Swiss Lawyer Pleads Guilty to U.S. Tax Crimes (8/16/13)

USAO SDNY has issued a press release announcing the guilty verdict of Edgar Paltzer, a former partner in a Swiss law firm.  See Swiss Lawyer Pleads Guilty In Manhattan Federal Court To Conspiring With U.S. Taxpayers To Evade Federal Income Taxes And File False Tax Returns (USAO SDNY 8/16/13), here.  (For prior Tax Crimes Blog covereage on the indictment of Paltzer and a related party, Stefan Buck, see Bank Frey Executive and Swiss Lawyer Indicted (Federal Tax Crimes 4/18/13), here.)

Key excerpts:

[Paltzer pled guilty to] "conspiring with U.S. taxpayer-clients and others to help U.S. taxpayers hide millions of dollars in offshore accounts from the IRS, and to evade U.S. taxes on the income earned in those accounts."\ 

* * * * 

PALTZER is a U.S.-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 also licensed to practice in New York State.\ 

* * * * 

PALTZER conspired with various U.S. taxpayers and others to ensure that their clients could hide their Swiss bank accounts and the income generated in them from the IRS. PALTZER, acting as a financial intermediary, helped U.S. taxpayers maintain undeclared assets in Swiss banks by, among other things, working with these U.S. taxpayers to create and maintain sham foundations and other entities to nominally hold the U.S. taxpayers’ accounts in Swiss banks. When certain Swiss banks required that these U.S. taxpayers close their accounts, PALTZER worked with these U.S. taxpayers and others to move their accounts to other Swiss banks that were still willing to maintain accounts for U.S. taxpayers with undeclared assets.\ 

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 of jewelry in order to avoid detection of an account in Switzerland. 

Buck, PALTZER’s co-defendant, has not been arrested and remains at large. The charges against Buck are merely accusations and he is presumed innocent unless and until proven guilty.  [JAT Note:  Buck is a Swiss banker who, naturally, finds it inconvenient to come to the U.S. to face the music because, apparently, he does not like the tune the U.S. is playing.]

The Superseding indictment is here. The plea agreement is here.  Some points of the plea agreement:

1. Paltzer commits to make restitution.  Restitution, of course, would have been authorized even in the absence of his agreement.
2. Paltzer agrees to cooperate -- meaning providing information and testimony regarding U.S. taxpayers and other enablers (including banks).
3. No guarantee of the sentence is provided.  Often sentencing factors are addressed in plea agreements, but not in this case except as follows: "[T]his Office will inform the Probation Department and the Court of: (a) this Agreement; (b) the nature and extent of the defendant's activities with respect to this case and all other activities of the defendant which this Office deems relevant to sentencing; and (c) the nature and extent of the defendant's cooperation with this Office. In so doing, this Office may use any information it deems relevant, including information provided by the defendant both prior to and subsequent to the signing of this Agreement. In addition, if this Office determines that the defendant has provided substantial assistance in an investigation or prosecution, and if he has fully complied with the understandings specified in this Agreement, this Office will file a motion, pursuant to Section 5K 1.1 of the Sentencing Guidelines, requesting that the Court sentence the defendant in light of the factors set forth in Section 5Kl.1(a)(l)-(5). It is understood that, even if such a motion is filed, the sentence to be imposed on the defendant remains within the sole discretion of the Court. Moreover, nothing in this Agreement limits this Office's right to present any facts and make any arguments relevant to sentencing to the Probation Department and the Court, or to take any position on post-sentencing motions. The defendant hereby consents to such adjournments of his sentence as may be requested by this Office."
4. The agreement has a paragraph on potential immigration and deportation consequences of the plea "if he is not a citizen of the United States."  This seems to me a bit odd.  Wouldn't they know whether or not he is a citizen?

Addendum 8/17/13 at 12:28pm:

Reuters has this article, Nate Raymond, Swiss lawyer pleads guilty in U.S. tax evasion case (Reuters 8/16/13), here.  Key excerpts that go beyond the plea agreement and indictment (apparently from information at the plea hearing):.

A Swiss lawyer accused of helping U.S. clients conceal millions of dollars in offshore accounts pleaded guilty to conspiracy to commit tax fraud in federal court in New York on Friday. 

The case shined a light on Bank Frey, one of the smaller Swiss private banks with just 1.9 billion Swiss francs ($1.54 billion) under management last year. 

Prosecutors say the bank gained U.S. clients as the Justice Department pursued other banks. 

* * * * 

U.S. authorities say that by the third quarter of 2012, about 44 percent of the bank's assets under management were for U.S. taxpayers. The number had grown 300 percent between February 2009 and February 2012 amid prosecutions of rival banks UBS AG and Wegelin & Co. 

* * * * 

The bank had as recently as May been considering applying for a license to open in the United States to avoid a U.S. investigation.  [JAT Note:  This is too cryptic to know exactly how that would have avoided a U.S. investigation.] 

[Markus] Frey, the bank's founder, had also been a partner in Niederer Kraft & Frey. But he resigned on April 25, with Niederer Kraft at the time saying it "concluded that it was in the best interests" of the law firm.  [JAT Note:  Paltzer was a former partner in NKF; Mr. Frey seems to have been a ringleader (at least that is my inference) from this paragraph (chair of the Bank and name partner in NKF); so, we know that Bank Frey is already a person (in the corporate sense) of interest to the U.S.; one might infer that Mr. Frey and even the law firm may at some point be persons of interest as well.

Addendum 8/26/13 4:30pm:

Laura Sanders reported on last week the following (Laura Saunders, Offshore-Adviser Plea Marks a Shift in Tax Crackdown (WJS 8/23/13):  Some excerpts:

The case puts further pressure on U.S. taxpayers holding secret offshore accounts, because advisers might opt to protect themselves by turning in their clients. "If I were one of [Mr. Paltzer's] clients, I'd be having a heart attack," said Edward Robbins, a criminal tax lawyer with Hochman, Salkin, Rettig, Toscher & Perez in Los Angeles. 

[Noting that Paltzer's 5 UBS vaults have been sealed], ""This could be a new avenue of pursuit for the IRS," Mr. Sharp says, because some physical assets might have been purchased with funds from an undeclared account that has since been closed. There is no statute of limitations for civil tax-fraud penalties, which can be severe."

Laura's article quotes Paltzer's attorney that Paltzer has not been "charged" with violating Swiss law, apparently justifying that claim, in part, on the idea that Mr. Paltzer "was not acting as an attorney, but as a financial intermediary." I suppose that remains to be seen exactly what role in the food chain he served and whether, in any event, the Swiss might want to charge him.  (See below the report that he has been allowed to return to Switzerland; I suppose at this point in the US-Swiss negotiations, the Swiss would be reluctant to move against a key U.S. asset.)

It is also reported that Paltzer's was permitted to use for partial bail a painting, Daubigny's La Gardeuse de Chevres, valued at between $450,000 and $550,000 which is to be held by Paltzer's U.S. defense attorney and turned over to the Government "if requensted."  John Letzing, Swiss Lawyer Posts Bail with 19th Century Painting (WSJ Money Beat 8/26/13), here.  Other excerpts:

As part of his court proceeding, filings also note that Mr. Paltzer and his wife have consented to have five safe-deposit boxes held in Mr. Paltzer’s name at a UBS AG branch in Zurich sealed. 

Mr. Paltzer has been allowed to return to Switzerland, and is scheduled for sentencing in February of next year.