Monday, November 3, 2014

Raoul Weil Found Not Guilty (11/3/14; 11/6/14)

This news just flashed into my in-box.  I will post more as I get it (see below).  This is twice in just a few days that a banker has been found not guilty.

For all Federal Tax Crimes blogs on Weil, click here.

Addendum 11/4/14 8:00 am:

Susannah Nesmith and David Voreacos, Ex-UBS Executive Weil Acquitted of U.S. Tax Conspiracy (Bloomberg 11/3/14), here.  Excerpts (with bold face added by JAT):
The federal jury in Fort Lauderdale, Florida, reached its verdict after deliberating about 90 minutes yesterday. Weil, 54, was indicted in 2008 on a charge of conspiring to help as many as 17,000 U.S. taxpayers hide $20 billion from the IRS. Weil was arrested last year in Bologna, Italy, and waived extradition. Weil, who didn’t testify, had faced five years in prison. 
* * * * 
“The verdict shows you the difficulty of going after senior management who can at times blame the bank’s customers and lower-level employees for the bank’s mistakes,” Nathan Hochman, a former assistant attorney general who oversaw the Justice Department’s tax division, said in a phone interview. “It’s difficult to prove a historical case beyond a reasonable doubt when the government heavily relies on witnesses who have received very favorable treatment.” 
* * * * 
Prosecutors argued that Weil knew that UBS used sham corporate structures to help U.S. clients hide their identities from the IRS, and its bankers used cloak-and-dagger methods to deliver them cash and account statements. 
“This conspiracy lasted for years and years, all done to conceal this business and hide these clients,” Mark Daly, a Justice Department trial attorney, said yesterday in summarizing a case that began Oct. 14. “It’s a pyramid. At the top, you’ve got the senior executives who have the power to either grow or shut down this business.” 
* * * * 
Menchel [Weil's lawyer] argued in his summation that prosecutors failed to prove that Weil was part of a single conspiracy involving taxpayers. He also said that Weil was unaware of the activities of a group of bankers below him. 
“There’s no evidence in this case that Mr. Weil knew and much less participated in activities by low-level bankers who were violating the bank’s own policies,” Menchel told the jury. 
* * * * 
Weil was also told by lawyers that the existence of the U.S. cross-border business, including that portion that allowed taxpayers to not declare accounts, was agreed to by the IRS and permitted by U.S. tax law, Menchel argued. 
In instructing the jury, U.S. District Judge James Cohn told the panel it must decide if “a single overall conspiracy did exist,” and if so, who its members were. 
The judge said that if Weil acted in good faith, “sincerely believing himself to be in compliance with the law,” then he didn’t act willfully to violate the law.
I have bold faced certain portions of the article and make the following comments:

1.  Weil did not testify.  That is one of the toughest calls that a defendant makes in a white collar crime case (tax crimes are just a subset of white collar crimes).  Most of the time, it is a mistake for the defendant to testify, but still it is a very tough call because a defendant often wants to tell / sell his story.

2.  Weil's lawyer argued that Weil was not part of a single conspiracy involving U.S. taxpayers as well as lower level UBS employees.  The implication from the wording of the sentence is that he might have been a member of a conspiracy that did not include U.S. taxpayers.  (I can't say that the authors necessarily meant that implication, but still perhaps they did.)  In any event, if the conspiracy charged included the taxpayers, perhaps DOJ Tax mischarged the scope of the conspiracy.  In the major criminal tax shelter prosecutions, the Government strategy was to argue that the criminality did not include the taxpayers (who may have been innocent or at least not guilty in a conspiracy with the promoters because they believed the bullshit tax shelter opinions they received).  One has to wonder whether charging the narrower conspiracy might have worked.  In this regard, with the broader conspiracy charged to include the taxpayers, I am also curious about how they sought to prove up that the taxpayers were part of the conspiracy charged.  While their participation may seem obvious to professionals and even taxpayers, I am not sure that it would be obvious to the jury.  I suppose that the actions of the UBS bankers who testified to keep the information about the accounts secret could give rise to a fair inference that the taxpayers participated in the conspiracy.

