Impact of Credit Suisse Guilty Plea on Resolution of Other Swiss Bank U.S. Tax Issues (5/21/14)

A Swiss web report has a good discussion of comments from various parts of the Swiss bank community regarding the effect of the Credit Suisse guilty plea.  Credit Suisse Deal Seen Paving Way for Swiss Banks to Settle (swissinfo.ch 5/210/14), here.  Excerpts that caught my attention are:

The Department of Justice reached the [Credit Suisse] deal after years investigating more than a dozen Swiss firms, including Julius Baer Group Ltd., the nation’s third-largest wealth manager. Many of the companies are close to settlements, said Andreas Brun, an analyst with Zuercher Kantonalbank in Zurich. 

“I expect resolutions in the next couple of weeks,” he said. 

* * * * 

'Speedy Resolution’ 

Julius Baer, which had 264 billion francs ($296 billion) of client assets worldwide at the end of April, may achieve a better deal than Credit Suisse as it has no business operations in the U.S.
“I can now see Julius Baer settling rapidly as well,” said Alevizos Alevizakos, a London-based analyst with Mediobanca SpA. In this bank’s case, four analysts polled by Bloomberg News estimated fines ranging from 400 million francs to 2 billion francs. 

Julius Baer dropped 0.8 percent to 39.4 francs as of 3:21 p.m. in Zurich today, extending the stock’s decline this year to 9 percent. 

“Removing the overhang of these tax disputes will be beneficial for any Category 1 bank,” Alevizakos said, using a Justice Department term for Swiss banks under investigation before it opened a voluntary disclosure program. “A speedy resolution in the coming weeks or months would be marginally positive for Julius Baer.” 

* * * *

A Swiss Bank Related Sentencing (10/8/13)

On October 4, 2013, Pius Kampfen was sentenced.  See prior blog on the plea agreement: Julius Baer Retired Banker Pleads to FBAR Crime (Federal Tax Crimes Blog 6/28/13), here.  The key documents are listed, with links at the end of this blog.  However, the plea agreement itself is under seal.

Key details:

Defendant:  Pius Kampfen
Age: 69
Count of Conviction (By Plea):  FBAR (1)
Banks: Pictet & Cie, ABN-AMRO, Bank Vontobel
Tax loss:  $1,394 (D calculation); $4,945 (Govt calculation)
Restitution: To be determined in later hearing
FBAR Penalty: $1,465,392 (derived from forfeiture and prior plea agreement; already paid)
High Balance:  $2,930,785. (derived from FBAR penalty at 50%)
Sentence - Incarceration:  0 months (Govt recommended 6 months)
Sentence - Home confinement:  6 months
Probation - 2 years.
Fine: $20,000
Court: ND CA
Judge Jon Tigar (Wikipedia entry here)

Here are the relevant documents:

• 20130926 Kampfen Opening Sentencing Memo, here.
• 20130926 Kampfen's Statement with Sentencing Memo, here.
• 20130927 Government Sentencing Memo, here.
• 20131001 Kampfen Response to Govt Sentencing Memo, here.
• 20131001Kampfen Corrections (Exh to Response), here.
• 20131004 Kampfen Sentencing Judgment, here.
• 20131004Kampfen Sealing Order, here.
• 20131004Kampfen Sentencing Minutes, here.

With the indicated tax loss, and the reference to the tax loss table for setting the base offense level, the sentence seems to be not out of line with other sentences.  But, I wonder why the Government would have prosecuted the case with such a small tax loss.  Certainly, probably his role as a Swiss banker himself (working for Julius Baer) probably was in the mix.  Also, the following stuck out to me from the Govt Sentencing Memo:

Convictions of U.S. Persons Related to UBS and Pictet Accounts (4/12/13)

DOJ Tax has this press release titled Arizona Businessmen and California Attorney Convicted for Hiding Millions in Secret Foreign Bank Accounts at UBS AG and Pictet & Cie (DOJ Tax 4/12/13), here.

Defendants:  Stephen M. Kerr and Michael Quiel
Conviction: by jury verdict
Counts of Conviction:  Tax Perjury (2 counts); FBAR (Kerr only, 2 counts).
Court:
Judge:

Pior conviction by plea:  Christopher M. Rusch - conspiracy (1 count) and FBAR (1 count) on 2/6/13

Key excerpts:

According to the evidence presented at trial, Kerr and Quiel, with the assistance of Rusch and others, including Swiss nationals, established nominee foreign entities and corresponding bank accounts at UBS AG and Pictet & Cie to conceal Kerr and Quiel’s ownership and control of stock and income that were deposited into these accounts. Rusch testified at trial, admitting that he and others caused the sale of the shares of stock through the undeclared accounts . Kerr also hired Rusch to facilitate the domestic sale of 11.4 million shares of stock held in the name of a foreign entity controlled by Kerr and to transfer the proceeds from the sale of the stock to an undeclared foreign account at UBS AG to conceal that the money was income to Kerr that should have been reported on his tax returns.

