Raoul Weil Pleads Not Guilty: Thoughts and Speculations (1/8/14)

Raoul Weil, the top UBS banker, pled not guilty yesterday.  See Zachary Fagenson, UPDATE 2-Ex-UBS banker pleads not guilty in major tax fraud case (Reuters 1/7/14), here.  For prior blogs on Weil, see the list at the end of this blog.

The not guilty plea is a routine step in a criminal case.  So there really is nothing eventful in Weil's plea itself.  A plea deal is often agreed to or finalized after the initial not guilty plea, and the defendant will still qualify for hte sentencing benefits of accepting responsibility provided it is not immediately before trial after all the preparation work has been done.

The article, however, does report some speculations from Bradley Birkenfeld's lawyer on his whistleblower claim that the government may be "negotiating a 'sweetheart deal'" with Weil in order to keep him from implicating prominent former UBS account holders.  This claim is made on the lawyer's web site under an entry titled Federal Court Hearing Scheduled for UBS Tax Fraud Kingpin Raoul Weil (Whistleblowers Protection Blog 1/6/13), here.  The source of the lawyer's claim is obviously Birkenfeld, who worked for Weil at UBS.

I can't speak to whether the lawyer's claim is true.  I am skeptical.  If the Government wanted to keep things quiet , the Government would not have obtained his indictment and then pursued his extradition.  This smacks of a conspiracy theory with scant but speculations on thin threads.

I do note at least the possibility that Weil could be a whistleblower and claim some gargantuan award.  Of course, his central role in the tax underpayments involved would likely disqualify him from a whistleblower award.  See Section 7623(b)(3), here.

Tax Notes Today has an article offering skeptical comments on the lawyer's claim.  Stephanie Soong Johnston, Former UBS Banker Pleads Not Guilty to Tax Fraud Conspiracy Charges, 2014 TNT 5-2 (1/8/14).  Peter Hardy, a well-known criminal tax lawyer (bio here), expresses his doubts as well.  From the article:

 "He may or may not know embarrassing details, but generally speaking, the DOJ wants to prosecute, when appropriate, the elite, not to make sweetheart deals to protect them," Hardy told Tax Analysts. "The government is going to want him to enter into a guilty plea and cooperate."

According to Hardy, it is unusual that Weil faces only one count of conspiracy because economic crime cases, including tax fraud, usually include multiple counts. Because the general statute of limitations for tax crimes is six years and the last overt act the indictment references is in 2006, the government may not be able to add any additional charges, he said.

So, as noted, I am skeptical that the Government will handle the Weil case in a way to protect certain unnamed influential persons.  It could happen.  There is just not much to support the speculation that it is happening.

As to the statute of limitations on additional counts, however, I think key suspensions of the statute apply to make the statute a nonissue.  From my Federal Tax Crimes Book current draft (footnotes omitted):

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.  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).  

The statutes cited in this quote are Section 6531, here, and 18 USC Section 3290, here.

Moreover, one would have thought that, if the statute were the problem to adding other counts it might want to pursue, the Government could have timely obtained a superseding indictment some time ago.  So, unless there were a major screw-up, the Government has the charge it needs.  Of course, that charge -- a count for conspiracy -- has a maximum sentence of 5 years, so Weil's sentence cannot exceed 60 months if he is convicted.  (By contrast, Birkenfeld's sentence was 40 months.)  In this regard, the tax loss involved would likely push the guidelines sentence way beyond 60 months, but with the cooperation that Weil  would be expected to give, his actual Booker sentence is not likely to get to 60 months.  (That is speculation also.)

Finally, somewhere rattling around in my brain is the idea that charges cannot be added after extradition.  Of course, it is reported that Weil waived extradition.  I can't imagine that, if he did waive extradition, he did not have some agreement from the U.S. that additional counts would not be added.  The reason.  If he had not waived extradition, he would have to be extradited and, under the doctrine of specialty, the ability to add new counts would be limited.  See Stephen C. Warneck, A Pre-emptive Strike: Using RICO and AEDPA to Attack the Financial Strength of Terrorist Organizations, 78 B.U.L.Rev. 177 (1998), which says in relevant part (one footnote omitted:

The third principle governing extradition, the "specialty" principle, prevents a requesting state from prosecuting an extradited individual for any crime other than the crimes that were the subject of the extradition request. 195 Under a strict interpretation of this principle, a requesting state could never add charges to a defendant's prosecution that previously had not been listed in the extradition request. As a practical matter, however, U.S. courts interpret the specialty principle broadly and allow prosecution of later-added charges so long as the extraditing state permits it.  n196

   n196. See United States v. Puentes, 50 F.3d 1567, 1575 (11th Cir. 1995) (holding that an extraditing state may waive the specialty principle); United States v. Najohn, 785 F.2d 1420, 1422 (9th Cir. 1986) (stating that specialty principle "defenses exist[] only to the extent that the surrendering country wishes"); see also United States v. Andonian, 29 F.3d 1432, 1437 (9th Cir. 1994) (finding that later-added charges were proper because the extraditing country probably would not object to the additional charges).

In Puentes, the Eleventh Circuit said (p. 175):

The extradition treaty between the United States and Uruguay provides that an extradited person "shall not be detained, tried or punished in the territory of the requesting Party for an offense other than that for which extradition has been granted…." Treaty on Extradition and Cooperation in Penal Matters, April 6, 1973, United States-Uruguay, art. XIII, P.I.A.S. No. 10850. Puentes makes the unassailable assertion that the prosecutable offense from an extradition proceeding is the offense specified in the warrant of extradition.

In Andonian, the doctrine of speciality was found not applicable where the counts added by superseding indictment were within the scope  of the original charge for which indictment was obtained.   The court concluded:

There is no dispute here that money laundering is an extraditable offense under the Treaty, or that Uruguay agreed to extradite Vivas on charges of money laundering. 

Our concern is with whether Uruguay would regard Vivas' prosecution for the additional counts of money laundering as a breach of the Treaty. We are confident Uruguay would not.

The Court then explains why it thinks Uruguay would have permitted it, but I omit that discussion.

So, and I caution that I am not an expert on specialty, but it seems that the U.S. ability to add additional charges, assuming the statute is still open, would be dependent upon the treaty, the scope of the extradition order, and what Italy might permit.  In short, in negotiating a waiver of extradition, Weil's attorneys should have negotiated a limitation to additional charges or, failing obtaining the limitation, insisted on extradition.  (That is speculation as well.)

Prior Blogs on Raoul Weil:

• Raoul Weil Has First U.S. Court Appearance (Federal Tax Crimes Blog 12/17/13), here.
• Weil, former UBS Exec and Former Fugitive, Set for Preliminary Hearing Today (Federal Tax Crimes Blog 12/16/13), here.
• Switzerland as Club Fed for Swiss Enablers of U.S. Tax Crimes (Federal Tax Crimes Blog 10/24/31), here.
• Ex Top UBS Banker Arrested; Likely to be Extradited (Federal Tax Crimes Blog 10/21/13), here.