3.  Since Weil did not testify, I wonder how exactly Weil's attorney got in the evidence that Weil had been advised by lawyers that the business was not illegal.  Note that Weil's attorney made the argument to the jury, so presumably there was some factual predicate in the record.  This is a variation of the good faith defense -- which is really not a defense but an attack on whether the Govenrment has proved the level of mes rea required for the crime.  In most Title 26 tax crimes, that level of mens rea is willfulness -- voluntary, intentional violation of a known legal duty.  For the conspiracy charge, that level of mens rea is certainly required if the conspiracy charged is an offense conspiracy to commit a Title 26 tax crime requiring willfulness and, I would argue, something like that even with the defraud / Klein conspiracy.  I have discussed the of "good faith" and "reliance on professionals in my Federal Tax Crimes book.  The relevant excerpts from the book (as updated) are "good faith," here, and "reliance on professionals," here.

Addendum 11/5/14 11:24 am:

Aruna Viswanatha and Kevin Drawbaugh, Exclusive: U.S. lacked hard proof in tax trial of ex-UBS banker, jurors say (Reuters 11/4/14), here.

Ajay Gupta, Weil Verdict a Setback for U.S. Campaign Against Foreign Bankers, 2014 TNT 214-1 (11/5/14), no link available.  Summary of selected items from the article:

  1. The charge was for the defraud / Klein conspiracy only.  (The consequence of that is that there is no textual requirement of willfulness and the scope and even validity of the Hammerschmidt expansion was necessarily in play, although that would be an issue for the judge.  See Pretrial Skirmishing in Weil - the Coplan Issue of Improper Expansion of the Defraud / Klein Conspiracy (Federal Tax Crimes Blog 10/21/14), here.  The TNT article cites the Coplan issue.
  2. Even as expanded, the Hammerschmidt formulation, properly interpreted as Judge Kozinski famously said in Caldwell, the defraud / Klein conspiracy "how beyond a reasonable doubt that the defendant acted with dishonesty or deceitfulness, he said."  That may not sound like the equivalent of willfulness, but for practical purposes it may be.
  3. The problem for the Government came at trial, where the jury believed the Government's case was weak.  This is developed more in the Reuters article linked above.
  4. The article quotes the Government comment as no comment and the defense counsel's comments as posturing to say why the Government screwed up in bringing the indictment and prosecuting the case.
  5. On the earlier acquittal of Baravaian, one of Baravarian's attorneys "speculated that the Klein conspiracy charge may have taken up the bulk of the jury's deliberations. The jury took four hours to return a not-guilty verdict, evidently rejecting a connection between the taxpayers' decisions to evade taxes and Baravarian's banking services."  For my blog on the Baravarian acquittal, see Mizrahi Tefahot Bank U.S. Banker Acquitted (Federal Tax Crimes Blog 11/2/14), here.
Addendum 11/6/15 10:20 am:

Lynnley Browning, UBS Tax Evasion Case Shed Light on Swiss Secrets (Newsweek 11/6/14), here.  Key excerpts:
[The case provided] the first public assertion by the Justice Department, via the lead prosecutor in the case, Mark Daly, that the global bank’s former highest executives, namely former chief executive Marcel Rohner and former chief inhouse lawyer Peter Kurer, were involved in the alleged scheme. 
“Two or more people in some way agreed to try to accomplish a shared unlawful plan,” Daly said in his closing argument against Weil on Monday in a federal court room in Fort Lauderdale, Fla., for which Newsweek obtained a rush transcript. “Who are those people?  The Government submits they are Mr. Weil, the defendant, Marcel Rohner, the former CEO, Peter Kurer, the former general counsel, Martin Liechti, who testified before you,” and other former UBS bankers. 
Never mind that Rohner and Kurer, both Swiss citizens, have not been charged, and that Swiss citizen Liechti, a former top UBS private banker who once reported to Weil and was the prosecution’s star witness, has enjoyed an immunity deal, requiring his cooperation with the Justice Department since spring 2008—a fact that Weil’s defense lawyers used to their advantage. 
* * * * 
Others aren't so sure. Weil's acquittal "is the subject of much water cooler gossip," a senior tax lawyer in Washington, D.C., who requested not to be named because of his law firm's cases involving Swiss banks and their clients, tells Newsweek.  "DOJ did a crappy job, apparently unaware of the harm that failure will cause to their agenda" of expanding its probe of Switzerland to other tax-haven countries. "What Hong Kong or Indian or Israeli bank is going to be intimidated by this Gang That Can’t Shoot Straight?"
My only comment is that I am not sure bank enablers or others should draw too many inferences from this case and the earlier Bavarian acquittal.

I will try to find time to post the spreadsheet (upper right) this afternoon, since an update is long overdue.

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