Bank Frey Executive and Swiss Lawyer Indicted (4/18/13)

The USA for SDNY has announced, here, the indictment of Stefan Buck, head of "Bank 1" (Bank Frey), and Edgar Paltzer, a partner at a Swiss law firm, a dual U.S.-Swiss citizen, and a registered attorney in NY.  (A copy of the indictment is here.)  According to the press release, they "are each charged with one count of conspiring with U.S. taxpayer-clients and others to hide millions of dollars in offshore accounts from the IRS and to evade U.S. taxes on the income earned in those accounts."  The following are other key excepts from the press release.

PALTZER is a U.S.- and Swiss-trained lawyer who began to practice at the Swiss Law Firm in 1998, in the fields of international private client work, wealth transfer planning, successions, trusts and foundations, and eventually became a partner. PALTZER is licensed to practice in New York State. 

In 2007, BUCK worked as a client adviser, and later, as the head of private banking at Swiss Bank No. 1, which provides private banking, asset management, and other services to clients around the world. In December 2012, BUCK became a member of Swiss Bank No. 1’s three-person executive committee. 

In March 2009, UBS AG (“UBS”), a Swiss bank that provided private banking services to U.S. taxpayers, entered into a deferred prosecution agreement with the Department of Justice and admitted engaging in a conspiracy to defraud the IRS. In February 2012, Wegelin & Co. (“Wegelin”), another Swiss bank that provided similar services, was indicted by a grand jury in the Southern District of New York for its conduct in conspiring with U.S. taxpayers to evade taxes, and ultimately pled guilty. Between March 2009 and February 2012, Swiss Bank No. 1 experienced an increase of approximately 300% in clients who were U.S. taxpayers. Further, as of September 30, 2012, Swiss Bank No. 1 had approximately 2 billion Swiss francs in assets under management (“AUM”), equating to approximately $2.12 billion. Approximately 882.5 million Swiss francs of this AUM, equating to approximately $938 million, or approximately 44 percent of Swiss Bank No. 1’s total AUM, was held on behalf of U.S. taxpayers living in the United States.

PALTZER and BUCK conspired with various U.S. taxpayers and others to ensure that their clients could hide their Swiss bank accounts and the income generated in these accounts from the IRS. The defendants opened and managed undeclared accounts on behalf of U.S. taxpayers at Swiss Bank No. 1 and other Swiss banks. PALTZER and BUCK helped U.S. taxpayers open undeclared accounts at Swiss Bank No. 1 after these U.S. taxpayers had been informed by other Swiss banks that they had to close their undeclared accounts. 

BUCK and PALTZER also helped to repatriate funds to the U.S. taxpayers from their undeclared accounts in Switzerland in ways that were designed to ensure that U.S. authorities would not discover these undeclared accounts. For example, PALTZER helped a U.S. taxpayer repatriate assets in the form jewelry in order to avoid detection of an account in Switzerland. BUCK attempted to dissuade a U.S. taxpayer with an undeclared account at Swiss Bank No. 1 from entering the IRS’s voluntary disclosure program. In substance, he told the taxpayer that the account did not need to be disclosed to the IRS because Swiss Bank No. 1 operated only in Switzerland, and the U.S. rules did not apply. 

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PALTZER, 56, a dual U.S.-Swiss citizen, and BUCK, 32, a Swiss citizen, both reside in Switzerland. Neither defendant has been arrested. 

PALTZER and BUCK each face a maximum sentence of five years in prison, a maximum term of three years of supervised release, and a fine of the greatest of $250,000, or twice the gross pecuniary gain derived from the offense or twice the gross pecuniary loss to the victims.

Key points:

Defendants:  Edgar Paltzer and Stefan Buck
Charge:  Conspiracy (1 count)
Bank(s):  Bank 1 (Bank Frey), Bank 2 ("purported to be the oldest private bank in Zurich"), Swiss Bank No. 3, Swiss Bank No. 4, Swiss Bank No. 5, Swiss Bank No. 6, Swiss Bank No. 7, Liechtenstein Bank

Interesting (to me) excerpts from the indictment:

5. Swiss Bank No. 1 is a private Swiss bank that has, since in or about 2000, provided, among other services, advisory and portfolio management services for individuals and entities, including U.S. taxpayers in the Southern District of . New York. At all times relevant to this Indictment, Swiss Bank No. 1 did not maintain any offices in the United States. The founder and chairman of the board of directors of Swiss Bank No. 1 is a partner of EDGAR PALTZER, the defendant, at the Swiss Law Firm and, like PALTZER, obtained an advanced degree at a law school in the United States. 

