USAO SDNY and Bank of Butterfield Enter NPA (8/3/21)

The USAO SDNY has issued this press release:  Manhattan U.S. Attorney Announces Agreement With Bermudian Bank To Resolve Criminal Tax Investigation: The Bank of N.T. Butterfield & Son Limited Pays $5.6 Million in Forfeiture and Restitution; Receives Non-Prosecution Agreement as a Result of its Cooperation, here.  The combined NPA and Statement of Facts are linked in the press release; direct link is here.

Key excerpts from the press release:

Audrey Strauss, the United States Attorney for the Southern District of New York, Stuart M. Goldberg, Acting Deputy Assistant Attorney General of the Justice Department’s Tax Division, and James C. Lee, Chief of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today that Bank of N.T. Butterfield & Son Limited (“BUTTERFIELD”) entered into a non-prosecution agreement (“NPA”) with the U.S. Attorney’s Office and agreed to pay $5.6 million to the United States for assisting U.S. taxpayer-clients in opening and maintaining undeclared foreign bank accounts from 2001 through 2013.  The NPA was based on BUTTERFIELD’s extraordinary cooperation, including its efforts in providing 386 client files for non-compliant U.S. taxpayer-clients, and provides that BUTTERFIELD will not be criminally prosecuted.  The NPA requires BUTTERFIELD to forfeit $4.896 million to the United States, representing certain fees that it earned by assisting its U.S. taxpayer-clients in opening and maintaining these undeclared accounts, and to pay $704,000 in restitution to the IRS, representing the approximate unpaid taxes arising from the tax evasion by BUTTERFIELD’s U.S. taxpayer-clients.

Bloomberg Article on the Intrigue in the Smith NPA (Related to Brockman Indictment) (2/3/21)

I have written previously about Robert Smith’s unusual nonprosecution agreement.  I say unusual because his misconduct was sustained and blatant over many years.  Based on my experience and attention to the federal tax crime universe over the years, it was unusual because, even with an agreement to cooperate, a plea of guilty to some serious tax crime (often conspiracy and/or tax evasion) would be required for the type of conduct involved.

 Bloomberg has a report of some of the intrigue behind the unusual plea agreement (at least as alleged in the article).  Neil Weinberg and David Voreacos, How Billionaire Robert Smith Avoided Indictment in a Multimillion-Dollar Tax Case (Bloomberg 2/3/21), here.

 Excerpts that attracted my attention:

But rather than expose a man worth about $7 billion to a possible prison term and potentially force him to give up control of his private equity firm, Vista Equity Partners, Barr signed off on a non-prosecution agreement. It required Smith to admit he had committed crimes, pay $139 million and cooperate against a close business associate indicted in the largest tax-evasion case in U.S. history—Texas software mogul Robert T. Brockman.

Smith, the richest Black person in the U.S. according to the Bloomberg Billionaires Index, agreed to cooperate after spending years raising his public profile as a philanthropist and advocate for racial justice. He praised the Trump administration’s efforts to provide economic assistance to minority business owners amid the Covid-19 pandemic. As his wealth tripled over the past five years, he also gave away more than he had hidden abroad. All that complicated the possible prosecution of a defendant whom jurors may have viewed sympathetically.

****

Thoughts on NonProsecution for Trump (11/9/20)

Yesterday, Josh Blackman, law professor at South Texas College of Law, posted this blog:  Would President Biden's Nominee for Attorney General Pledge Not to Prosecute Former-President Trump? (The Volokh Conspiracy 11/8/20), here.  Blackman argues that the Senate, controlled by Republicans, can condition advice and consent to the Attorney General nominee upon the AG nominee agreeing or promising not to prosecute Trump and his associates (whatever associates really means, see below).  I understand that prosecuting Trump for crimes is probably not good for the country, given the passion that almost half the country has for Trump.  I think, however, there is some reason to warrant further investigation as to whether Trump committed serious crimes, including tax crimes, I thought I would state my thoughts on what might be a good resolution of the issue.  I frame my thoughts in terms of tax crimes but it would apply generally for all federal crimes.  And, I frame the discussion in terms of nonprosecution (whether that nonprosecution takes the form of Presidential pardon, full letter immunity, or nonprosecution agreement).

1.  The tax crimes for which nonprosecution is granted to Trump should be identified perhaps without specifying details (such as specific years or tax loss, etc.).  The nonprosecution could be, for example, for all tax or tax related crimes prior to January 2021.  The tax crimes could be listed such as 26 U.S.C. § 7201 (tax evasion) or 18 U.S.C. § 371 (tax conspiracy, offense or defraud).  [As I said above, a similar technique could be applied for other crimes, but I think the crimes for which the country grants nonprosecution should be named.]  I don’t think that Trump should be required to admit specific crimes in the nonprosecution agreement, because he simply won’t do that and investigating the crimes would take too much time and be divisive.  Any crimes Trump commits after January 2021 are not within the scope of nonprosecution.

2.  In return for the country’s gift of nonprosecution, Trump must pledge that he will not attempt to pardon himself or any of his “associates” as Blackman calls them.  [This will require that the agreement be reached before he leaves office.]  I would include in associates that he will not pardon the following: V.P. Pence and all White House officers or appointees (even if serving in a voluntary capacity), cabinet-level appointees, all agency political appointees, all Trump family members, all Trump off-the-Government books minions (like Rudy Giuliani, etc., and Trump players such as Manafort, Stone, etc.), and Trump’s affiliated business entities and their officers, employees or agents.  (This may not be a complete list.)

