax Journal July-August 2008), here.


IRS reopens Offshore Voluntary Disclosure Program: Should Indian Americans apply? (Economic Times 2/23/12), here.
Pretty good layman's summary of the current state of the foreign bank account universe.  Focused, as the title indicates, on Indian Americans.

Wesley Elmore, Shulman Won't Formally Respond to Taxpayer Advocate Directive on OVDP, Olson Says, 2012 TNT 34-6 (2/21/12)
This article reports the following: 
1.  IRS Commissioner Shulman has no plans to respond to the taxpayer advocte directive ("TAD") regarding OVDP.   
2.  There is some confusion regarding whether Commissioner Shulman is required to respond.   
3.  Apparently Commissioner Shulman is not required by law to respond except to recommendations in the Taxpayer Advocate's report to Congress; a separately issued TAD does not require a response.   
4.  Despite his nonresponse, the Commissioner and the Taxpayer Advocate met and had what she described as a "good meeting."   
5.  The Taxpayer Advocate is not giving up the issues presented and suggested that the TAD requires a more formal response.  The article notes:
Olson said the TAD came about because the IRS was treating everyone participating in the OVDP with a "one-size-fits-all" approach that assumed they were "all people trying to rip off the federal government." The IRS should recognize that there are different categories of taxpayers in the program and should clarify what taxpayers in each of those categories should do under the program, she said. For example, taxpayers with no tax liability or minimal liabilities should be told to "go and sin no more," while taxpayers who show reasonable cause or who meet a non-willfulness standard should be allowed to opt out of the program, Olson said. She added that she believed some examiners were trying to provide taxpayers with such options before the March 2011 memo was released.


Deepa Venkatraghvan, New IRS form affecting Indian Americans (Times of India 2/16/12), here.
This article discusses the new U.S. income tax Form 8938.  For all blogs on Form 8938, see here.  For the IRS web page on the Form, including links, see here.


Swiss banking secrecy: Don’t ask, won’t tell (The Economist 2/11/12), here.
This is an excellent article on the current drama in the high stakes game of shaking revenue from the Swiss banking system that has shielded tax evaders from the U.S. and other countries (as well as other skullduggers and potentates trying to hide money).  I recommend the article.  The article has an  excellent graph, titled the shores of El Dorado showing the location and sources of offshore money.  A larger and better version of the graph is here.
Chad Bray, Woman Says She Lied to Get on Jury in Tax-Shelter Case (WSJ Law Blog 2/15/12 5:26 PM), here.
This is the follow up on the story below.  The hearing is in process and will continue.  Nevertheless, the juror in question admitted she lied in the jury questionnaire   This is all interesting, but it is unclear whether it is simply a battle that will not affect the outcome of Daugerdas' war.  If I get updates as the hearings further progress, I will post them.
 Chad Bray, Judge Orders Juror Arrested In Tax-Shelter Case (WSJ Law Blog 2/15/12 12:39 PM), here.
The blog  chronicles post conviction discovery of potential juror misconduct in the Daugerdas case, a tax shelter prosecution about which I have written often.  (For Daugerdas related blogs, see here.)  Claims of juror misconduct are usually not reviewed for one reason or another.  Even when reviewed, often will not result in a different outcome for the complaining convicted defendants.  But this one may go somewhere, I suppose only to a retrial.  (The tax / white collar crime world is anxiously awaiting a retrial of Daugerdas et al.!)  A common phenomenon on retrials is that both sides go into the retrial a lot smarter about what works and what does not work.  Sometimes that vision permits a resolution short of retrial -- perhaps dismissal of the indictment (not likely in Daugerdas), a plea to skinnied down charges, or a much more streamlined case on retrial.  (OK, I know this is not an offshore evasion article, but I just did not want to devote a separate blog entry to the item.)

