Schumacher, UBS and Neue Zürcher Bank Enabler, Pleads Guilty (4/7/15)

As expected, Hansruedi Schumacher yesterday pled guilty to one count of defraud / Klein conspiracy.  See Susannah Nesmith and David Voreacos, Ex-UBS Banker Schumacher Pleads Guilty in U.S. Tax Probe (Bloomberg 4/6/15), here.  Schumacher testified as a Government witness in the unsuccessful trial of Raoul Weil.  See Raoul Weil Found Not Guilty (Federal Tax Crimes Blog 11/3/14; 11/6/14), here.

The plea agreement is here.  In the plea agreement, the parties agreed that "the appropriate disposition of this case is, and agree to recommend jointly, that the Court impose a sentence of a term of probation of five (5) years."  That disposition is consistent with the sentences of Andreas Bachmann and Josef Dörig, Swiss enablers sentenced recently.  See Swiss Bank Enablers Get Unsupervised Probation and Relatively Light Fines (Federal Tax Crimes Blog 3/30/15), here.

Last night in the Tax Fraud and Money Laundering class, we covered sentencing.  Within that subject, we covered how plea agreements address sentencing matters, in getting to the "appropriate disposition."  The plea agreement thus addresses the key sentencing calculation factors as follows (with my comments in brackets):

2. The United States and the defendant jointly agree that the appropriate disposition of this case is, and agree to recommend jointly, that the Court impose a sentence of a term of probation of five (5) years.In accordance with Rule 11(c)(1)(B) of the Federal Rules of Criminal Procedure, the United States and the defendant will recommend to the Court that the following provisions of the Sentencing Guidelines apply:

A. Base Offense Level: 26 (U.S.S.G. §§ 2T1.1(a), 2T1.4.1(K)) [Note that the tax loss indicated by the base offense level is between $7,000,000 and $20,000,000.]

B. Sophisticated Means: 2 (U.S.S.G. § 2T1.1(b))(2))

C. Acceptance of Responsibility: - 3 (U.S.S.G. § 3E1.1(a) and (b))

D . Total Offense Level: 25 [The Sentencing range per the Tax Table is 57-71 months.]

3. The parties respectfully submit that they will be making a joint recommendation, pursuant to 18 U.S.C. § 3553(a) and U.S.S.G. § 5K1.1, [Substantial Assistance Departure] that the defendant be sentenced as follows;

A. That the defendant be placed on probation for a period of five years;

B. That the defendant pay a fine of $150,000;

C. That, in addition to the standard terms and conditions of probation, the Defendant be required to (i) abide by all terms and conditions of Paragraph 5, infra, concerning his duty to cooperate under this Plea Agreement, and (ii), to facilitate that cooperation, the defendant be required to return to the United States as requested as part of his requirements under Paragraph 5, infra;

D . That based upon the nature of the tax loss and liabilities in this case, which were personal to each taxpayer, as opposed to the defendant, an order of restitution not be imposed.

Swiss Category 2 Banks Reportedly Get Draft of NPA Agreement (10/11/14; 10/14/14)

A reader forwarded me a link to an article in Neue Zürcher Zeitung, Zoé Baches, Schock für Schweizer Banken: USA fordern totale Kooperation (11/10/14), here.  The article is in German.  My German is rusty.  So I relied on a Google translation of the article which, I think, is not perfect but better than if I had tried to translate it (not sure how much better, since I did not try very hard).  The Google translation has the title of the article as follows:  Shock for Swiss banks: USA require total cooperation.

A Reuters article in English reports on the NZZ article, Alice Baghdjian, Draft US deal for Swiss banks in tax row seeks "total cooperation" - paper (Reuters 10/11/14), here.  I rely for the comments below principally because the Google translation is not clear on a lot of points, and my inference from it alone might not  be good.

Here is my summary:

1.  DOJ has emailed the banks participating as Category 2 banks in the DOJ Swiss bank program a "Model-NPA."  NPA is the acronym for nonprosecution agreement which is what the Category 2 banks seek in the program.

2.  DOJ demands "total cooperation."  The requirements "would also apply to parent companies, subsidiaries, management, workers and external advisors"

3. Quoting NZZ: ""This total cooperation would, in addition, not only apply with respect to the DOJ and the Internal Revenue Service, but also to anyone, even foreign law enforcement agencies, that the DOJ is supporting in its investigations," with "no end date."

4.  "It is also unclear whether the requested information would only need to be handed over when doing so complied with Swiss law, the paper said."

5.  "Failure to follow any one of the terms of the agreement would render it void, and the bank could risk prosecution from the DOJ."

Although, as noted the Google translation of the German is not perfect, I infer that it says also the following (which is not reported in the Reuters article):

6.  Either within the Model-NPA or separately, the banks must commit for the future to report about U.S. taxes -- presumably violations or suspected violations.

7.  Hardliners have taken over the leadership of DOJ, mentioning Tamara Ashford, Acting AAG Tax, who is awaiting confirmation to the U.S. Tax Court.  (I don't know what this means other than that DOJ Tax will continue to do what it was doing with respect to Category 2 banks; I am not aware that Ms. Ashford is tougher on the issues than the prior AAG.)

Addendum 10/14/14 10:00 AM:

A reader, Andre Watts, sent me the following and gave me permission to post it since, for some reason, he could not get it to post as a comment.  It adds considerable nuance to the article from the German rather than the rough translations:

Credit Suisse Enabler Christos Bagios Plea and Sentencing (11/7/12)

Yesterday, Christos Bagios, a Credit Suisse Banker who had been in custody for some time, pled and was sentenced.  The following are the relevant documents:

Bagios Information, here.
Bagios Plea Agreement, here.
Bagios Sentencing Minutes, here.
Bagios Judgment, here.

Key features:

Defendant:  Christos Bagios
Bank:  Former employee of Credit Suisse; also involved UBS and Neue Zuercher Bank
Count of Plea:  Defraud / Klein Conspiracy (1 count)
Tax Loss:  $1,000,000 +  (See below indicating the tax loss was at least $1,086,75)
Fine: -0-
Restitution: -0-
5K1 Departure:  Irrelevant because of plea - see discussion below.
Sentence:  37 days imprisonment - see discussion below
Court:  SD FL
Judge:  Kenneth Marra (Wikipedia here)

Comments:

1.  Type of Plea.  Normally tax pleas leave sentencing in the discretion of the Judge who is guided by the Sentencing Guidelines and Booker.  This particular plea, however, was under FRCrP 11(c)(1)(C) and (3)(A), here.  In a plea pursuant to that rule, the parties agree upon the sentence.  If the Court rejects the plea as made, either party may withdraw from the plea agreement.  Obviously, such a plea takes out some of the risk of a guilty plea.  But judges have been known to reject those pleas.  One famous instance of a judge rejecting such a plea was in the Lea Fastow case, here.  Lea Fastor was the wife of Andy Fastow of Enron fame.