3. Trump’s civil liabilities to the Government may be pursued.  In the tax area, Trump must agree to cooperate with the IRS and DOJ Tax as necessary to determine tax liabilities, penalties and interest for himself and his affiliated entities.  Trump may still assert any defenses he may otherwise have (e.g., nonliability for the tax or penalties, statutes of limitations, etc.), but Trump must assist and cooperate with the IRS and DOJ Tax in the determination of his liabilities.  On the statute of limitations issue, for years not otherwise within the three or six-year statute of limitations, the IRS would still have to meet the substantial burden of proving fraud by clear and convincing evidence.  (I mention DOJ Tax here only protectively, for the determination of the liabilities is initially an IRS function alone unless it somehow gets to court.)

Private Equity Guru Smith Got a Hell of a Deal (10/23/20)

Today, the Wall Street Journal published what, I understand, is called an “explainer” about the Brockman indictment and the Smith nonprosecution agreement (“NPA”).  See Laura Saunders The IRS Reels in a Whale of an Offshore Tax Cheat—and Goes for Another (WSJ 10/23/20), here.  I previously wrote on these events.  One Big Fish Indicted and Lesser Big Fish Achieves NPA for Cooperation (10/16/20), here.  

The WSJ article provides a good bullet point high-level summary of the events.  I write today to provide some nuance to a sound bite quote that I gave for the article.  The quote, at the end, is:  "Jack Townsend, a lawyer who publishes the Federal Tax Crimes blog, says, 'He got a hell of a deal, considering what he did.'"

My statement was based only on the publicly disclosed facts in the NPA and the Statement of Facts (Exhibit A) with the NPA, which are here and here, respectively.  Those publicly disclosed facts may not tell the whole story as to why Smith achieved an NPA rather than some other disposition (I discuss some possible other dispositions below.)  

Just on those facts, Smith’s deal is exceptionally good for him.  He committed years of tax evasion, then attempted to do a Streamlined disclosure (after being rejected from OVDP) where he had to certify nonwillfulness and submit amended returns and delinquent or amended FBARs which he did and which were false.  That pattern, particularly, the second step Streamlined disclosure was just incredibly stupid.  If he had done only the OVDP and been accepted into OVDP, he likely would have avoided prosecution if his OVDP submissions and cooperation were truthful and complete.  Two caveats on that, however: (i) OVDP did not “guarantee” nonprosecution but, as a practical matter it would if the disclosure and cooperation were good (I am not aware of any prosecution of an OVDP participant whose cooperation was truthful and complete); and (ii) his behavior on the subsequent Streamlined suggest at least that his amended return and delinquent or amended FBAR submissions in the posited counterfactual OVDP if it had gotten that far likely would not have been truthful and thus would not have resulted in the key relief generally offered by OVDP – nonprosecution.

What I address today is why, given the facts in the NPA and Statement of Facts, DOJ would have given Smith an NPA for such egregious behavior (by which I don’t mean just the dollars involved, but more importantly his overall behavior to cheat and avoid getting caught with continued lies).

The Statement of Facts and the NPA do not really address that issue, except that in the press release his cooperation was emphasized.  I presume that the cooperation is not only the cooperation in exposing his own criminal conduct but more importantly in indicting and prosecuting Brockman.  So, this raises some speculations / questions.

1. Did Smith get an NPA because the Government did not have the necessary proof to convict Smith and the NPA was the best the Government could do, particularly if it helped nail a bigger fish?  In other words, the facts in the Statement of Facts could have been provable only after Smith’s cooperation after his lawyers negotiated the commitment for an NPA.  Hence, rather than indicting Smith with a weak case, the Government might have been motivated to grant the NPA in order to get his cooperation against Brockman as well as obtain the monetary benefits accorded by the NPA.  That’s a matter of what each party’s hand was as they negotiated Smith’s disposition.  I just don’t know that.

Swiss Category 1 Bank Enters NPA (8/6/19)

On August 5, 2019, DOJ Tax announced here another nonprosecution agreement (NPA) with a Category 1 Swiss Bank, LLB Verwaltung (Switzerland) AG, formerly known as “Liechtensteinische Landesbank (Schweiz) AG” (LLB-Switzerland).  The announcement has links to the NPA, here, and the Statement of Facts, here.

Key features of this NPA are:

1.  LLB Verwaltung must pay the Tax Division a penalty of $10,680,554.64.  According to the NPA, the penalty is in lieu of restitution, forfeiture or criminal fine.

2.  LLB Verwaltung must "cooperate in any related criminal or civil proceedings in return for the Department’s agreement not to prosecute the company for tax-related criminal offenses committed by LLB-Switzerland."

3.  A related Liechtenstein bank, Liechtensteinische Landesbank AG (LLB-Vaduz), earlier in 2013 reached a separate NPA.  See DOJ Tax Press Release, here.  LLB-Vaduz paid restitution of $7,525,542.  See also Liechtensteinische Landesbank Enters NPA (Federal Tax Crimes Blog 7/30/13), here.