The evidence established that in order to create a further layer of separation between Kerr and Quiel and the income they concealed in the undeclared foreign accounts, they directed Rusch to transfer some of the money in the undeclared accounts back to the United States through Rusch’s Interest on Lawyer’s Trust Account (IOLTA) before dispersing the money for Kerr and Quiel’s benefit. Rusch transferred approximately $2,000,000 through his IOLTA account so that Kerr could purchase a golf course in Erie, Colo.  Additionally, after transferring approximately $955,000 from Quiel’s undeclared foreign accounts to his IOLTA account, at Quiel’s direction, Rusch wrote checks payable to an Arizona bank account owned and controlled by Quiel. 

According to trial evidence, Kerr and Quiel filed false tax returns with the IRS that failed to report the proceeds of stock sales, interest and dividend income earned through the secret accounts, and further failed to report that they had a financial interest in bank accounts located in Switzerland. Kerr also failed to file FBARs in 2007 and 2008 that reported his offshore accounts to the IRS.  Accountants for Kerr and Quiel testified that neither Kerr nor Quiel disclosed the existence of their offshore accounts in Switzerland during the preparation of their tax returns.

Swiss Bank Pictet & Cie On DOJ Tax Radar Screen (11/27/12)

The news services report that the Justice Department is investigating Swiss bank Pictet & Cie.   See U.S. justice department probes Swiss bank Pictet (Reuters 11/25/12), here.  This should not be news to anyone paying attention to the unfolding events.

The introductory bullet points in the article are:

• Pictet says will cooperate with U.S. justice
• Pictet says business with U.S. clients complies with law
• Bank had already handed over account data
• Swiss seeking deal to get investigations dropped

The following is from a Tax Notes Today article, Kristen A. Parillo, Swiss Bank Pictet Under Investigation by Justice Department, 2012 TNT 228-3 (11/27/12)

Swiss Bank Pictet Turns Over U.S. Client Data (5/8/12)

Swiss bank Pictet & Cie, here, is reportedly swept up in the milieu, although it was not one of the 11 banks previously in the IRS's cross-hairs.  See Swiss bank Pictet gave data to U.S. in tax probe (Reuters 5/6/12), here.  Pictet, of course, had U.S. clients all along, but had a much lower profile than other Swiss banks.  As reported in the article the particular accounts in issue were accounts transferred to Pictet from UBS after UBS was targeted by the IRS. According to the article, Pictet turned over the information to the IRS in November 2010 pursuant to a treaty request.  Pictet says it is not targeted by the IRS..

It is not clear whether Pictet disclosed U.S. customers than the two mentioned in the article.  There were others.

Pictet is the unidentified Swiss Bank A in the indictment of Messrs. Kerr, Quiel and Rusch, which I previously discussed in the blog entitled 2 Taxpayers and their U.S. Lawyer Indicted re Foreign Accounts (2/1/12), here.  I don't know if the disclosure of documents discussed in the article relates to any of those individuals or not.

2 Taxpayers and their U.S. Lawyer Indicted re Foreign Accounts (2/1/12)

Three individuals -- two U.S. taxpayer clients and their U.S. lawyer -- have been indicted for illegality relating to their tax reporting and FBAR obligations. See DOJ Tax press release here; the indictment is here.

The bullet points are:

Taxpayer Defendants:  Stephen M. Kerr and Michael Quiel
Enabler Defendant:  Christopher M. Rusch (a U.S. lawyer whose website is here, who in addition to enabling allegedly failed to meet his own obligations.

Banks : UBS, "Swiss Bank A" (described as a partnership and one of Switzerland's larged private banks; subsequently identified as Pictet & Cie, here), "Panamanian Bank A"

Other Players:  "Financial Intermediary A," a Swiss investment management firm; "Financial Intermediary B," an independent Swiss wealth management company; "Account Manager," a Swiss national and managing director of Financial Intermediary A and long-time friend of Rusch; Red Rock Investment AG, a nominee Swiss entity for Kerr's benefit; Swiss Fidelity Investment AG, a nominee Swiss entity for Kerr's benefit; Cyril Capital, LLC, a nonminee St. Kitts & Nevis entity for Kerr's benefit; Legacy Asset Management AG, a nominee Swiss entity for Quiel's benefit; Swiss International Trust Company AG, a nominee Swiss entity for Quiel's benefit; Worldnet Corporate Services, S.A., a nominee Panamanian entity with bearer shares controlled by Rusch; and Attorney Trust Corp, A.G., a nominee entity controlled by Rusch.  Not surprisingly, the creation nominee companies is alleged as "Overt Acts" of the conspiracy.

Entities: Yes

Charges:  One count of conspiracy; two counts 7206(1) (tax perjury) for  Kerr and Quiel for the 2007 and 2008 returns; and two  failure to report undeclared accounts on FBARs for Kerr and Quiel.  (The only charge for Rusch is the conspiracy count; it is interesting that Rusch was not charged under the derivative liability provisions for the substantive crimes, such as aiding and abetting them or under Pinkerton liabiltity).