A Swiss Bank Related Sentencing (10/8/13)

On October 4, 2013, Pius Kampfen was sentenced.  See prior blog on the plea agreement: Julius Baer Retired Banker Pleads to FBAR Crime (Federal Tax Crimes Blog 6/28/13), here.  The key documents are listed, with links at the end of this blog.  However, the plea agreement itself is under seal.

Key details:

Defendant:  Pius Kampfen
Age: 69
Count of Conviction (By Plea):  FBAR (1)
Banks: Pictet & Cie, ABN-AMRO, Bank Vontobel
Tax loss:  $1,394 (D calculation); $4,945 (Govt calculation)
Restitution: To be determined in later hearing
FBAR Penalty: $1,465,392 (derived from forfeiture and prior plea agreement; already paid)
High Balance:  $2,930,785. (derived from FBAR penalty at 50%)
Sentence - Incarceration:  0 months (Govt recommended 6 months)
Sentence - Home confinement:  6 months
Probation - 2 years.
Fine: $20,000
Court: ND CA
Judge Jon Tigar (Wikipedia entry here)

Here are the relevant documents:

• 20130926 Kampfen Opening Sentencing Memo, here.
• 20130926 Kampfen's Statement with Sentencing Memo, here.
• 20130927 Government Sentencing Memo, here.
• 20131001 Kampfen Response to Govt Sentencing Memo, here.
• 20131001Kampfen Corrections (Exh to Response), here.
• 20131004 Kampfen Sentencing Judgment, here.
• 20131004Kampfen Sealing Order, here.
• 20131004Kampfen Sentencing Minutes, here.

With the indicated tax loss, and the reference to the tax loss table for setting the base offense level, the sentence seems to be not out of line with other sentences.  But, I wonder why the Government would have prosecuted the case with such a small tax loss.  Certainly, probably his role as a Swiss banker himself (working for Julius Baer) probably was in the mix.  Also, the following stuck out to me from the Govt Sentencing Memo:

In order to maintain these accounts, Kampfen paid thousands of dollars annually in fees to the Swiss banks; as noted by the PSR, these high fees are nonetheless deductible for tax purposes, which affects the tax loss for sentencing and restitution purposes. 

Kampfen was interviewed by agents from IRS Criminal Investigation (IRS-CI) in December 2009. When initially interviewed, Kampfen admitted that he had worked for UBS but falsely stated he was not familiar with Albia. When the agents showed Kampfen documents from UBS associated with Albia, Kampfen terminated the interview and stated he wanted to speak with an attorney. IRS agents subsequently obtained additional evidence related to Kampfen's foreign bank accounts and Albia. 

During an interview with IRS agents in May 2012, Kampfen stated that he considered the money held by Albia to be part of his "nest egg" and that he never deposited any of the money he earned in the United States into this account. In contrast to the money he earned in the United States, for which Forms 1099 or Forms W-2 were filed with the IRS, there was no similar reporting of Kampfen's money in Switzerland to the IRS. Kampfen stated that he would receive updates on his Albia accounts when traveling to Europe and withdraw money from the account while there to spend on vacations. [PSR ¶¶ 8-9] Kampfen stated that it was his decision not to hold the money he earned in Switzerland in his name; that was the reason Albia was created. 

* * * * 

Though Kampfen has ultimately accepted responsibility for his actions, the context of that acceptance is important. When initially questioned by the IRS in December 2009, Kampfen falsely denied any knowledge or connection to Albia. It was a little over two years later, in May 2012, after the IRS had obtained additional documentation and records for the Albia accounts, that Kampfen finally admitted to his role and ownership of the accounts at issue. While Kampfen now states it was a "mistake" not to disclose these accounts, his claim that he was not monitoring the accounts is belied by evidence that he would meet with the accounts' manager while traveling in Europe and would withdraw funds in those accounts to pay for his vacations. [PSR ¶ 9] Further, the care that Kampfen took to segregate the money he earned in the United States from the money he previously earned in Switzerland is further evidence that his failure to report the Albia accounts was not a mistake and not a cultural misunderstanding resulting from his "Swiss upbringing": the evidence shows that Kampfen did report the foreign bank accounts into which he deposited money earned in the United States (and thus reported to the IRS) while simultaneously failing to report the interest, dividends, and even existence of foreign bank accounts in which he held assets previously earned overseas (and thus not reported to the IRS). 

* * * * 

The government agrees that Kampfen may indeed be proud, and appears to have conducted himself with honor in other respects of his life. However, while Kampfen's other professional activities may have promoted economic relations between the United States and Switzerland, it is immensely troubling that Kampfen was simultaneously concealing a portion of his overseas assets, in violation of U.S. law. If anything, Kampfen's professional position and the conduct underlying the charge here send precisely the wrong message as to what constitutes permissible behavior: given that Kampfen was the senior vice president of Julius Baer, another Swiss bank, when he retired in 2001, he never should have engaged in the sort of conduct underlying his conviction. Further, he should have been one of the first to avail himself of the IRS voluntary disclosure program. He did not. Rather, he waited until IRS agents approached before he began filing FBARs for the Albia accounts. 

* * * * 

A downward departure is not appropriate here precisely because the total offense level is not based on loss: even assuming there is no tax loss, because Kampfen used sophisticated means to commit this crime, including the formation of Albia and segregation of assets based on location earned (and reporting to the IRS). Because of the sophisticated means enhancement, the total offense level after applying U.S.S.G. § 2T1.1(b)(2), before taking into account acceptance of responsibility, will be 12. With acceptance of responsibility (-2), the adjusted offense level is 10, even assuming no tax loss. [Doc. No. 5, at 5] Given that Kampfen is highly educated and intimately familiar with U.S. financial reporting requirements, including the FBAR, it is far from clear that the one-time civil penalty is sufficient to communicate the seriousness of the offense. The precise reason why a short term of imprisonment is appropriate here is because Kampfen's actions during the period in question indicate a pronounced lack of respect for the law, the very law he was required to be familiar with in order to advise clients as a financial advisor. 