4.  The bad behavior, variations on a theme for many Swiss banks, is described in the press release:

According to the statement of facts agreed to by the parties, LLB-Switzerland and some of its employees, including members of the bank’s management, conspired with a Swiss asset manager and U.S. clients to conceal those U.S. clients’ assets and income from the Internal Revenue Service (IRS) through various means, including using Swiss bank secrecy protections and nominee companies set up in tax haven jurisdictions. At its peak, LLB-Switzerland had approximately one hundred U.S. clients holding nearly $200 million in assets. The majority of those accounts were in the names of nominee entities. 

In 1997, Liechtensteinische Landesbank AG (LLB-Vaduz), a bank headquartered in Liechtenstein, acquired LLB-Switzerland (LLB-Vaduz reached a separate agreement with the Justice Department in 2013 that excluded LLB-Switzerland from the resolution). At that time, LLB-Switzerland provided banking and asset management services to individuals and entities, including citizens and residents of the United States, principally through private bankers based in Zurich, Geneva and Lugano, Switzerland. LLB-Switzerland also acted as a custodian of assets managed by third-party external investment advisers. 

In 2003, LLB-Switzerland began a relationship with a Swiss asset manager. The asset manager offered to create nominee structures, including corporations, foundations, and trusts, to conceal accounts owned by his U.S. clients at Swiss financial institutions. LLB-Switzerland delegated to the Swiss asset manager the authority to prepare account opening and “know your customer” (KYC) documents.  

The Swiss asset manager provided prospective customers with a sales letter, pitching his ability to conceal a client’s assets and income from taxing authorities through the use of multiple layers of sham offshore entities and nominee directors in countries or regions that the Swiss asset manager thought would resist requests for information and assistance from foreign law enforcement, including law enforcement in the United States. LLB-Switzerland and its management knew that the Swiss asset manager was marketing structures to clients as a means of tax evasion as the bank kept a copy of the manager’s sales letter in the bank’s files. 

In 2008, after it became publicly known that UBS AG, Switzerland’s largest bank, was the target of a U.S. criminal investigation focusing on tax and other violations, the amounts that LLB-Switzerland held for U.S. clients swelled. At the end of 2007, the Bank had 72 U.S. clients with almost $80 million in assets. By the end of the next year, the number of U.S. clients increased to 107, but the assets more than doubled to over $176 million. LLB-Switzerland’s management knew that many of the U.S. clients coming to LLB‑Switzerland were bringing undeclared funds with them.  

Although LLB-Switzerland’s management monitored the United States’ investigation of UBS, LLB-Switzerland failed to take actions to cease assisting U.S. taxpayers to evade their taxes. While in August 2008, LLB-Vaduz prohibited U.S. persons from becoming clients of the Liechtenstein bank, LLB-Switzerland did not implement a similar policy. Despite press reports, indicating the Swiss asset manager was under investigation for helping clients evade U.S. taxes, LLB-Switzerland waited two years – until a grand jury had indicted the Swiss asset manager - to close the accounts he managed.

Zurich Life Enters NPA with DOJ Tax (4/25/19)

DOJ Tax announced here that it has reached a nonprosecution agreement ("NPA") with Zurich Life Insurance Company Ltd (Zurich Life), headquartered in Zurich, Switzerland, and Zurich International Life Limited (Zurich International Life), headquartered in the Isle of Man (collectively Zurich).  Zurich will pay a penalty of $5,115,000 and agrees to cooperate in any related criminal or civil proceedings.

The description of the conduct is long, but I just cut and paste:

From Jan. 1, 2008, through June 30, 2014, Zurich issued or had certain insurance policies and accounts of U.S. taxpayer customers, who used their policies to evade U.S. taxes and reporting requirements. In particular, Zurich had approximately 420 U.S. related policies, 127 with Zurich Life and 293 with Zurich International Life, with an aggregate maximum value of approximately $102 million, for which the U.S. taxpayer customers did not provide evidence that they had declared their policies to U.S. tax authorities. 

To qualify for favorable tax treatment under the U.S. tax code, insurance must meet certain minimal requirements. The policies offered by Zurich Life and Zurich International Life did not meet these requirements. The increase of the principal in these policies was therefore subject to taxation, and the policies were required to be disclosed to the Internal Revenue Service (IRS) on FinCEN Form 114 Foreign Bank Account Report, commonly referred to as an FBAR. In issuing or having undeclared U.S. related policies, Zurich knew or should have known that they were helping U.S. taxpayers conceal from the IRS ownership of undeclared assets, maintained as insurance policies or accounts. 

Zurich International Life, in particular, sold insurance products to U.S. taxpayers that were “unit linked,” meaning the cash surrender value and death benefit amount were linked to the value of specified investments. With such policies, the U.S. taxpayer had a suite of specialized investment options, allowing them to access potentially higher returns by taking on the market risk associated with the policies. Some of these unit-linked policies offered a base death benefit that was nearly equivalent to the cost of the policy itself, and in some instances was fully funded by transfers from offshore bank accounts. Upon redemption, the U.S. taxpayer would receive the premium amount plus any investment earnings on the policy less a very small percentage for putative risk and fees. 

Despite knowing that some of these policies, which had minimal-to-no risk mitigation function and specialized investment options, were held by U.S. taxpayers, Zurich International Life failed to act appropriately to ensure timely compliance by the policyholders with U.S. tax laws. In at least one instance, uncovered during the course of Zurich Life’s internal review, a former U.S. citizen, who pled guilty to a federal fraud offense after purchasing a Zurich International Life policy, used that insurance policy to hide substantial assets, despite owing approximately $900,000 in restitution to his victims. 