Kevin Gray and Lynnley Browning, Detained Swiss banker's fate up in the air (Reuters 2/13/12), here.
Christos Bagios, a Credit Suisse employee, was arrested and detained on a criminal complaint.  Nomally, an indictment must follow within 30 days.  Bagios has repeatedly waived that requirement and has done so for another 60 days.  The speculation is that his ultimate fate in terms of criminal indictment may be linked to the ongoing negotiations with Credit Suisse.

Bloomberg interview of Credit Suisse CEO (2/9/12), here.
Readers might be interested in this interview of Brady Dougan, CS CEO, regarding the fourth quarter results.  The interview covers a range of topics about Credit Suisse's financial position and prospects.  One of the topics is the U.S. tax brawl.  The discussion appears beginning around 4:15 minutes into the interview and ends about 8:00 minutes into the interview.  The expected pablum is there -- important, complex issues; will take time to resolve; CS is cooperating and doing everything it can.  And so forth.  Mr. Dougan does state that CS had reserved $295 million for resolution of the issue in the third quarter, and that possibly that amount may rise.  He did not feel CS would be indicted in the U.S., noting that CS exited the U.S. business and did not take any of UBS U.S. customers as did Wegelin.

Stephanie Soong Johnston, U.S. Labels Swiss Bank 'Fugitive' in Tax Case,  2012 TNT 29-8 (2/13/12).
Noting that Wegelin has stated that it was not properly served with a summons.  The article quotes Bryan Skarlatos of Kostelanetz and Fink as stating that Wegellin may be contesting jurisdiction, apparently because it has no U.S. footprint or lack of ability to properly serve Wegelin.

See David Glovin, Wegelin Doesn’t Appear at Hearing, Called ‘Fugitive’ by U.S. (Bloomberg 2/10/12), here.
Prosecutors call Wegelin a fugitive when its representative fails to appear in court.  For the blogs on Wegelin, see here.

Robert W. Wood and Christopher A Karachale, The ABCs of Foreign Bank Accounts, 134 Tax Notes 553 (Jan. 30, 2012).  I don't have a link to the article, but I would expect a link to it to be posted shortly on the authors' article web page, here.
This article recounts where we are and some problems with one size fits all. I suspect that most readers of this blog will not find anything new here, but still it is a good article.
Thomas E. Zehnle, Rethinking the Approach to Voluntary Disclosures, 134 Tax Notes 575 (Jan. 30, 2012).  I don't have a link to the article, but I would expect a link to it to be posted on the author's firm's article web page, here.
The author laments lack of nuance and promotes better overall enforcement results with more nuance and, in many cases, lesser penalties.  His conclusions: 
As stated at the outset, this article simply seeks to start a thoughtful discussion about where we go from here. Taking an approach from a different area, such as federal sentencing, and attempting to analogize it to the IRS's voluntary disclosure practice won't be easy, but it could produce the uniformity, proportionality, and certainty necessary to bring many taxpayers back into compliance -- and millions of untaxed dollars back into the system when they are most needed.
Make no mistake, developing an approach along the lines suggested would require compromise. To maximize tax revenues from voluntary disclosures, penalty ranges might have to be reduced (or possibly waived) from those in the most recent initiatives. This would seem unfair to the individuals who disclosed under the OVDP and the OVDI. But if punishment is the lodestar, no logical approach will work for the future because everything will proceed from the significant penalty structures of the past. If increasing tax revenues is instead the primary goal -- as it must be -- a pragmatic structure needs to be created and employed. With FATCA just around the corner, the time seems right for big thinking.

Leandra Ledermann, The Use of Voluntary Disclosure Initiatives in the Battle Against Offshore Tax Evasion, 56 VILL. L. REV. __ (2012) (forthcoming) (symposium), on SSRN here.
A useful summary, but probably most readers of this blog are already familiar with the information.  Thanks to Tax Prof Blog, here, for the link.


Swiss Bank Wegelin Agrees to Sale Amid U.S. Tax Crackdown (Bloomberg 1/27/12), here.
Wegelin is selling itself, probably because of U.S. tax pressure.  Some whining going on by Wegelin's owners.

