One More Bank Obtains NPA under DOJ Swiss Bank Program (10/26/15)

On October 23, 2015, DOJ announced here that Piquet Galland & Cie SA has entered an NPA under the DOJ program for Swiss banks, here.  The penalties are:

Piquet Galland & Cie SA

$15.365 million

Here are key excerpts:

Piguet Galland evolved through the combination of three small, traditional Swiss private banks focused on wealth management.  In November 2003, Banque Franck SA acquired the client relationships of Banque Galland & Cie SA to become Franck Galland & Cie SA.  Until 2011, Piguet & Cie (Banque Piguet) was a separate entity, majority-owned by Banque Cantonale Vaudoise (BCV).  Between February and April 2011, BCV acquired Franck Galland from its owner, a U.S. financial group (the U.S. financial group), and then merged it with Banque Piguet (the 2011 Acquisition) to form the current entity, Piguet Galland.  BCV owns Piguet Galland. 

Piguet Galland and its predecessor banks opened, serviced and profited from accounts for U.S. taxpayers with the knowledge that some of these accountholders likely were not complying with their U.S. income tax and reporting obligations.  Piguet Galland and its predecessor banks offered a variety of traditional Swiss banking services that they knew or should have known would assist U.S. taxpayers in concealing assets and income from the Internal Revenue Service (IRS), including hold mail and code name or numbered account services. 

One particular relationship manager (RM-1) was responsible for managing many of the U.S.-related accounts at Banque Franck and later Franck Galland.  RM-1 was a member of senior management at both of those banks.  Before Aug. 1, 2008, RM-1 opened several entity and trust accounts for U.S. persons, which remained open past Aug. 1, 2008.  RM-1 was a relationship manager for at least 65 U.S.-related accounts at Piguet Galland after Aug. 1, 2008. 

RM-1 traveled regularly to the United States, mostly to attend meetings with both existing and potential U.S. clients.  Among other places, RM-1 traveled to Arizona, California, New Hampshire, New York and Wisconsin to meet both existing and potential clients.  This travel sometimes occurred at the request of the U.S. financial group that owned Franck Galland and often was in connection with trips to visit the U.S. financial group’s management.  RM-1 met with U.S. clients at hotels, clients’ clubs and other public places in the United States.  Management at Franck Galland, including its former chief executive officer, was aware of RM-1’s travel to the United States.  In fact, at least one member of Franck Galland’s Executive Committee knew that RM-1 was a U.S. person at the time he started employment. 

Franck Galland permitted two other former relationship managers to travel to the United States to meet with U.S. taxpayer-clients.  On one occasion, one of these relationship managers provided $5,000 in cash from an undeclared account held by a U.S. taxpayer-client directly to that client in the United States. 

Franck Galland had a sister entity that was also owned by the U.S. financial group.  This sister entity was a now-dissolved Cayman Island entity (the Cayman Entity).  The Cayman Entity was acquired by Piguet Galland as part of the 2011 Acquisition.  The Cayman Entity was ultimately liquidated in 2013, effective in 2014.  Prior to the 2011 Acquisition, the Cayman Entity: 

• Assisted in the opening of undeclared U.S.-related accounts at Franck Galland, sometimes through entities the Cayman Entity helped to create;
• Helped manage structures holding undeclared U.S.-related accounts at Franck Galland;
• Suggested facilitating meetings in the United States between RM-1 and undeclared U.S. taxpayer-clients with Cayman Entity accounts at Franck Galland;
• Facilitated cash withdrawals and transfers out of undeclared U.S.-related accounts at Franck Galland; and
• Served as trustee for two trusts that held U.S.-related accounts from 1995 to June 2011.

The Cayman Entity also held a subsidiary, the only purpose of which was to hold a condominium in George Town, Cayman Islands.  While the condominium was principally for use by the U.S. financial group and its management, it was also used by executives of Franck Galland and at least three of its U.S. taxpayer-clients.  The condominium was sold prior to the 2011 Acquisition. 

Banque Piguet, another predecessor to Piguet Galland, allowed some of its relationship managers to communicate with its clients, including U.S. taxpayers, through private email accounts and the email domain “4uonly.ch,” without disclosure of the communication’s origin.

Franck Galland and Banque Piguet opened and maintained undeclared accounts beneficially owned by U.S. taxpayers and held in the name of structures, some of which had cash or credit cards linked to them, while knowing, or having reason to know, that some of these structures were used by U.S. taxpayer-clients to help conceal their identities from the IRS.  Franck Galland and Banque Piguet also: 

• Accepted instructions in connection with U.S.-related accounts not to invest in U.S. securities and not to disclose the names of U.S. taxpayer-clients to U.S. tax authorities, including the IRS;
• Opened and maintained accounts for U.S. taxpayer-clients transferring from other Swiss financial institutions that were closing such accounts, while both Franck Galland and Banque Piguet knew, or had reason to know, that a portion of the accounts at the other institutions were or likely were undeclared; and
• Maintained undeclared accounts for U.S. taxpayer-clients who renounced their beneficial ownership of such accounts, or who transferred account funds to non- U.S.- related accounts, while continuing to exercise control or retain entitlement to the funds.

Throughout its participation in the Swiss Bank Program, Piguet Galland committed to providing full cooperation to the U.S. government.  Among other things, Piguet Galland provided a list of the names and functions of individuals who structured, operated or supervised the cross-border business at Franck Galland, Banque Piguet and Piguet Galland. 

Since Aug. 1, 2008, Piguet Galland and its predecessor banks held 337 U.S.-related accounts, with aggregate assets under management of $441 million.  Piguet Galland will pay a penalty of $15.365 million. 

While U.S. accountholders at Piguet Galland who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.  

Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts.  On Aug. 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement.  With today’s announcement of this non-prosecution agreement, noncompliant U.S. accountholders at Piguet Galland must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

The bank will be added to the IRS's Foreign Financial Institutions or Facilitators, here.  As indicated in the last quoted paragraph, accountholders in the listed banks joining OVDP after one of their banks are listed will be subject to the 50% penalty in OVDP (provided that they do not opt out, in which case, who knows).

Here are the updated statistics for the Swiss Bank Program:

US DOJ Swiss Bank Program	Number	Number Resolved	Total Costs
U.S. / Swiss Bank Initiative Category 1 (Criminal Inv.) *	17	5	$3,470,550,000
U.S. / Swiss Bank Initiative Category 2 **	83	43	$380,577,990
U.S. / Swiss Bank Initiative Category 3	14		$0
U.S. / Swiss Bank Initiative Category 4	8		$0
Swiss Bank Program Results	122		$3,851,127,990
* Includes subsidiary or related entities counted as separate entities, so the numbers may exceed the numbers the IRS and DOJ posted numbers which combine some of the entities.
** DOJ says original total was 106 but that it expects about 80 to complete the process.