Following the commencement of the Department’s Swiss Bank Program, the Zurich Group initiated a global review of the life insurance, savings and pension business sold by all of its non-U.S. operating companies to identify policies or accounts with U.S. indicia. This review prompted an extensive customer outreach to current and former customers with a possible nexus to the United States to confirm the customers’ status as U.S. taxpayers, assess their compliance with applicable U.S. tax and reporting rules, and encourage participation in an IRS voluntary disclosure program. 

In July 2015, Zurich contacted the Department to inform it of the initial findings of the self-review. Prior to the self-reporting, Zurich was neither a subject nor a target of any investigation being conducted by the Tax Division. Since this self-disclosure, Zurich has conducted a thorough investigation and reported substantial findings to the Tax Division, including dozens of detailed summaries of account information and comprehensive reports for the U.S. related policies. 

In addition to these efforts, the Companies have worked closely with non-U.S. regulators to ensure full disclosure to the Department. For instance, in 2016, Zurich Life applied to the Swiss Federal Department of Finance and received approval to waive Article 271 of the Swiss Criminal Code, which restricted the disclosures that Zurich Life could make to the Department, thereby facilitating Zurich Life’s production of certain information that would have otherwise been prohibited.

On Trump 's White Collar Issues -- Immunity for Witnesses (8/23/18)

The Trump Presidency is a gift that keeps on giving to lawyers and, a smaller subset, lawyers interested in white collar crime (of which tax crimes is a subset).  I have in the past few days had several postings arising from the developments -- principally convictions by jury and plea agreement of persons close to the President.

Today, we have yet another development of interest.  It is reported that David Pecker, chair and CEO of American Media, the publisher of such publications as the National Enquirer.  (See his Wikipedia page here.)  Pecker used his publication power in support of Trump both in the press and outside the press and before his campaign for President and during his campaign for President.  The prominent instance of such support in the current news was his "purchase" of the rights to one of Trump's extra-marital sex partners' story about her liaisons with Trump (is he really big or as good as he claims?). The purchase was to help Trump by getting the rights to the story and then burying it -- called "catch and kill."

Readers will recall that Trump's long-time personal attorney who was active in paying to suppress such stories pled guilty to campaign finance crimes.  See The Michael Cohen Information and Plea - Some Comments (Federal Tax Crimes Blog 8/21/18), here; and The Tax View of the Hush Money Payments and Cohen's Reimbursements and Bonus (Federal Tax Crimes Blog 8/21/18), here.  One of the suppressions related to the one that Pecker had National Enquirer "catch and kill."  As reported in the news, apparently, Pecker was doing Trump's bidding in that activity.  The news now reports that Pecker has obtained immunity from the prosecutors, presumably the prosecutors on the Cohen prosecution in USAO SDNY, rather than the Special Counsel.  Jim Rutenberg and Rebecca R. Ruiz, David Pecker, Chief of National Enquirer’s Publisher, Is Said to Get Immunity in Trump Inquiry (NYT 8/23/18), here.

This offers an opportunity to talk about immunity in white collar crime cases such as we have under the Trump penumbra.  There are various shades of immunity, and I will get into that below in summary and a cut and paste from my Federal Tax Crimes book.  At this point, let me preface the discussion of immunity by noting that obtaining an immunity agreement is a contractual negotiation, not dissimilar to a plea negotiation.  The issue is how strong a party's perception of the other party's hand is.  Prosecutors will not agree to a strong form of immunity unless, by giving that strong form of immunity, the immunized party will give information that the prosecutors need, usually to nail a bigger fish. With that spare introduction, let's talk about the forms of immunity.  At the end of this blog, in addition to offering links to other blog entries on immunity, I will offer a cut and paste of the discussion of immunity in the working draft my Federal Tax Crimes Book (if I ever publish it again).  But, here is the thumbnail summary.

The types of immunity in the federal criminal universe are (I usually present these from the strongest to the weakest, and will us that ordering here):

1.  Transactional immunity.  Transactional immunity can be either blanket (extremely rare) or, for crimes within the scope of the testimony the witness will give (rare).  In the federal criminal universe, transactional immunity, either general or specific is rarely given.  Transactional immunity is not granted by federal statute.  So, it has to be stated in the "contract."  A subset of this would be a nonprosecution agreement that has been the topic of many blog entries here.  But, there is no indication that Pecker was given a nonprosecution agreement by that name.

2.  Use and Derivative Use Immunity.  This immunity which can be granted via the statute (a judge grants this immunity) or by agreement with the prosecutor assures the witness that the testimony he gives and any leads that might be derived from the testimony will not be used by the prosecutor to prosecute him for a crime.  This type of immunity is also not common, but one would say not rare (except in the SDNY which, in my experience and understanding through the white collar grapevine) seems to have a visceral answer of no to requests for this type of immunity).  This type of immunity still permits prosecution for the crime, but the prosecutor will have to establish in what is called a Kastigar hearing that the prosecution is not based directly or indirectly from the immunized testimony or the fruits of the immunized testimony.  That is usually so difficult that, as a practical matter, use and derivative use immunity is virtually transactional immunity for the crimes within the scope of the investigation.