Chad Bray, Ex-M&A Lawyer Sentenced To Two Years In Tax Case (WSJ Law Blog 1/11/12), here.
I previously blogged on a plea by a prominent lawyer to a tax mainstream tax crime.  See Prominent Lawyer Pleads to Mainstream Tax Crimes (8/5/11), here.  The WSJ Law blog reports that the lawyer has now been sentenced to two years in prison.  The reports are too cryptic to make any comment on why, on the failure to pay tax on $10MM+, the sentence is only 2 years.  There  must be a lot of nuance that the sentencing judge took into consideration.
Lynnley Browning, US moves toward legal action against Swiss bank-sources (1/9/12 Reuters), here.
Speculations about possible U.S. criminal prosecutions of a prominent Swiss bank which has few U.S. entanglements (at least onshore U.S.) and who proactively sought to exploit offshore evasion.  For my  blog posts on Wegelin, see here.

Marie Sapirie, Year in Review: Offshore Disclosure, FATCA Reflect IRS Enforcement Efforts, 134 Tax Notes 29 (Jan. 2, 2012), here.
This is posted with the permission of Tax Analysts, as indicated on the article itself.  Thanks to Tax Analysts.

Jeff Neiman, Wegelin Digs In Heals (Jeff Neiman Blog 1/5/12), here.
Jeff's comments are good ones.  For the related story, see my blog of Tuesday, New Swiss Enabler Indictments - Bankers Related to UBS and, Allegedly, Wegelin (1/3/12), here.

Lynnley Browning, New U.S. tactic for suspected Swiss bank tax cheats (12/28/11), here.
Lynnley has a nice article on the required records subpoena used to extract records -- or their absence, itself a violation of law -- from real or imagined U.S depositors in foreign accounts.  I have written on this previously - see here.  The article is not without its hyperbole (lawyers, after all, are quoted), but knowledgeable readers should be able to weed the wheat from the chaff.   
The district court's opinion from SD TX rejecting the required records subpoena is here. I understand that the Government has appealed the case to the Fifth Circuit. I don't plan to discuss this district court opinion, given that it is interim in view of the Government's appeal.
For a good article on the subject, see Todd Welty and Denise Mudigere, The Erosion Of 5th Amendment Privilege (Portfolio Media, Inc. 12/15/11), here.
 Thanks to Just Me (a frequent commenter on this blog) for pointing me to Lynnley's article. 

Roy A. Berg, IRS Says No New Relief Planned For Canadians (Moodys Tax Advisors 12/16/11), here.
Key points I noted that may be of more general interest:
  • "Penalty abatement for Canadian residents participating in the OVDI is available only if the taxpayer “opts out” of the program and successfully argues that he had 'reasonable cause' for failing to file the returns."
  • "The IRS is on the lookout for taxpayers who attempt to bring their unfiled returns current by using 'quiet disclosure' and those who attempt to resolve their filing obligations in this way will face harsh penalties."  (Emphasis supplied by JAT.)  This leads the author to conclude that: "those who attempt to bring their filing obligations current by using “quiet disclosure” may find themselves in much more trouble than if they had used “voluntary disclosure."  JAT Comment:  Of course, the fuzz word in the conclusion is "may" which invites its counterpart "may not."  The truth is that no one really knows what is going to happen.  But, for those taxpayers whose criminal exposure is low (that is probably a high percentage of the taxpayers involved, but it is uniquely a factual inquiry) and whose audit exposure is less than inside the OVDI 2011, then the worst that can happen to them should they not do a voluntary disclosure is an audit which, as posited, achieves a better result anyway.  So, a question the practitioner should help the client with in the client's unique facts is whether to make any disclosure at all.  In most of the case where no disclosure is made, my suspicion (that's the fuzz word) is that the IRS will never come knocking and will just lose the revenue but if the IRS does, all it will get is the audit result which would be the same result by joining the program and opting out.
  • IRS is aware of the RRSP issue; author concludes that the resolution of the issue is still open.


