Monday, October 21, 2013

Ex Top UBS Banker Arrested; Likely to be Extradited (10/21/13)

Raoul Weil, a fugitive from U.S. justice [Wikipedia entry here], was arrested in Italy.  See Guy Dinmore and Daniel Schäfer, Former UBS banker faces US extradition (Financial Times 10/21/13), here.  Excerpts:
A prominent Swiss asset manager is facing extradition to the US after being arrested while holidaying in Italy on charges he helped American clients with $20bn of assets to evade US taxes during his previous job at UBS. 
Police in Bologna said Raoul Weil was arrested early on Saturday after he registered at a hotel and his name appeared on a police list of international arrest warrants. Mr Weil was transferred to Bologna’s prison where the next step would be for the US authorities to request his extradition, police said. 
Under Swiss laws, a suspect has to consent to an extradition, making it all but impossible for foreign authorities to succeed with such a request. Under Italian law, however, Mr Weil could be extradited within weeks or months, according to a US official following the case.
Tax Notes Today has the following article:  Kristen A. Parillo and Andrew Velarde, Fugitive Swiss Banker Wanted by U.S. Arrested in Italy, 2013 TNT 204-3 (10/22/13).  Excerpts:\
Weil was indicted by the DOJ in 2008 for conspiring to defraud the United States by helping U.S. clients conceal taxable assets. The indictment alleged that Weil and others conspired between 2002 and 2007 to help about 17,000 Americans conceal about $20 billion in assets in Swiss bank accounts. In January 2009 Judge James Cohn of the U.S. District Court for the Southern District of Florida signed an order declaring Weil a fugitive after he failed to surrender himself to U.S. authorities. (Prior coverage 2009 TNT 10-7: News Stories.) 
Bryan C. Skarlatos of Kostelanetz & Fink LLP told Tax Analysts that the latest development highlights the DOJ's long reach. "Swiss banks, bankers, and other professionals who claim to have no connection to the U.S. still have real risks because the U.S. can and will indict them on charges of conspiring to help U.S. citizens evade U.S. tax," he said. 
Not only do Swiss banks face the prospect of paying stiff fines and potentially going out of business, but the individual bankers or professionals are effectively imprisoned in Switzerland for fear of being picked up on an international arrest warrant, Skarlatos said. "The lesson here is that the DOJ does have real leverage in forcing banks and bankers to comply with U.S. demands for information," he said, adding that this is why so many Swiss banks are considering making a voluntary disclosure to the United States under the recently announced DOJ settlement program for Swiss banks.  
* * * * 
Weil likely doesn't have a lot of settlement options given that the UBS probe is completed and other UBS bankers entered into plea deals with the DOJ, [Peter D.] Hardy said. "Perhaps there are some individuals out there that he can provide information on, but at this point I wouldn't be surprised if we saw a trial," he said. "And based on the indictment, he'd be looking at significant jail time.
Attorneys quoted in the foregoing excerpts are Bryan C. Skarlatos, here, and Peter D. Hardy, here.

JAT Comments:

Swiss bankers who played the U.S. tax cheat enabler game face a real dilemma.  Some few have already been indicted.  Those players take great risk in traveling outside Switzerland, as Mr. Weil's case indicates. Mr. Weil knew that he had been indicted and, surely, knew that he was taking this risk when he went to Italy.  Of course, accomplished business people like Mr. Weill.are used to global travel and, probably, consider it their right or entitlement (a popular word nowadays).  Switzerland is a small country and, for players on a global scale, may be confining, a form of prison itself (OK, it is not that bad, but it is confining).  I don't think Swiss bankers appreciate being confined to Switzerland and perhaps some lesser countries who will not extradite to the U.S.  So an indictment can be a significant event even for a resident of a country that will not extradite for U.S. tax crimes.

Another issue relevant here is the sealed indictment.  See F.R.Cr.P. 6(e)(4) provides:

The magistrate judge to whom an indictment is returned may direct that the indictment be kept secret until the defendant is in custody or has been released pending trial. The clerk must then seal the indictment, and no person may disclose the indictment's existence except as necessary to issue or execute a warrant or summons. 
A timely sealed indictment brought within the statute of limitations is timely even if unsealed after the statute of limitations would have otherwise expired, unless the defendant is materially prejudiced by the delay. Even more in point for the current topic, the defendant named in the indictment will not know that he or she has been indicted.  At a minimum, should that person attempt to enter the U.S., the person would be arrested.  I don't know how sealed indictments are pursued through international channels, but the risk might also exist wherever the unsuspecting defendant travels.  What this means for "players" in the U.S. tax cheat game, even if they have no notice that they are indicted, probably should not be venturing out of Switzerland.  And, since there were a lot of these players, these enablers have had their wings clipped from a practical perspective, whether they know they have been indicted or they don't know that.