3.  Use Immunity.  This type of immunity prevents the use of the immunized testimony, but permits the use of any evidence that the prosecutor learned from leads based on the immunized testimony.  This is a weak form of immunity.  This is the type of immunity usually offered, if at all, by USAO SDNY.  Of course, if someone has something major to offer the prosecutors, I am sure a stronger form of immunity can be negotiated.  (I have never been in a position to offer something major to prosecutors in my limited contact with USAO SDNY.)  This type of immunity is contractual and the terms of the contract may vary.  The USAO SDNY has a standard "contract" which offers the witness very limited, if any immunity.  But, since it does offer some immunity, the "contract" is often called a Queen for a Day agreement.  Use immunity,  or Queen for a Day, agreements are used in connection with proffer sessions whereby the witness who may be a subject or target is interview for up to a day (sometimes more than one day) by the prosecutors.  Sol Wisenberg has a good discussion in his posting, Queen For A Day: The Dangerous Game of Proffers, Proffer Agreements and Proffer Letters, here.

DOJ Tax Announces Addendum with Category 2 Bank, Bank Lombard & Odier & Co. (7/31/18)

DOJ Tax announced here an Addendum to the nonprosecution agreement ("NPA") with Bank Lombard Odier & Co., Ltd., of Zurich Switzerland.  The bank previously obtained an NPA with an agreement to pay $99.809 million.  See Two More Banks Obtain NPAs under DOJ Swiss Bank Program (Federal Tax Crimes 12/31/15), here.  The Addendum requires the bank to pay an additional $5.3 million.

The key excerpt explaining the supplemental agreement is:

Every bank that signed a non-prosecution agreement in the Swiss Bank Program had represented that it had disclosed all of its U.S.-related accounts that were open at each bank between August 1, 2008, and December 31, 2014.  Each bank also represented that it would, during the term of the non-prosecution agreement, continue to disclose all material information relating to its U.S.-related accounts.  In reaching today’s agreement, Lombard Odier acknowledges that there were certain additional U.S.-related accounts that it knew about, or should have known about, but that were not disclosed to the Department at the time of the signing of the non-prosecution agreement.  Lombard Odier provided early self-disclosure of their unreported U.S.-related accounts and has fully cooperated with the Department. 

Swiss Asset Manager and DOJ Enter Nonprosecution Agreement (8/15/17 8/18/17)

DOJ Tax and USAO SDNY announced here  and here that it has reached a nonprosecution agreement ("NPA") with Prime Partners SA (“Prime Partners”), a Swiss asset management firm,  The plea agreement and attached Statement of Facts ("SOF") are here.

The cost to Prime Partners is $5 million, consisting of $4.32 million in forfeiture (representing a portion of the gross revenue it earned with respect to the undeclared accounts for 2001-2010) and $0.068 million in restitution to the IRS (representing the approximate unpaid taxes from Prime Partners' clients).  Key excerpts from the press release are:

As part of the NPA, Prime Partners admitted various facts concerning its wrongful conduct and the remedial measures that it took to cease that conduct. Specifically, Prime Partners admitted that it knew certain U.S. taxpayers were maintaining undeclared foreign bank accounts with the assistance of Prime Partners in order to evade their U.S. tax obligations, in violation of U.S. law. Prime Partners acknowledged that it helped certain U.S. taxpayer-clients conceal from the IRS their beneficial ownership of undeclared assets maintained in foreign bank accounts by, among other things: (i) creating sham entities, which had no business purpose, that served as the nominal account holders for the accounts; (ii) advising U.S. taxpayer-clients not to retain their account statements, to call Prime Partners collect from pay phones, and to destroy any faxes they received from Prime Partners; (iii) providing U.S. taxpayer-clients with prepaid debit cards, which were funded with money from the clients’ undeclared accounts; and (iv) facilitating cash transfers in the United States between U.S. taxpayer-clients with undeclared accounts. 

The NPA recognizes that, in early 2009, Prime Partners voluntarily implemented a series of remedial measures to stop assisting U.S. taxpayers in evading federal income taxes. The NPA further recognizes the extraordinary cooperation of Prime Partners, including its voluntary production of approximately 175 client files for non-compliant U.S. taxpayers, which included the identities of those U.S. taxpayers.

This NPA is not part of the Swiss Bank Program.  So the question one must ask is why did DOJ even do this?  Well, the press release sets forth DOJ Tax's public explanation in the press release:

The U.S. Attorney’s Office entered into the NPA based on factors including:

• Prime Partners’ voluntary and extraordinary cooperation, including its voluntary production of account files containing the identities of U.S. taxpayer-clients;
• Prime Partners’ voluntary implementation of various remedial measures beginning in or around early 2009, before the investigation of its conduct began;
• Prime Partners’ willingness to continue to cooperate to the extent permitted by applicable law; and
• Prime Partners’ representation – based on an investigation by outside counsel, the results of which have been reviewed by the U.S. Attorney’s Office and the Tax Division – that the misconduct under investigation did not, and does not, extend beyond that described in the Statement of Facts.

The NPA requires Prime Partners to continue to cooperate with the United States for at least three years from the date of the agreement. In the event that Prime Partners violates the NPA, the U.S. Attorney’s Office may prosecute Prime Partners.

Addendum 8/18/17 10:30 am:

Whistleblower Claims Swiss Bank IHAG did not Come Clean with DOJ as Category 2 Bank Receiving an NPA (2/11/17)

Finews.com reports (based on a Tax Notes report) that 

A whistleblower reported a Swiss private bank to U.S. prosecutors for violating an offshore settlement, it has emerged. Among his accusations: a Zurich-based bank shielded a gigantic precious emerald from the prying eyes of tax officials. Has IHAG [Private Bank] got a new problem on its hands?