Jeff Neiman Blog, Paper: US Offers 11 Swiss Banks Deal to End Tax Investigation (12/20/11), here.
Jeff Neiman reports of buzz about a potential deal between the U.S. and 11 Swiss Banks.  See Jeff reports that the details are murky and, reportedly, the banks are believed to include:  Credit Suisse, HSBC, Bank Hapoalim, Bank Leumi, Basler Kantonalbank, Julius Baer, Wegelin, Zurcher Kantonalbank.
Of course, the question is whether the U.S.'s fury against Swiss banks will be spent with the 11 (if the rumor is even true).  I suspect banks in other countries will be targeted, but wonder if we are nearing conclusion on the Swiss bank juggernaut.


IRS Audits of Quiet Filers Have Begun (The Tax Times 12/16/11), here.
I recently attended an ABA conference where multiple representatives from the IRS including, Senior Litigation Counsel Kevin M. Downing, were speakers and they all reiterated that the IRS has a program in place to audit Quiet Filers, who chose not to make a voluntary disclosure but rather chose solely to amend their tax returns to include their previously unreported income from their foreign bank accounts.
Jamie Golombeck, Amreicans in Canada Still at the Mercy of the IRS (Financial Post 12/17/11), here.

Robert W. Wood, IRS Exempts Many Expats from FATCA (Forbes 12/16/11), here.


Laura Saunders, What's Next for Offshore Accounts (WSJ 12/10/11), here.
The whale's mouthpiece news organ touts why the whales can get better results than the minnows.  Perhaps, that's why they are rich.  They are entitled.

On 12/7/11 the IRS has posted a fact sheet titled Information for U.S. Citizens or Dual Citizens Residing Outside the U.S. (dated 12/7/11),  here.  This may be a fact sheet that previously existed, and just updated as of 12/7/11.  It does provide the basic tax and FBAR requirements in one place in reasonable summary fashion.


Robert W. Woods, Primer For First Time FBAR Filers (Forbes Blog 12/5/11), here.
Given the limitations of the medium, perhaps as good as it could be but certainly not in any way definitive.  Still, perhaps, worth a read.

Previously unreported but atypical FBAR violation prosecution.
In United States v. Berrettini, 2011 U.S. App. LEXIS 12323 (3rd Cir. 2011), here, the Third Circuit affirmed the conviction and sentence of the husband in a husband-wife team tried for "eleven counts of tax offenses: conspiracy to defraud the United States by filing false individual income tax returns in violation of 18 U.S.C. § 371 (Count 1); filing false individual income tax returns and false corporate tax returns for both a foreign corporation and a United States corporation in violation of 26 U.S.C. § 7206(1) (Counts 2-10); and filing a false treasury form in violation of 31 U.S.C. § 5314 (Count 11)."  They were convicted on all counts except the conspiracy count.  The indictment was brought on 10/25/07, so it was well before the recent offshore initiatives starting in 2009.  It is an outlier case, so I am not devoting a full blog entry to it.  For the IRS's summary of the conviction and sentence, see here.  I am putting the information in the spreadsheet, so it will be there when next I upload it to the blog site.

Robert W. Woods, Got FBARs? But Which One? (Forbes Taxes 12/1/11), here


David Voreacos, Credit Suisse Bankers Want U.S. Charges Dropped (Bloomberg 11/20/11), here.
JAT Comment:  They are smoking something that is affecting their collective minds.

The Rumor Mill (Unsubstantiated):
Latest rumor I have heard (just a rumor not for attribution) is that Credit Suisse (including Clariden Leu) sent out 600 for U.S. clients with intervening entitites. The reported extectation is that Credit Suisse will soon receive a mandate from the Swiss Federal Tax Administration for between 3,000 to 4,000 individual names to be handed out as well.  Since Credit Suisse is now out of the business of servicing U.S. customers who won't comply, this presumably would involved only non-active clients.  (No indication of the characteristics for identifying the accounts.)  Besides, what have the non-active clients done for Credit Suisse lately?
Klaus Wille, Swiss Parliament Panel Approves Amendment to Tax Deal With U.S. (Bloomberg Businessweek 10/14/11), here.

