Superseding Indictment for Wegelin Individual Enablers to Add Tax Obstruction Count to Tax Conspiracy Count (2/21/15)

A superseding indictment has been filed in United States v. Berlinka, Frei & Keller (SDNY S 12 Cr. 02 (JSR)).  For discussion of the original indictment, see New Swiss Enabler Indictments - Bankers Related to UBS and, Allegedly, Wegelin (Federal Tax Crimes Blog 1/3/12), here.  The superseding indictment continues the original offense and defraud / Klein conspiracy charge and adds one charge each against the three defendants.  One of the defendants, Keller, was recently arrested in Germany.  See Wegelin Banker Arrested in Germany on U.S. Charges (Federal Tax Crimes Blog 2/6/15), here, so this apparently was the time to expand the scope of the indictment..

The additional charge against each defendant is the substantive crime of tax obstruction, Section 7212(a), here.  The charge is under what is called Section 7212(a)'s Omnibus Clause.  Tax obstruction has been called a one-person Klein conspiracy (which is also charged against each of the defendants).  So, I thought I would discuss the new tax obstruction charge as it relates to the conspiracy charge.

The guts of the conspiracy charge is:

STATUTORY ALLEGATIONS 

138. From at least in or about 2002 up through and including in or about 2011, in the Southern District of New York and elsewhere, MICHAEL BERLINKA, URS FREI, and ROGER KELLER, the defendants, together with Wegelin, Managing Partner A, Executive A, Client Advisor A, Beda Singenberger, Gian Gisler, Clients A through JJ, and others known and unknown, willfully and knowingly did combine, conspire, confederate, and agree together and with each other to defraud the United States of America and an agency thereof, to wit, the IRS, and to commit offenses against the United States, to wit, violations of Title 26, United States Code, Sections 7206(1) and 7201. 

139. It was a part and an object of the conspiracy that MICHAEL BERLINKA, URS FREI, and ROGER KELLER, the defendants, together with others known and unknown, willfully and knowingly would and did defraud the United States of America and the IRS for the purpose of impeding, impairing, obstructing, and defeating the lawful governmental functions of the IRS in the ascertainment, computation, assessment, and collection of revenue, to wit, federal income taxes. 

140. It was further a part and an object of the conspiracy that various U.S. taxpayer-clients of MICHAEL BERLINKA, URS FREI, and ROGER KELLER, the defendants, together with others known and unknown, willfully and knowingly would and did make and subscribe returns, statements, and other documents, which contained and were verified by written declarations that they were made under the penalties of perjury, and which these U.S. taxpayer-clients, together with others known and unknown, did not believe to be true and correct as to every material matter, in violation of Title 26, United States Code, Section 7206(1). 

141. It was further a part and an object of the conspiracy that MICHAEL BERLINKA, URS FREI, and ROGER KELLER, the defendants, together with others known and unknown, willfully and knowingly would and did attempt to evade and defeat a substantial part of the income tax due and owing to the United States by certain of Wegelin's U.S. taxpayer clients, in violation of Title 26, United States Code, Section 7201.

As thus charged, the conspiracy is an offense conspiracy and a defraud / Klein conspiracy to impair or impede the lawful functioning of the IRS.  In other words, it is one overarching conspiracy with the two stated objectives.  The offense objective charged is an to commit tax evasion, Section 7201, here and to commit tax perjury, Section 7206(1), here.  See pars. 140 and 141 quoted above.  As typical with conspiracies the indictment alleges a litany of means and methods (pars. 16-17, involving Clients A - JJ, excluding Clients D&E, N&O, P-U, AA-DD).  The indictment alleges overt acts in par. 142, suparagraphs a - i (a fairly short list of overt acts as these things go, but the Government may rely at trial on any other overt acts proved).  These allegations are more or less standard fare for bank enablers.

The indictment then includes the tax obstruction, Section 7212(a) , charge against Berlinka, Frei and Keller, in Counts Two (par. 143-144), Three (pars. 145-146) and Four (pars. 147-148), respectively.  These counts, worded the same except for the defendant's name, are short and straight-forward.  I quote Berlinka's tax obstruction count to illustrate:

COUNT TWO
(OBSTRUCTING AND IMPEDING THE DUE ADMINISTRATION OF
THE INTERNAL REVENUE LAWS) 

The Grand Jury further charges: 

143. The allegations in paragraphs 1 through 137 and 142 of this Indictment are repeated and realleged as though fully set forth herein. 

144. From at least in or about 2002 up through and including in or about 2011, in the Southern District of New York and elsewhere, MICHAEL BERLINKA, the defendant, did corruptly obstruct and impede, and endeavor to obstruct and impede, the due administration of the Internal Revenue Laws, to wit, BERLINKA engaged in a corrupt endeavor to, among other things, conceal from the IRS undeclared accounts owned by U.S. taxpayers at Wegelin.

JAT Comments:

1. The standard charge for indictments of offshore bank account enablers has been a conspiracy charge -- both offense and defraud / Klein conspiracy.  When a plea is obtained, it is for conspiracy.  Raoul Weil's recent trial was for a single count of conspiracy.  (Readers will recall that Weil was acquitted.  See Raoul Weil Found Not Guilty (Federal Tax Crimes Blog 11/3/14; 11/6/14), here.
2. The role or goal of the additional tax obstruction charge for each defendant is not clear.  The defraud / Klein conspiracy substantially overlaps tax obstruction -- both being to impair or impede the IRS.  Perhaps the goal is to protect against a jury not finding a conspiracy.  One of the implications of the Weil acquittal might be that the culpable low level actors were not part of a conspiracy but were rather lone-wolf actors.  The obstruction charge could thus permit acquittal on the conspiracy charge but guilt on the obstruction charge.  (That may not have worked in the Weil case, had it been charged, because it appears that he was not close enough to the action to be charged without conspiracy either as a separate offense or as the nexus for Pinkerton liability for the substantive tax obstruction crime.)
3. In the same vein, it would seem likely that tax obstruction could be charged along with a defraud / Klein conspiracy in every case.  Even if there might be instances where the defraud / Klein conspiracy could be charged where tax obstruction could not, I  suspect that in the cases that DOJ Tax would actually charge, there would be sufficient overt acts of  the conspiracy (elements of the crime) that would make a tax obstruction charge appropriate for the individuals committing the acts and for other members of the conspiracy under the Pinkerton doctrine.  See Pinkerton v. United States, 328 U.S. 640 1946), here.  For further discussion of the issue, see The Intersection of Conspiracy and Tax Obstruction (7212(a)) (Federal Tax Crimes Blogt 1/16/14), here; and Tax Obstruction Crimes -- Section 7212 and Klein Conspiracy (Federal Tax Crimes Blog 5/26/11), here.
4. If the jury were to return a verdict of guilt as to each on both counts in which each is named, the sentences could be up to 5 years for the conspiracy and 3 years for tax obstruction, or 8 years total.  It is not likely that these actors would draw a sentence in excess of 3 years, so obtaining a double conviction would not seem to be the ultimate goal of charging both.  Perhaps it would permit the Government appear to make an illusory concession in a plea setting by dropping one count.
5. It looks like Keller's trial may be teed up first without Berlinka and Frei who apparently remain in Switzerland, outside the scope of treaties that would permit the U.S. to extradite.