Katherina Bart, Whistleblower Alleges Swiss Bank Cheated in U.S Tax Pact (Finews.com 2/8/17), here.

Other excerpts:

He [Rolf Schnellmann]  is the most recent in a series of Swiss private banking whistleblowers including former UBS banker Bradley Birkenfeld, ex-Julius Baer banker Rudolf Elmer, and Herve Falciani, who stole data from HSBC private bank when he worked at the Geneva-based institute as an information technology specialist.  

* * * * 

Schnellmann came forward as an informant to U.S. justice officials several months before IHAG reached a settlement in the U.S. for helping wealthy Americans cheat on their taxes. The bank, founded in 1949 by a wealthy weapons manufacturer and art collector, agreed in 2015 to pay a nearly a $7.5 million penalty to to avoid prosecution for its wrong-doings with U.S. clients. 

The bank voiced confidence that it is out of the woods. 

* * * * 

$870 Million Emerald 

A cursory read of Schnellmann's accusations, summarized in letters to U.S. officials through a lawyer, appear to at least partly jibe with the bank's own admissions to U.S. prosecutors.  

IHAG admitted to using several steps, including with the help of third parties, to strip assets of any sign they belonged to U.S. taxpayers. 

The gist of Schnellmann's accusations is that IHAG's deception went further: for example, he maintains that IHAG also set up a fund structure to hide beneficial ownership – the true account holder. 

Schnellmann also accuses a Zurich private bank of safekeeping an emerald valued at $870 million for a client who has since died. This claim appears far-fetched: the world's most expensive emerald gemstone, the Bahia Emerald, is valued at $400 million – a 341-kilogram schist. 

U.S. Revisits IHAG? 

The Department of Justice, or DoJ, must determine if Schnellmann's accusations are compelling enough to warrant revisiting IHAG's non-prosecution agreement. The DoJ didn't comment to finews.com. 

DOJ Swiss Bank Program NPAs Spike the Data for Overall NPAs in 2015 (1/7/17)

Corporate Nonprosecution Agreements Plummet in 2016, but DOJ Still Willing to Make a Deal (National Law Journal 1/6/17), here.

From the opening:

Corporate nonprosecution agreements dropped dramatically in 2016 from the previous year, but the government is still offering deals to penitent white-collar defendants, according to a recent study by Gibson, Dunn & Crutcher. 

Last year the U.S. Department of Justice and the U.S. Securities and Exchange Commission collectively entered into 35 corporate nonprosecution agreements (NPAs) or deferred prosecution agreements (DPAs). That compares with 102 such agreements in 2015, according to the report. 

But there's a big caveat to what appears to be a steep slide in corporate NPAs and DPAs. It follows a dramatic spike in 2015, driven by the Justice Department's Swiss Bank Program. Most of the 2015 agreements were offered by the DOJ's Tax Division as part of a structured agreement to bring foreign bank accounts into compliance with U.S. tax law, which brought in $6.4 billion in recoveries, according to the report. 

ast year, of the 35 NPAs and DPAs, the majority, 26, involved matters other than tax-related and monetary transaction offenses. In all, they brought in $4.6 billion in recoveries, according to the report. 

Chart 2 illustrates the total monetary recoveries related to NPAs and DPAs from 2000 through today. Monetary recoveries associated with 2016 NPAs and DPAs also were consistent with recoveries in years past. Where 2014 and 2015—with 30 and 102 agreements, respectively—saw $5.1 billion and $6.4 billion in recoveries, 2016 saw $4.6 billion. 

[Graphic omitted - but recommend that readers see it in the original] 

"If you back out 2015, the numbers are essentially in the heartland of what NPAs and DPAs have been for nearly a decade," said F. Joseph Warin, chair of Gibson Dunn's Washington, D.C., office's litigation department. "On balance is what we're seeing is this vehicle has become an alternative to a plea of guilty for businesses that are in a regulated industry."

JAT Comment:  One open question is whether the Swiss Bank Program will be a template for resolutions of similar behavior in other countries.   And, even if there is no publicly announced program, whether DOJ/IRS will be willing to settle cases with other country banks on that basis in one on one negotiations.  Of course, the other countries may require some cooperation from their Governments in order to avoid privacy commands in their laws in order to divulge the data required under this template and that would likely require some public notice of a general program.  I anyone knows whether DOJ/IRS is willing to resolve other country banks' exposures on this or any other basis, please let me know either by email (jack@tjtaxlaw.com) or by comments to this blog entry.

Also, readers interested in the general subject of NPAs and DPAs should check regularly with Professor Brandon Garretts' (UVA Law) database presentation here.

DC Circuit Opinion Limiting District Court Oversight of Deferred Prosecution Agreements (5/2/16)

The Government has used deferred prosecution agreements (DPAs) in tax cases (e.g. the UBS DPA in 2009 and the DPAs offered in the DOJ Tax Swiss Bank initiative).  For the UBS Deferred Prosecution Agreement and other DOJ Preferred Prosecution Agreements see Brandon Garrett's excellent compilation on his UVA Law Website here; and for the DOJ Tax Swiss Bank Initiative which offered nonprosecution agreements but reserved the right to required a DPA in a particularly egregious case (see Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks, par. II.K. (apparently, as yet DOJ Tax does not seem to have exercised that discretion, see here.))