The amendment allows for the handover of files on suspected tax offenders to the U.S. in cases where the U.S. authorities don’t know the identities of American holders of Swiss bank accounts and are basing requests for information merely on certain patterns of behavior. 
The amendment is intended to clarify the September 2009 accord, the Swiss government said in August, when it asked the upper house to back it. The previous 1996 agreement already allowed the transfer of dossiers in cases where the U.S. doesn’t have the names. While both the U.S. and the Swiss governments said they understood the new treaty would let that continue, the Swiss authorities still said they wanted to obtain parliament’s approval for the clarification.

Rupert Neate, Credit Suisse to reveal details of super-rich US 'tax evaders' (The Guardian 11/14/11), here.

H.P. Agrawal, New Swiss tax treaty needs further improvement (Business Standard (India) 11/14/11), here.


Amy Feldman, REFILE-Undisclosed foreign accounts? The IRS is coming (Reuters 11/9/11), here.

Standard fare with some hyperbole.


Julia Werdiger, Tax Evaders Face Greater Scrutiny as National Debts Pile Up (NYT 11/2/11), here.

Discusses the effort by many developed countries to crack down on tax havens and tax evasion


David Voreacos, Klaus Wille and Giles Broom, Swiss Banks Said Ready to Reveal Clients (Bloomberg 10/24/11), here.

The article's title gives a fair summary of the thrust of the article, but here are some pungent quotes:
“The Swiss would like to get out of this by paying money, and they’ve done that with other countries,” said tax attorney H. David Rosenbloom of Caplin & Drysdale Chartered in Washington, who isn’t involved in the talks. “For the U.S., it’s not primarily a money question. It’s a matter of making sure the laws apply fairly among taxpayers.”

  * * * *

Final Accord

The Swiss government seeks to outline a final accord for the Foreign Affairs Committee of its Parliament’s upper house on Nov. 10, according to a person familiar with the matter. The number of banks that will pay to resolve the U.S. negotiations may extend beyond the 11 under criminal investigation, the people said.

“We are aiming for an all-encompassing solution that will apply to all the banks,” Finance Minister Eveline Widmer- Schlumpf said in an Oct. 4 interview in the Swiss capital Bern. “We don’t want to be confronted with the same issues time and again.”
  * * * *

The U.S. insists that the Swiss disclose client account data, and the banks may end up handing over data on 5,000 to 10,000 accounts, the people said. A final determination hasn’t been made, they said.

The group of 11 also includes [in addition to Credit Suisse] HSBC Holdings Plc (HSBA), the biggest European bank, Basler Kantonalbank, Wegelin & Co., Zuercher Kantonalbank, and Julius Baer Group Ltd. (BAER), the people said. Three Israeli banks -- Bank Leumi Le-Israel BM (LUMI), Bank Hapoalim BM (POLI), and Mizrahi-Tefahot Bank Ltd. (MZTF) -- are on the list, as well as Liechtensteinische Landesbank AG and an asset manager, NZB AG, according to the people.

  * * * *

Statistical Data

Urs Rohner, chairman of Credit Suisse, last month told newspaper NZZ am Sonntag that the bank has transferred statistical data sought by the U.S. Marc Dosch, a spokesman for the Zurich-based bank, declined to comment further.

Basler Kantonalbank (BSKP) spokesman Michael Buess said it also gave such data to the U.S.

Wegelin & Co. spokeswoman Albena Bjoerck said it will show “Swiss and U.S. authorities that the bank has not breached either Swiss or U.S. law.” The bank is cooperating with authorities “within the scope of Swiss law.”

After a U.S. indictment of two Julius Baer bankers this month, the bank said it “is one of a number of Swiss financial institutions supporting the ongoing tax negotiations between the U.S. and Switzerland” and is cooperating with the U.S. probe. Spokesman Martin Somogyi declined to comment further.

Youval Dichovski, Zurich-based head of internal audit at Bank Leumi Switzerland Ltd., said the bank is cooperating.

