Friday, May 9, 2014

Swiss Non-Bank Enabler Enters NPA and Cooperates to Identify U.S. Persons (5/9/14)

This press release from DOJ:  Swiss Asset Management Firm and Related Companies Agree to Resolve Criminal Tax Investigation, here.

I cut and paste virtually the entire press release because it is so important.  I do bold-face certain parts of the press release that I think readers should pay particular attention to:

* * * swisspartners Investment Network AG, a Swiss-based asset management firm, and three of its wholly-owned subsidiaries (collectively, the Swisspartners Group), entered into a non-prosecution agreement (NPA) with the U.S. Attorney’s Office for the Southern District of New York and agreed to pay $4.4 million to the United States.
  The NPA was entered into based on, among other things, the Swisspartners Group’s remedial measures, voluntary self-reporting and extraordinary cooperation, including its voluntary production of approximately 110 client files for non-compliant U.S.-taxpayer clients, and provides that the Swisspartners Group will not be criminally prosecuted for assisting U.S. taxpayer-clients in opening and maintaining undeclared foreign bank accounts from in or about 2001 through in or about 2011.   The NPA requires the Swisspartners Group to forfeit $3.5 million to the United States, representing certain fees that it earned by assisting its U.S. taxpayer-clients in opening and maintaining these undeclared accounts, and to pay $900,000 in restitution to the IRS, representing the approximate amount of unpaid taxes arising from the tax evasion by the Swisspartners Group’s U.S. taxpayer-clients.   The NPA applies only to the four specific entities that are party to it and does not apply to any other subsidiaries of swisspartners Investment Network AG or any individuals. 
“The extraordinary cooperation of Swisspartners has enabled us to identify U.S. tax cheats who have hidden behind phony offshore trusts and foundations,” said Deputy Attorney General Cole .   “In this and other cases around the world, we will continue to provide substantial credit for prompt and full cooperation.”
“As today’s announcement shows, we receive information about U.S. taxpayers with undisclosed accounts from many sources, some of which are not public,” said Assistant Attorney General Keneally.   “For many accountholders, the time to come forward voluntarily to avoid criminal prosecution has run out.” 
“This office will continue to work aggressively to hold accountable not only those U.S. taxpayers who evade their tax obligations by hiding money overseas, but also those abroad who make such tax evasion possible,” said U.S. Attorney Bharara.   “For its wrongdoing in assisting U.S. taxpayers to open and maintain undeclared accounts overseas, the Swisspartners Group is being made to pay $4.4 million in forfeiture and restitution.   Swisspartners avoided criminal charges as a direct result of its decision to self-report its misconduct at a time when it was not even under investigation and its extraordinary cooperation, including its decision to turn over voluntarily the files and identities of U.S. taxpayer clients it helped hide money from the IRS.   The case serves as a clear example of the benefits that can be obtained from early and complete cooperation with federal law enforcement." 
“I am very pleased that we have successfully concluded negotiations with the Swisspartners Group,” said IRS-CI Chief Weber .   “In making amends, the Swisspartners Group has turned over 110 account files relating to U.S. taxpayer-clients who maintained undeclared assets overseas.   This agreement marks yet another significant step forward in combating offshore tax evasion.   Anyone who is hiding money or assets offshore with the intent of committing tax evasion will be found and prosecuted.   It's not a matter of ‘if,’ it's a matter of ‘when." 
* * * * 
The NPA recognizes that, beginning in 2008, the Swisspartners Group voluntarily implemented a series of remedial measures to stop assisting U.S. taxpayers in evading federal income taxes.   The NPA further recognizes that in 2012, at a time when it was neither a subject nor target of any investigation by the U.S. Department of Justice, the Swisspartners Group self-reported its conduct concerning U.S. taxpayer-clients to the Department of Justice.   Additionally, the NPA recognizes the extraordinary cooperation of the Swisspartners Group, including its voluntary production of client files for 110 non-compliant U.S. taxpayers that included the identities of those U.S. taxpayers. 
As part of the NPA, the Swisspartners Group admitted various facts concerning its wrongful conduct and the remedial measures that it took to cease that conduct.   Specifically, the Swisspartners Group admitted that it knew certain U.S. taxpayers were maintaining undeclared foreign bank accounts with the assistance of the Swisspartners Group in order to evade their U.S. tax obligations, in violation of U.S. law.   The Swisspartners Group acknowledged that it helped certain U.S. taxpayer-clients conceal from the IRS their beneficial ownership of undeclared assets maintained in foreign bank accounts by, among other things, creating sham foundations and other sham entities that served as the nominal account holders; placing accounts or insurance policies in the names of non-U.S. nationals; facilitating the transportation of large amounts of cash into the United States on behalf of U.S. taxpayer-clients; and arranging for the bulk deposit of cash at Swiss depository financial institutions on behalf of U.S. taxpayer-clients. 
As part of the NPA, the Swisspartners Group has agreed to forfeit $3.5 million to the United States, representing certain fees it obtained in exchange for services that it provided to U.S. taxpayers with undeclared foreign bank accounts from in or about 2001 through in or about 2011.   In connection with this forfeiture, the Swisspartners Group has agreed not to contest a civil forfeiture action filed by the United States.   That action was filed on May 9, 2014, in the U.S. District Court for the Southern District of New York and assigned to U.S. District Judge Gregory H. Woods.
The department entered into the NPA based on factors including: 
 ·          the Swisspartners Group’s voluntary implementation of various remedial measures beginning in or about May 2008;
·          the Swisspartners Group’s voluntary self-reporting of its criminal conduct at a time when it was neither a subject nor target of any investigation by the U.S. Department of Justice;
·          the Swisspartners Group’s voluntary and extraordinary cooperation, including its voluntary production of account files that include the identities of U.S. taxpayer-clients;
·          the Swisspartners Group’s willingness to continue to cooperate to the extent permitted by applicable law; and
·          the Swisspartners Group’s representation, based on an investigation by outside counsel, the results of which have been shared with the U.S. Attorney’s Office and the Tax Division, that the misconduct under investigation did not, and does not, extend beyond that described in the Statement of Facts. 
The NPA requires the Swisspartners Group to continue to cooperate with the United States for at least three years from the date of the agreement.   In the event that the Swisspartners Group violates the NPA, the U.S. Attorney’s Office may prosecute the Swisspartners Group.
 JAT Comments:

1.  Of course, the sweeping scope of the claims (such as it is not if but when) is a bit of hyperbole.  But, I do think the DOJ and the IRS through various sources are significantly expanding the scope of U.S. taxpayers that are within their sights.  The point is that all U.S. taxpayers employing offshore accounts for tax evasion will not be prosecuted but some significant number will.  And there will be major tax collection and FBAR penalty collection initiatives arising from these leads.

2.  Readers should keep in mind as AAG Keneally keeps reminding that the DOJ and IRS have nontraditional sources of information.  Taxpayers with the issue / problem should realize that they are taking the risk that these nontraditional sources can produce their names and result in major problems for them.

3.  Obviously joining OVDP is the only practical alternative for any of these with material criminal prosecution risk and even for those who do not even want to take the risk that their criminal prosecution potential might or might not be material.  I still don't think that means that OVDP is for everyone with noncompliant foreign accounts.  Careful assessment of all the facts and good judgement are required.

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