Readers interested in DPAs likely will want to read the opinion in United States v. Fokker, ___ F.3d ___, 2016 U.S. App. LEXIS 6176 (DC Cir. 2016), here.  Bottom line, the decision gives wide deference to prosecutiorial discretion in charging decisions and limits the district court's discretionary oversight in accepting DPAs.  The opinion is notable for its content, but also notable because it is written by Judge Srinivasan, Wikipedia here, who was recently on the short list for appointment to the Supreme Court and who, likely, will be on the short list for the next President, to use President Obama's phrase, "whoever she is."  I focus in this blog only on the content of the opinion limiting the district court's discretion.

Although I strongly encourage federal tax crimes and white collar crimes enthusiasts to read and study the opinion, I offer here the opening of the opinion to introduce the summary background and holding in the opinion:

The Constitution allocates primacy in criminal charging decisions to the Executive Branch. The Executive’s charging authority embraces decisions about whether to initiate charges, whom to prosecute, which charges to bring, and whether to dismiss charges once brought. It has long been settled that the Judiciary generally lacks authority to second-guess those Executive determinations, much less to impose its own charging preferences. The courts instead take the prosecution’s charging decisions largely as a given, and assume a more active role in administering adjudication of a defendant’s guilt and determining the appropriate sentence.  

In certain situations, rather than choose between the opposing poles of pursuing a criminal conviction or forgoing any criminal charges altogether, the Executive may conclude that the public interest warrants the intermediate option of a deferred prosecution agreement (DPA). Under a DPA, the government formally initiates prosecution but agrees to dismiss all charges if the defendant abides by negotiated conditions over a prescribed period of time. Adherence to the conditions enables the defendant to demonstrate compliance with the law. If the defendant fails to satisfy the conditions, the government can then pursue the charges based on facts admitted in the agreement. 

This case arises from the interplay between the operation of a DPA and the running of time limitations under the Speedy Trial Act. Because a DPA involves the formal initiation of criminal charges, the agreement triggers the Speedy Trial Act’s time limits for the commencement of a criminal trial. In order to enable the government to assess the defendant’s satisfaction of the DPA’s conditions over the time period of the agreement—with an eye towards potential dismissal of the charges—the Speedy Trial Act specifically allows for a court to suspend the running of the time within which to commence a trial for any period during which the government defers prosecution under a DPA.  

In this case, appellant Fokker Services voluntarily disclosed its potential violation of federal sanctions and export control laws. After extensive negotiations, the company and the government entered into an 18-month DPA, during which Fokker would continue cooperation with federal authorities and implementation of a substantial compliance program. In accordance with the DPA, the government filed criminal charges against the company, together with a joint motion to suspend the running of time under the Speedy Trial Act pending assessment of the company’s adherence to the agreement’s conditions. The district court denied the motion because, in the court’s view, the prosecution had been too lenient in agreeing to, and structuring, the DPA. Among other objections, the court disagreed with prosecutors’ decision to forgo bringing any criminal charges against
individual company officers. 

We vacate the district court’s denial of the joint motion to exclude time under the Speedy Trial Act. We hold that the Act confers no authority in a court to withhold exclusion of time pursuant to a DPA based on concerns that the government should bring different charges or should charge different defendants. Congress, in providing for courts to approve the exclusion of time pursuant to a DPA, acted against the backdrop of long-settled understandings about the independence of the Executive with regard to charging decisions. Nothing in the statute’s terms or structure suggests any intention to subvert those constitutionally rooted principles so as to enable the Judiciary to second-guess the Executive’s exercise of discretion over the initiation and dismissal of criminal charges. 

In vacating the district court order, we have no occasion to disagree (or agree) with that court’s concerns about the government’s charging decisions in this case. Rather, the fundamental point is that those determinations are for the Executive—not the courts—to make. We therefore grant the government’s petition for a writ of mandamus and remand for further proceedings consistent with this opinion.

Final Swiss Bank Achieves NPA Under Swiss Bank Program (1/25/16)

DOJ Tax announced here the final Category 2 resolution in its Swiss Bank Program, here, as follows:

HSZH Verwaltungs AG

$49.757 million

The press release opens with DOJ Tax touting the results achieved under the program (emphasis supplied by JAT):

The Department of Justice announced today that it reached its final non-prosecution agreement under Category 2 of the Swiss Bank Program, with HSZH Verwaltungs AG (HSZH).  The department has executed agreements with 80 banks since March 30, 2015, when it announced the first Swiss Bank Program non-prosecution agreement with BSI SA.  The department has imposed a total of more than $1.36 billion in Swiss Bank penalties, including more than $49 million in penalties from HSZH.  Every bank in the program, including HSZH, is required to cooperate in any related criminal or civil proceedings, and that cooperation continues through 2016 and beyond.

* * * * 

“The department’s Swiss Bank Program has been a successful, innovative effort to get the financial institutions that facilitated fraud on the American tax system to come forward with information about their wrongdoing – and to ensure that they are held responsible for it,” said Acting Associate Attorney General Stuart F. Delery.  “As we have seen over the last year, Swiss banks are paying an appropriate penalty for their misconduct, and the information and continuing cooperation we have required the banks to provide in order to participate in the program is allowing us to systematically attack offshore tax avoidance schemes.” 

