Monday, September 28, 2009

Another UBS Related Plea Agreement (9/28/09)

Juergen Homann pled guilty. The DOJ press release is here. The key points are:

1. The plea agreement is to one count of willful failure to file the FBAR in violation of 31 U. S. C. §§ 5314 and 5322(a). This is a 5 year count.

2. The defendant is relieved of criminal prosecution for tax crimes related to his UBS accounts. For my students, I offer some nuance on this. Normally, one U.S. Attorney's office (USAO) cannot bind other USAOs, but this agreement joins DOJ Tax as a contracting party. DOJ Tax must approve tax and tax related crimes. Thus, as a practical matter, this binds the DOJ (which includes all USAOs). Nice. But, in true cautionary fashion, the agreement later provides that the agreement is limited only the USAO for DNJ and "cannot bind other federal, state or local authorities." The Government will, however, "bring this agreement to the attention of other prosecuting offices, if requested to do so."

3. The judge may order restitution. Note that the plea is to a nontax crime. Restitution is not allowed for a tax crime unless contractually agreed to in the plea agreement or imposed as a condition to some sentencing benefit. The other parts of the agreement suggest that the "victim" -- the United States -- may be paid before sentencing, so restitution may not be a practical issue.

4. The Government retains the right to bring appropriate sentencing factors to the sentencing court (subject to the stipulated sentencing factors discussed below). The form of this agreement is:
Rights of the Offices Regarding Sentencing
Except as otherwise provided in this agreement, the Offices reserves its right to take any position with respect to the appropriate sentence to be imposed on Juergen Homann by the sentencing judge, to correct any misstatements relating to the sentencing proceedings, and to provide the sentencing judge and the United States Probation Office all law and information relevant to sentencing, favorable or otherwise. In addition, the Offices may inform the sentencing judge and the United States Probation Office of: (1) this agreement; and (2) the full nature and extent of Juergen Homann's activities and relevant conduct with respect to this case.
5. As noted, the parties stipulate as to certain sentencing factors, but the Government reserves the right to avoid any stipulation that it subsequently determines to be untrue. Furthermore, the stipulations do not prevent the Government from responding to questions from the Court or correcting misinformation provided to the Court.

6. The civil income tax aspects are not resolved in the plea. However, the civil liability for the FBAR penalty is resolved by an agreement to pay 50% of the highest amount in the account for 1 year in the period from 2001 through 2007. Note that the FBAR penalty exposure at least for the years after 2004 is 50% of the highest amount in the account, so this civil settlement is quite a deal for this convicted FBAR felon. Note in this regard that the civil penalty is in no way limited by the fact that the defendant pled to only one count involving one year.

7. The parties stipulate as follows: "Pursuant to U.S.S.G. §2S1.3(c)(1), since this offense was committed for the purposes of violating the Internal Revenue laws, the applicable guidelines are U.S.S.G. §§ 2T1.1 and 2T4.1." I have previously addressed before concerns I have about this particular genre of stipulation to funnel the sentence into the tax guidelines, so shall not repeat them now. The bottom-line, of course, is that, if this stipulation is accepted, Homann gets sentenced the same as if he had entered plea to the common tax crime used in this context -- tax perjury under § 7206(1) -- except that his potential sentence is 5 years rather 3 years. Of course, just focusing on the Guidelines, his amount involved may be low enough that the risk involved in the extra exposure is not that great. (Note that according to my calculations below, Homann may be close to the 36 months (depending on where the judge sentences in the guidelines range), that the plea to a 5 year rather than a 3 year count could make a difference.)

8. In the stipulations, the parties agree to a tax loss for sentencing purposes of between $400,000 to $1,000,000. That tax loss under the Guidelines produces a Base Offense Level of 20. Curiously, the parties limit that stipulate to a specific UBS account disclosed to the Government pursuant to the UBS deferred prosecution agreement. Were there other accounts that, presumably, Homann should have disclosed to the Government and should disclose to the Probation Office and be considered by the sentencing court in determining the tax loww? Are the parties attempting to push such other accounts, if they even exist, under the rug?

9. The parties stipulate, rightly, that the sophisticated means 2 level enhancement applies. Nothing unusual here.

10. The parties stipulate that the 2 level acceptance of responsibility reduction applies and that defendant will be entitled to the additional 1 level acceptance of responsibility if applicable. Nothing unusual here.

11. The parties then stipulate that, with the foregoing adjustments, the sentencing level is 19 and further stipulate:

7. The parties agree not to seek or argue for any upward or downward departure, adjustment or variance not set forth herein. The parties further agree that a sentence within the Guidelines range that results from the agreed total Guidelines offense level of 19 is reasonable.
Note in this stipulation that the parties will not "seek or argue" for a "departure" (in the jargon a departure authorized by the Guidelines) or a "variance" (in the jargon a sentence outside the range otherwise determined under the post-Booker regime for sentences outside the Guidelines after departures). So that the apparent expectation is that the sentence will be within the range determined by the offense level of 19.

12. The parties do not stipulate a sentencing history, and this is curious to me. The parties do stipulate that they "reserve any right they may have under 18 U.S.C. § 3742 to appeal the sentencing court's determination of the criminal history category." This suggests that there is a sentencing history issue that the parties could not resolve.

13. So, given the offense level of 19, the indicated range under the 2008 Guidelines which the parties stipulated is: 30-37 months at Criminal History I or 33-41 months at Criminal History II.

14. It is lore among practitioners that the Government's particular prosecutorial angst will be directed against those persons who created additional subterfuge beyond the mere establishment of a foreign bank account. The DOJ Tax press release here spells this out with respect to Homann. With the assistance of a previously indicted Swiss enabler (Mattias Rickenbach), Homann established a foreign entity to appear as the nominal account owner. Further, with the assistance of Rickenbach, Homann "conducted a sham loan by transferring $5 million from an account in the name ELM Finance Limited to a second Hong Kong entity in order to obtain financing for Homann's U.S. business without alerting authorities that he controlled the assets in the ELM at UBS." Finally, "Rickenbach and a Swiss banker persuaded the defendant not to seek out and enter into the IRS's Voluntary Disclosure program."

15. The DOJ Press Release drums up business / revenue for the IRS as follows by reminding those with such offshore accounts that (i) the voluntary disclosure program is available to avoid prosecution and (ii) absent voluntary disclosure, they can be prosecuted. As further inducement, the release identifies those already prosecuted.

1 comment:

  1. Mr. Homann was sentenced on Jan. 6, 2010 to a five year term of probation. Although under the plea agreement, the parties agreed not to argue for a downward departure/variance, the defense was free to argue under the 3553 factors how far the court should depart pursuant to the government's 5K1.1 motion.


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