Special Counsel Opposes Motion to Dismiss FBAR Count as Untimely Because of Secret 18 USC 3292 Order (5/15/18)

Paul Manafort filed a motion to dismiss the FBAR count, Count 11 of the superseding indictment, here, in the case in E.D. Virginia, United States v. Manafort (E.D. Va. No. 1:18-cr-83 (TSE)).  The argument was the the statute of limitations prevented that count.  As described in the superseding indictment:

COUNTS 11-14: 31 U.S.C. §§ 5314 and

5322(a); 18 U.S.C. §§ 2 and 3551 et seq.

Failure To File Reports Of Foreign Bank

And Financial Accounts

Count 11 was for failure to file the FBAR for 2011, due on June 29, 2012.  The statute of limitations is 5 years (18 USC 3282(a), here), which had lapsed on June 29, 2017.  The original indictment was brought on February 13, 2018, and the superseding indictment brought on February 22, 2018.  The indictment was clearly out of time unless some special rule applied.  And it did.  As the prosecutors explained in its response to the motion, here (and Exhibit A here):

Section 3292(a)(1) of Title 18 suspends the running of the statute of limitations where the government, before the return of an indictment, applies to a court in which a grand jury is investigating the offense to suspend the running of the statute of limitations because evidence of the offense being investigated is in a foreign country. In connection with that application, the government must show, by a preponderance of the evidence, that “an official request has been made for such evidence and that it reasonably appears, or reasonably appeared at the time the request was made, that such evidence is, or was, in such foreign country.” 18 U.S.C. § 3292(a)(1). If the government is successful in making that showing, the running of the applicable statute of limitations is suspended from “the date on which the official request is made” until “the date on which the foreign court or authority takes final action,” id. § 3292(b), though the suspension may not exceed three years, id. § 3292(c).

Because the government secured a timely and valid order in this District to suspend the running of the applicable statute of limitations until at least the date on which the Superseding Indictment was returned, Manafort’s motion should be denied. On June 6, 2017, the government transmitted a request pursuant to a mutual legal assistance treaty (“MLAT”) to the Republic of Cyprus seeking, among other evidence, bank records, articles of incorporation, and witness interviews concerning certain of Manafort and Richard Gates’s bank accounts in Cyprus.  

On June 26, 2017, the government applied, ex parte, to this Court for an order pursuant to 18 U.S.C. § 3292 to suspend the applicable statute of limitations in light of the government’s MLAT request to Cyprus. This Court (Hilton, J.) granted the government’s request on June 27, 2017, thus suspending the applicable statute of limitations during the pendency of the government’s official request to Cyprus. See In Re Grand Jury Investigation, No. 14 GJ 1420 (E.D.V.A. June 27, 2017) (attached hereto as Exhibit A). As found by Judge Hilton, a grand jury impaneled in this District was conducting an investigation into, as relevant here, the flow of foreign money to Manafort, DMP International, Davis Manafort Partners, Smythson LLC, and Jesand Investment Corporation, and into subject offenses that included potential violations of 31 U.S.C. §§ 5314 and 5322(a) (Failure to File a Report of Foreign Bank Accounts). Judge Hilton further found, based on a preponderance of evidence, that evidence of such offenses was located in Cyprus and that the government had made an “official request” to Cyprus for that evidence under 18 U.S.C. § 3292(d) on June 6, 2017. Having found the requirements of Section 3292 satisfied, Judge Hilton ordered that the statute of limitations be suspended for the FBAR offenses, among others, for the period authorized by Section 3292(c). 

Because Cyprus had not taken “final action” on the government’s June 6, 2017 official request at the time the Superseding Indictment was returned, the statute of limitations remained suspended. Specifically, Cyprus produced documents in response to the government’s June 6 request on September 6, 2017; October 2, 2017; November 1, 2017; and April 30, 2018. Several of the items requested in the June 6, 2017 request remained outstanding at least until the time of the April 2018 production. For example, on December 8, 2017—before Cyprus’s most recent production—the government wrote to Cypriot authorities to renew its June 6, 2017 request (and a related request made two weeks later). The government’s December 8 letter stated that, after reviewing the records produced thus far, investigators had identified several items called for in the MLAT request that Cyprus had not produced. And Cyprus did not make a subsequent response to the government’s request until the April 30, 2018 production mentioned above. The bottom line, then, is that Cyprus had not fully satisfied the government’s official request when the original and Superseding Indictment of Manafort were returned on February 13 and 22, respectively. As a result, no “final action” had yet occurred as of the date of the operative indictments, and the applicable statute of limitations remained suspended. See United States v. Bischel, 61 F.3d 1429, 1433-34 (9th Cir. 1995) (construing “final action” to mean “a dispositive response by the foreign sovereign to both the request for records and for a certificate of authenticity of those records”); see also, e.g., United States v. Ratti, 365 F. Supp. 2d 649, 659-60 (D. Md. 2005) (following Bischel’s interpretation of Section 3292).