CONCLUSION 

* * * * Based on the foregoing, the United States recommends that Kampfen be sentenced to a term of 6 months' imprisonment, 18 months of probation, a $20,000 fine, and restitution to the IRS. The government submits that the sentence is sufficient, but not greater than necessary, to accomplish the goals of sentencing, and that a lesser sentence is not supported by application of the 18 U.S.C. § 3553(a) factors.

Kampfen mounted a defense to the foregoing in a personal statement, a Correction, filed with his sentencing response.  Here are key excerpts:  

Page 4, lines 6-14 

I did not direct my Swiss attorney to create an entity. 

I discussed with him my desire and need to establish a will for my Swiss assets. A foreign corporation is the preferred vehicle in Switzerland for estate planning, much like a trust in the US. My Swiss attorney recommended that he set up a foreign corporation for me to hold my Swiss assets. I consented and he handled all the mechanics of setting it up. It is the administrator of a foreign corporation who opens and administers such account, not the beneficial owner. I had no role in the Albia accounts being transferred to different banks. I had no saying or input in this. The administrator had to change banks because at that time more Swiss banks started to ask their foreign customers to close and transfer their accounts. 

Page 5, lines 5-12 

I did not bring in or disclose the Swiss assets because I did not know for how long I would be working in the US. When I returned later on and latest when I became a US citizen, I should have declared them on my FBAR. I am now paying mentally and financially for my mistake.  

Page 5, line 12 

The foreign corporation, Albia, was created for estate planning only, with the main purpose of holding and distributing my Swiss assets on my death. 

Page 5, line 14 

I did not receive any interest and dividend. They went directly into the Albia accounts.  

Page 8, line 7 

1 did not open a series of bank accounts for Albia. The administrator made those decisions because the banks forced him to close these accounts as the US-Swiss tax issue grew bigger. I had no input on those changes. 

Page 8, line 8 

I did not receive interest and dividends, they stayed in Albia. 

Page 8, lines 14-15 

My job with UBS 32 years ago was to administer their accounts either at the client's directions, or via the bank's investment management programs, and not to advise individuals on their tax  situation. I was not a tax expert. With Julius Baer in San Francisco, my job was to market the investment management services for Julius Baer New York branch, as their West Coast representative. As this was a branch registered with the US banking authorities, there were no US tax issues involved. 

Page 8, lines 24-25 

This was not a conscious decision to hide, but my mistake to believe that I could just keep them were they were at the time. 

Page 9, line 10-11 

There was no monitoring necessary because about half the assets were in Swiss stocks held for many years, while the other half was managed by a local portfolio manager 

Page 9, line 24 

Again, the reason was that I wanted to keep separate the money earned in the US from the accounts I had before permanently settling in the US. 

Page 10, lines 3-6 

I made no decision to shift assets among different banks. The administrator was forced to transfer these accounts to other banks because many banks started to get rid of their US related clients, due to the pressure on banks relating to the US-Swiss Tax issues. Some smaller banks with no US ties were willing to take these accounts. 

Page 10, line 16 

There was no calculated decision; these accounts have been in Switzerland for so long that there was no reason at that time, to bring them into the United States.

This seems to me to be oddly worded.  Do any readers think so as well?  And does it come close to watering down his acceptance of responsibility?

Finally, readers with interest should note defense counsel's deft use of prior favorable sentencings in his opening sentencing memorandum under the following heading:

VII. A SENTENCE OF PROBATION IS NECESSARY TO AVOID UNWARRANTED SENTENCE DISPARITIES WITH DEFENDANTS WHO HAVE BEEN FOUND GUILTY OF SIMILAR OR MORE EGREGIOUS CONDUCT 

The goal of avoiding unwarranted sentencing disparities, which was a principal motivating force for the Sentencing Guidelines, remains a key sentencing factor under 18 U.S.C. § 3553. See United States v. Zavala, 300 Fed. Appx. 792, 795 (11th Cir. 2008); United States v. Owens, 464 F.3d 1252 (11th Cir. 2006); see also 28 U.S.C. § 991(b)(1)(B) (purposes of Sentencing Commission include “avoiding unwarranted sentencing disparities among defendants with similar records who have been found guilty of similar criminal conduct while maintaining sufficient flexibility to permit individualized sentences when warranted by mitigating or aggravating factors not taken into account in the establishment of general sentencing practices”). In this case, a below-guidelines sentence is required to avoid unwarranted disparities with sentences imposed on defendants guilty of similar or more egregious misconduct. 

A review of recent prosecutions of other holders of undisclosed accounts at UBS and other foreign banks shows that probation not only is the most commonly imposed sentence, but has been regularly granted to defendants whose conduct involved none of the mitigating factors present in Mr. Kampfen’s case and several aggravating factors that are not present here. Of the offshore account holder defendants who have pled guilty and have been sentenced since 2007, 18 — approximately 50% — have received sentences of probation (with half of those sentences including a term of home detention). Another six of the 37 cases involved sentences of incarceration of three months or less. Court records and government press releases show that those defendants who have received probation include  [EXAMPLES OMITTED HERE]:

Kampfen's attorney is an experienced tax litigator -- Jay Weill, here, with Sideman & Bancroft LLP, here.\