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8. In or about February 2009, UBS AG ( "UBS") , another Swiss bank that provided private banking services to U.S. taxpayers, entered into a deferred prosecution agreement with the Department of Justice and admitted that it had participated in a scheme to defraud the Internal Revenue Service (the "IRS"). In or about February 2012, Wegelin & Co. ("Wegelin"), another Swiss bank that provided private banking services to U.S. taxpayers, was indicted by a grand jury sitting in the Southern District of New York for conspiring with U.S. taxpayers to defraud the IRS, to evade taxes, and to file false tax returns with the IRS. Between approximately February. 2009 and February 2012, the number of Swiss Bank No. 1 clients who were U.S. taxpayers grew by approximately 300 percent. 

9. At all times relevant to this Indictment, the vice chairman of the board of directors of Swiss Bank No. 1 was one of the managing partners of Wegelin. Wegelin provided various back-office services to Swiss Bank No. 1, including permitting Swiss Bank No. 1 to have checks to Swiss Bank No. 1's clients issued from Wegelin's correspondent bank account in the United States. This permitted, among other things, Swiss Bank No. 1 to assist U.S. taxpayer clients in repatriating undeclared funds held at Swiss Bank No. 1 to the United States. 

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Means and Methods of the Conspiracy 

14. Among the means and methods by which EDGAR PALTZER and STEFAN BUCK, the defendants, and their coconspirators would and did carry out the conspiracy were the following: 

a. PALTZER and BUCK opened, maintained, and/or managed "undeclared accounts" on behalf of U.S. taxpayers at Swiss Bank No. 1 and other Swiss banks. 

b. PALTZER and BUCK helped U.S. taxpayers open undeclared accounts at Swiss Bank No. 1 after these U.S. taxpayers were forced to close undeclared accounts that these U.S. taxpayers had maintained at other Swiss banks. c. PALTZER, BUCK, and their co-conspirators used sham "foundations" formed under the laws of Liechtenstein to conceal, from the IRS and others, the ownership by U.S.  taxpayers of accounts established at Swiss Bank No. 1 and other Swiss banks and the income generated in those accounts. 

d. PALTZER, BUCK, and their co-conspirators used sham corporations formed under the laws of Panama, among other jurisdictions, to conceal, from the IRS and others, the ownership by U.S. taxpayers of accounts established at Swiss Bank No. 1 and other Swiss banks arid the income generated in those accounts. 

e. PALTZER prepared IRS forms that falsely and fraudulently stated under penalties of perjury that the beneficial owner of a particular undeclared account maintained at Swiss Bank No. 2 was not a U.S. person, when, in truth and in fact, PALTZER knew that the beneficial owner of the particular undeclared account was a U.S. person. 

f. U.S. taxpayers who conspired with PALTZER and BUCK filed false and fraudulent Forms 1040, which, among other things, failed to report their interest in their undeclared accounts and the income generated in their undeclared accounts. 

g. U.S. taxpayers who conspired with PALTZER and BUCK failed to file FEARs identifying their undeclared accounts or filed false and fraudulent FEARs omitting their undeclared accounts. 

h. PALTZER, BUCK, and their co-conspirators transferred the assets in the undeclared accounts from one Swiss bank to another when they believed that the first Swiss bank might be forced to identify the beneficial owners of undeclared accounts to the IRS. 

i. PALTZER, BUCK, and their co-conspirators arranged for account statements for the undeclared accounts of U.S. taxpayers not to be sent to the U.S. taxpayers in the United States. 

j. Co-conspirators of PALTZER and BUCK used their undeclared accounts to receive income that had not been previously taxed.  

k. BUCK and PALTZER helped U.S. taxpayers repatriate funds to the United States from their undeclared accounts in Switzerland in a manner designed to ensure that U.S. authorities did not discover these undeclared accounts.  

After that, as in usual conspiracy indictments in these cases, U.S. clients are identified by pseudonym, their relevant circumstances discussed and overt acts of the conspiracy alleged.