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.

Ex Top UBS Banker Arrested; Likely to be Extradited (10/21/13)

Raoul Weil, a fugitive from U.S. justice [Wikipedia entry here], was arrested in Italy.  See Guy Dinmore and Daniel Schäfer, Former UBS banker faces US extradition (Financial Times 10/21/13), here.  Excerpts:

A prominent Swiss asset manager is facing extradition to the US after being arrested while holidaying in Italy on charges he helped American clients with $20bn of assets to evade US taxes during his previous job at UBS. 

Police in Bologna said Raoul Weil was arrested early on Saturday after he registered at a hotel and his name appeared on a police list of international arrest warrants. Mr Weil was transferred to Bologna’s prison where the next step would be for the US authorities to request his extradition, police said. 

Under Swiss laws, a suspect has to consent to an extradition, making it all but impossible for foreign authorities to succeed with such a request. Under Italian law, however, Mr Weil could be extradited within weeks or months, according to a US official following the case.

Tax Notes Today has the following article:  Kristen A. Parillo and Andrew Velarde, Fugitive Swiss Banker Wanted by U.S. Arrested in Italy, 2013 TNT 204-3 (10/22/13).  Excerpts:\

Weil was indicted by the DOJ in 2008 for conspiring to defraud the United States by helping U.S. clients conceal taxable assets. The indictment alleged that Weil and others conspired between 2002 and 2007 to help about 17,000 Americans conceal about $20 billion in assets in Swiss bank accounts. In January 2009 Judge James Cohn of the U.S. District Court for the Southern District of Florida signed an order declaring Weil a fugitive after he failed to surrender himself to U.S. authorities. (Prior coverage 2009 TNT 10-7: News Stories.) 

Bryan C. Skarlatos of Kostelanetz & Fink LLP told Tax Analysts that the latest development highlights the DOJ's long reach. "Swiss banks, bankers, and other professionals who claim to have no connection to the U.S. still have real risks because the U.S. can and will indict them on charges of conspiring to help U.S. citizens evade U.S. tax," he said. 

Not only do Swiss banks face the prospect of paying stiff fines and potentially going out of business, but the individual bankers or professionals are effectively imprisoned in Switzerland for fear of being picked up on an international arrest warrant, Skarlatos said. "The lesson here is that the DOJ does have real leverage in forcing banks and bankers to comply with U.S. demands for information," he said, adding that this is why so many Swiss banks are considering making a voluntary disclosure to the United States under the recently announced DOJ settlement program for Swiss banks.  

* * * * 

Weil likely doesn't have a lot of settlement options given that the UBS probe is completed and other UBS bankers entered into plea deals with the DOJ, [Peter D.] Hardy said. "Perhaps there are some individuals out there that he can provide information on, but at this point I wouldn't be surprised if we saw a trial," he said. "And based on the indictment, he'd be looking at significant jail time.

Attorneys quoted in the foregoing excerpts are Bryan C. Skarlatos, here, and Peter D. Hardy, here.

JAT Comments:

Statutes of Limitations for FBAR Noncompliance Related to Tax Noncompliance (3/12/13)

A person commenting on an earlier blog asked the following question (modified slightly for clarity):

Does the statute of limitations for the FBAR penalty (both civil and criminal) toll if the taxpayer is outside the U.S.? 

I answered at least the criminal part of the question in a comment reply.  I thought the question was worthy of a blog entry to expand the reply and alert readers who may not work their way to the comment and reply.

Suspension of the FBAR Criminal Penalty Statute of Limitations

Before I answer the question, I should first state why the question may be important.  A U.S. person with a concern of criminal prosecution for FBAR violations may absent himself from the U.S. until the statute has run on the FBAR violations and thereby hope to avoid prosecution.  That person, of course, would want to become compliant prospectively upon adopting the strategy, if it worked, so that, with enough time (5 years for FBAR prosecution), the risk of FBAR prosecution would go away.

With that background, I think the direct answer is that the FBAR criminal statute of limitations would be tolled (or suspended). 18 USC 3290, here, provides simply and cryptically "No statute of limitations shall extend to any person fleeing from justice." Title 18 is the general criminal code.  The immediate question, of course, is whether  § 3290 applies to crimes outside Title 18, such as the FBAR crime codified in Title 31.   I have not researched the issue in great detail.  But I did find a case where for an immigration crime (18 USC 1326, felony re-entry), the  Second Circuit applied  § 3290.  United States v. Rivera-Ventura, 72 F.3d 277, 284 (2d Cir. 1995).  Section 3290 requires that the person be "fleeing from justice" (whether inside or outside the U.S.).  I suppose the question then is what this means.  As I say in my Federal Tax Crimes book, the “majority rule” for §  3290 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 (I suppose just the objective fact of being absent from prosecution of justice is sufficient).