“The completion of the agreements under Category 2 of the Swiss Bank Program represents a substantial milestone in the department’s ongoing efforts to combat offshore tax evasion, and we remain committed to holding financial institutions, professionals and individual taxpayers accountable for their respective roles in concealing foreign accounts and assets, and evading U.S. tax obligations,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.  “Using the flood of information flowing from various sources, the department is investigating this criminal conduct, referring appropriate matters to the Internal Revenue Service for civil enforcement and pursuing leads in jurisdictions well beyond Switzerland.  Individuals and entities engaged in offshore tax evasion are well advised to come forward now, because the window to get to us before we get to you is rapidly closing.”

As to HSZH, the history is presented as follows:

HSZH, the final bank to reach a non-prosecution agreement under Category 2 of the Swiss Bank Program, was previously known as Hyposwiss Privatbank AG.  HSZH was founded in 1889 in Solothurn, Switzerland.  In 1988, Schweizerische Bankgesellschaft AG, which was later merged into UBS AG, acquired the bank and renamed it Hyposwiss Privatbank AG.  Hyposwiss Privatbank AG increasingly focused on private banking activities, servicing both domestic and international clients, and at all times, HSZH solely operated on Swiss territory.  In 2002, the bank was acquired from UBS by St. Galler Kantonalbank (SGKB), the state-owned cantonal bank of St. Gallen.  In 2014, HSZH unwound its residual banking operations under the supervision of FINMA, the Swiss banking regulator.  On Jan. 6, 2014, and in connection with the wind-down, the bank changed its name to HSZH Verwaltungs AG.  HSZH returned its banking license, and FINMA released HSZH from its supervision on Nov. 27, 2014. 

The bank will be added to the IRS's Foreign Financial Institutions or Facilitators, here.  As indicated in the last quoted paragraph, accountholders in the listed banks joining OVDP after one of their banks are listed will be subject to the 50% penalty in OVDP (provided that they do not opt out, in which case, who knows).

The updated statistics are:

US DOJ Swiss Bank Program	Number	Number Resolved	Total Costs
U.S. / Swiss Bank Initiative Category 1 (Criminal Inv.) *	16	4	$3,470,550,000
U.S. / Swiss Bank Initiative Category 2 **	98	80*	$1,363,683,990
U.S. / Swiss Bank Initiative Category 3	14		$0
U.S. / Swiss Bank Initiative Category 4	8		$0
Swiss Bank Program Results	136		$4,834,233,990
* Includes subsidiary or related entities counted as separate entities, so the numbers may exceed the numbers the IRS and DOJ posted numbers which combine some of the entities.
** DOJ says original total was 106 but that it expects about 80 to complete the process.

* As revised on 1/30/16 to exclude Finacor S.A., an asset manager, which attempted to join the program under Category 2 but, since not a bank, was determined to be ineligible but achieved an NPA under the Category 2 terms.

One More Swiss Bank Achieves NPA Under Swiss Bank Program (1/25/16)

On January 25, 2015, DOJ announced, here, that 1 more bank has entered an NPA under the DOJ program for Swiss banks, here.

Leodan Privatbank AG

$500,000

The banks will be added to the IRS's Foreign Financial Institutions or Facilitators, here.  As indicated in the last quoted paragraph, accountholders in the listed banks joining OVDP after one of their banks are listed will be subject to the 50% penalty in OVDP (provided that they do not opt out, in which case, who knows).

Here are the updated statistics for the Swiss Bank Program:

US DOJ Swiss Bank Program	Number|	Number Resolved	Total Costs
U.S. / Swiss Bank Initiative Category 1 (Criminal Inv.) *	16	4	$3,470,550,000
U.S. / Swiss Bank Initiative Category 2 **	97	80	$1,313,926,990
U.S. / Swiss Bank Initiative Category 3	14		$0
U.S. / Swiss Bank Initiative Category 4	8		$0
Swiss Bank Program Results	135		$4,784,476,990
* Includes subsidiary or related entities counted as separate entities, so the numbers may exceed the numbers the IRS and DOJ posted numbers which combine some of the entities.
** DOJ says original total was 106 but that it expects about 80 to complete the process.

One More Swiss Bank Achieves NPA Under Swiss Bank Program (1/6/16)

On December 31, 2015, DOJ announced, here, that 1 more bank has entered an NPA under the DOJ program for Swiss banks, her

Union Bancaire Privée, UBP SA

$187.767 million

The banks will be added to the IRS's Foreign Financial Institutions or Facilitators, here.  As indicated in the last quoted paragraph, accountholders in the listed banks joining OVDP after one of their banks are listed will be subject to the 50% penalty in OVDP (provided that they do not opt out, in which case, who knows).

Here are the updated statistics for the Swiss Bank Program:

US DOJ Swiss Bank Program	Number	Number Resolved	Total Costs
U.S. / Swiss Bank Initiative Category 1 (Criminal Inv.) *	16	4	$3,470,550,000
U.S. / Swiss Bank Initiative Category 2 **	96	79	$1,313,426,990
U.S. / Swiss Bank Initiative Category 3	14		$0
U.S. / Swiss Bank Initiative Category 4	8		$0
Swiss Bank Program Results	134		$4,783,976,990
* Includes subsidiary or related entities counted as separate entities, so the numbers may exceed the numbers the IRS and DOJ posted numbers which combine some of the entities.
** DOJ says original total was 106 but that it expects about 80 to complete the process.