Finally, persons such as Mr. Weil aware of indictment and absenting themselves from the process are considered fugitives.  Fugitive status causes the statute of limitations   The following is from the current draft of my Federal Tax Crimes book (footnotes omitted):
Tolling By Absence from Country or Fugitive Status.
Tax Crimes & Conspiracies.  For the tax crimes created in the Internal Revenue Code and for conspiracies related to tax – both offense conspiracies and Klein defraud conspiracies – where the statute of limitations is determined in § 6531, the statute is tolled while the defendant is outside the United States or a fugitive from justice within the meaning of 18 U.S.C. § 3290.  Tolling is in the disjunctive.
Absence.  The defendant’s mere absence from the United States tolls the statute.  For example, a defendant’s eleven-day health and pleasure trip to Switzerland tolled the statute of limitations under 26 U.S.C. § 6531.
Fugitive.  18 USC Section 3290 defines fugitive as “any person fleeing from justice.”  The “majority rule” is that “intent to avoid arrest or prosecution must be proved” for § 3290's fugitive definition to apply; the minority rule is that mere absence from the jurisdiction, regardless of intent, is sufficient. As noted, of course, the disjunctive provision in § 6531 tolls the statute upon mere absence from the country regardless of fugitive status under § 3290.  I am not aware of a case that discusses whether § 3290 applies to crimes outside Title 18 (other than instances such as § 6531 which expressly imports it for Title 26 crimes).  For example, I am aware of no case that says that § 3290 applies for FBAR crimes.  However I found one case where it did apply to a non-Title 18 crime (an immigration crime), so I presume that it does apply to non-Title 18 crimes, but readers should confirm that if it is important.
For Other Crimes.  For other tax related Title 18 crimes where the statute of limitations is determined in Title 18 (e.g., false statements to an agent) rather than § 6531, the statute of limitations is tolled only if the defendant is a fugitive as defined in § 3290.  As noted, intent for the absence is critical under the majority rule.
This tolling means that a superseding indictment with additional charges can be pursued against Mr. Weil.

Addendum 10/23/13 8:15am:

Valentina Accardo, Italy judge confirms custody for ex-UBS banker wanted in U.S. (10/22/13), here.  Excerpts:
An Italian judge ruled on Tuesday that Raoul Weil, the ex-UBS banker wanted in the United States over allegations of helping Americans dodge taxes, must remain in custody while awaiting possible extradition, a judicial source said. 
* * * * 
The judicial source told Reuters that the United States now has 40 days to send the Italian judiciary a formal request for Weil's extradition. 
If the United States makes the request Italian judges at the Court of Appeal will assess at a further hearing whether Weil must be sent to the United States to face trial. 
The source also said that the Italian lawyers for Weil had asked for the banker to be put under house arrest, with electronic tagging, while awaiting possible extradition but that no decision on this request had yet been taken. 
* * * * 
Weil, who is the subject of an international arrest warrant, checked in with his wife at the 'I Portici' hotel in central Bologna on Friday. 
The hotel, as is customary in Italy, passed on Weil's identity details to the local police, triggering an alert and prompting the police to arrest him early on Saturday, police sources said. 
* * * * 
Italy has cooperated with the United States in the past except over crimes that carry the death penalty, which is banned in Italy. Under U.S. law a conviction for tax evasion may result in fines and imprisonment.


  1. Participation in OVDP is on a voluntary basis and there is no obligation to join and where is the legal justification for a different or less shabbily treatment if compliance is the goal (not).
    Where is the logic with regards to Form 872 and already ``closed years`` that the IRS cryptically states that “You do not have to sign the consent to be considered to have cooperated with the Internal Revenue Service for purposes of determining who has the burden of proof in any court proceeding.”

    The consent is silent on the issue of whether a taxpayer who does not sign it will be considered non-cooperative for purposes other than burden of proof in any court proceeding.

  2. Seems m. Weil became a little careless: vacationing in an extradition country like Italy is verboden for those in his situation.

    The Bloomberg coverage is more detailed than the FT.

    The penultimate paragraph of struck me as interesting. Apparently, m. Weil became CEO of Reuss Private Group AG earlier this year, "a leading network of specialist providers offering a comprehensive range of products and services for professional asset managers, family offices and sophisticated private investors." Couldn't this have been UBS slogan?

    Isn't this what m. Weil did at UBS? Could it be that Swiss banks now intend to use private, "non-banks" to front their "taxing" activities, if not for US citizens then for other "tax sensitive investors" ? Interestingly, the new treaty language information sharing provisions may not apply? Or FATCA for that matter. At least as I quickly read the rules.

    Who says there isn't "education in the second kick of the mule"? The mule may not have kicked hard enough first time round!


    there are still around 300 banks domiciled in CH, approx. 5-10% will dissolve just like Frey over the next 12-24 month. The bigger to medium sized Swiss banks will not use private, "non-banks" to front their "taxing" activities, if not for US citizens then for other "tax sensitive investors" - but many smaller ones < $1billion in assets and of course former key figures or customers either voluntarily or forced will go that private route. I hope no one was so naive in believing that ``money`` taxed or not just like water will not always find the path of least resistance. Financial innovation is not something that only the US knows something about !

  4. I should mention in this regard that an experienced lawyer even had the temerity to mention 'Homeland security' in my simple conversation with him about the OVDI. He was obviously trying to scare me and probably guessed I am from South East Asia based on my accent. I believe many lawyers (experienced and well known as well as un-experienced with OVDI) have tried to take full advantage of the confusion and fear created by the IRS.

  5. Asher, though I agree with you that detecting quiet disclosures would be difficult, I am not sure that the IRS can do so efficiently, or that it would do so on a backward-looking basis (ie those who did a QD in the past but are now compliant on a go forward basis.

    The IRS is not exactly a model of efficiency as shown by the rampant fraud in the earned income credit and the IRS's statement that it is aware of the problem but can't stop it.

  6. I think there are further subcategories within Category 1, and that different penalties would be appropriate given the fact and circumstances inherent in such subcategories. There are those who sent funds abroad for nefarious purposes, such as tax evasion. But then there are those who immigrated to the US but did not bring in funds previously earned abroad. Or those with family abroad who inherited from their parents who died abroad. It shouldn't be difficult to differentiate between these and assess penalties in line with the circumstances.

  7. I agree that there are many shades of grey but the IRS is not even willing to make the most basic differentiation with regards to my 6 categories since 2009 ! It is a very slippery slope if your life savings depend on the interpretation of an examiner with a potential PMS liability. I am sorry but for the majority of the taxpayer involved this is asset confiscation and not a compliance effort.

  8. How can I get in touch with you privately?


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