Thursday, May 31, 2012

Another UBS Related Taxpayer Plea Agreement (5/31/12)

DOJ Tax has announced yet another taxpayer plea agreement regarding UBS accounts.  The DOJ Tax press release is here.  The plea agreement is here.  Here are the key features based on these documents.

Defendant:  Wolfgang Roessel
Banks:  UBS, Wegelin, Bank A
Entities:  Yes (Cyan United A)
High Balance:  $11,501,868 (derived from statement that penalty was 50% of high balance)
FBAR Penalty: 5,750,933.99
High Balance:  Derived from penalty - $11,501,868
Count of Plea:  Tax perjury, Section 7206(1) with 3 year max sentence
Tax Loss: $312,802.95
5K1 Departure Possibility:  Yes
Judge:  Kathleen Williams

Fact Summary (from press release because these are not covered in the plea agreement; apparently they were stated in  court at the plea hearing or otherwise put in writing in the record):
[D]ating back to the 1980s and up through the late 2000s, Roessel held accounts at different times at Bank Wegelin and another Swiss bank (Bank A) into which he deposited foreign proceeds from his business, yet which he neither reported on his tax returns nor on the required FBARs. In the early 2000s, the foreign account at Bank A was put into the nominee name of Cyan United. A Swiss money manager made investments on Roessel’s behalf and met with the defendant periodically to discuss the performance of the account. In 2008 and 2009, during which period the defendant was aware of the government’s grand jury investigation into his foreign UBS accounts, the defendant disclosed only the existence of the UBS accounts on his tax returns for those years and did not report the other Swiss account.
From the plea agreement:
5.  The United States reserves the right to inform the court and the probation office of a1l
facts pertinent to the sentencing process, including all relevant information concerning the
offenses committed, whether charged or not, as well as concerning the defendant and the defendant's background. Subject only to the express terms of any agreed-upon sentencing
recommendations contained in this agreement, the United States further reserves the right to make any recommendation as to the quality and quantity of punishment.
Sentencing factors from the plea agreement:
  1. Standard acceptance of responsibility agreement (downward 2 + 1 levels)
  2. Recommendation of sentence at low end of SG range.  (But note paragraph 5 quoted above.)
  3. Sophisticate means enhancement (2 levels)

Must work with IRS to determine corporate and individual tax liabilities for years 2002-2009.

Statements can be  used against him and waives Rule  410 of FRE and Rule 11(f) of FRCrP. in criminal proceedings and civil  proceedings.

I will post an  updated spreadsheet this weekend.


  1. Does it sound like this guy actually did a 'going forward' disclosure ? Or maybe even joined the VD program (although I doubt that), but didn't disclose the non UBS account ?

  2. when you decide to expose yourself -- make yourself fully naked -- our dear government wants penalty for all offshore accounts -- including RRSP.

    this is disclosure class 101.

  3. Your stats show 56 taxpayers, and only 30-40 (don't recall exact number)  of them UBS customers out of around 250 who had their UBS info disclosed without notification from Switzerland.  What happened to the rest?  Did the IRS feel that there were strong indicators of misfeasance but not enough to guarantee conviction, so they were allowed to join OVDI#1 at 20%?

    And out of the 4,500 others disclosed by UBS, I imagine that a certain number were never notified of disclosure (perhaps because they had moved without giving the bank their new address.)  What happened to them?  Were they contacted by IRS and given a chance to join OVDI although the IRS already had their information?

  4. Don't knew what happen to all others in the 250 dataset or the 4,500 dataset. But do know that some are in the pipeline for (i) potential criminal prosecution (e.g., grand jury going) or (ii) civil adjustments which might not be very pretty.

    Jack Townsend

  5. Jack

     Is the government trying to go beyond extracting 50% of max balance (+ tax due + civil fraud penalty) in any of the civil adjustment UBS cases ? I assume these may be people with compelling stories like holocaust survivors or the like, who are obviously guilty of tax fraud, but might be hard to prosecute.

  6. I don't have any reason to believe that the IRS is imposing a worse result in civil audits than it forces as a condition for a minimum plea agreement in criminal cases -- i.e., 50% of the high balance in a single year. Indeed, I have heard government sources say cryptically and without attribution that that is the high point the Government will assert. Now, what the Government might do to child porn industry players and drug dealers is a different question. But for persons who sole misconduct is to cheat on taxes, even egregiously, I think the expectation is that it will be 50% in the high year and for the lesser conduct in tax cheating, it will scale down from there.

    Jack Townsend

  7.  Jack

    Thanks, that's a relief to minnows, who might be able to take an (unlikely) 50% penalty, but not a ridiculous penalty that far exceeds account size (assuming reasonably good facts).

  8.  It would be nice if the IRS were to  instruct its examiners on audit (opt out or otherwise) to consider the fact that the maximum penalty taken from people who were  clearly willful violators has been (so far) 50%. That is not much comfort to expats, who may have the great bulk of their assets abroad, of course.

    Jack, I suppose this is something that could be brought up with an examiner if the IRS tries to go beyond 50% (say by using the non-willful penalty per account), since penalties are supposed to be reasonably fair and consistent ?

  9. I think the examiners and the attorneys who must review the final work product know that they should not go beyond 50% in the highest year. Again, I am assuming just potential tax violators. What they might do with drug dealers, mafia bosses, and child molesters / pornographers, well I suppose that could be different.

    Jack Townsend

  10.  I remember one of your previous blog entries about someone called Michael Hase, who had (some) illegal income, which he had actually embezzled from the US Government as a USAID official, AND had an unreported account at UBS, and still paid only 50%.

    I would think the government would be nearly as harsh on a government official who steals from it,  as it would from a drug dealer. But the penalty was still 50%. To be fair, I think the account itself was much larger  (2 million or so) than the embezzled amount and may have been almost entirely legal source money.

    I am not sure if this indicates the 50% is a limit for illegal source income or not. I think at least one of the people who pled in the recent insider trading cases had an unreported foreign account in the name of his housekeeper. He may be subject to a FBAR civil penalty on that, although I think the SEC may have grabbed that money anyway. 


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