Bank Hapoalim Switzerland is complying with its legal and regulatory duties in cooperating with Swiss authorities, said Chief Executive Officer Michael Warszawski. He said the bank “has only a limited number of American clients whose holdings with the bank are very small.” The bank, he said, “is not aware of any violations of U.S. law by the bank or its employees.”

Few Employees

Cyrill Sele, a Vaduz, Liechtenstein-based spokesman for Liechtensteinische Landesbank AG (LLB), said it sent statistical data to the U.S. A man who answered the phone Oct. 20 at NZB said it is closing and has only a few employees.

Zuercher Kantonalbank spokesman Urs Ackermann said the bank was informed in September of the U.S. investigation. A spokesman for Mizrahi Bank had no immediate comment.


Swiss banks put under pressure from US ( 10/7/11), here:
Switzerland is preparing to send information about alleged tax cheats to the United States, a Swiss newspaper claimed on Friday, without naming its source.

The German-language Tages-Anzeiger says there was a “secret meeting” last week between the State Secretariat for International Financial Matters (SIF) and the “core group” of 11 Swiss banks currently in the sights of the US tax authorities.

The banks were allegedly told to put together the files of their US clients. A first batch of data is to be sent at the end of October, with several thousand more to follow in the middle of November, the paper says.

* * * *

Apart from Credit Suisse, the banks in question include Julius Bär, Zürich Cantonal Bank, Basel Cantonal Bank and Wegelin.

* * * *

The two sides are currently discussing a new agreement, which will give the US side easier access to Swiss bank client data. The Swiss parliament last month delayed discussion of this until December. At stake is the cherished tradition of banking secrecy.

James B. Stewart, At UBS, It’s the Culture That’s Rogue (NYT 9/23/11), here

The title of Stewart's article speaks for itself.  The tax crimes it committed were only part of the systemic problem within UBS.


Anecdotal Information That IRS Has HSBC Information and is Moving Civilly
From various sources, I understand that the IRS is sending out 30 day letters regarding income in HSBC accounts in foreign countries, asserting that the information came from "treaty partners." Apparently the notices do not assert civil penalties.  And, of course, the potential for an FBAR investigation and/or penalty remain unknown.
Stephanie Soong Johnston, Resistance in Swiss Parliament Threatens U.S. Tax Deal, 2011 TNT 182-5 (9/20/11) (no link available). 
Tax Notes today reports that Swiss Parliamentary resistance could derail the deal that has been cooking between the U.S. and Swiss Governments. Stephanie Soong Johnston, Resistance in Swiss Parliament Threatens U.S. Tax Deal, 2011 TNT 182-5 (9/20/11).  According to the article, the reports are that the deal in the works included about 2.25 billion and would permit the U.S. to seek routine help to identify tax evaders --  presumably via the John Doe Treaty request of some variety.  The article says in the latter regard:
The deal would also permit authorities to seek routine help from the Swiss to identify possible tax evaders and allow them to make group inquiries, instead of providing specific names, as is required now. Up to 10 group requests would be allowed, affecting such banks as Julius Baer, HSBC, and Credit Suisse, according to the AFP report. Local media report that the deal would also require banks to turn over some client data. The number of client names could range between 1,000 and 10,000, according to a September 17 Reuters report.

Credit Suisse to pay $206 million to settle German tax (Huffington Post - Reuters 9/19/11), here.

Key excerpts:
Credit Suisse said on Monday it has agreed to pay 150 million euros ($206 million) in Germany to end an investigation into employees of the Swiss bank by the public prosecutor's office in Duesseldorf concerning tax evasion.
* * * *

Later this week the German and Swiss governments are looking to sign a deal on taxing money stashed by German citizens in secret Swiss accounts, a German government source told Reuters on Sunday.

The terms of the deal were struck in August when Switzerland and Germany agreed to tax money held by German citizens in secret accounts, estimated at up to 150 billion Swiss francs ($171 billion).

The agreement could set a model for agreements between Switzerland and other countries, although they still require the approval of the Swiss and German parliaments.