US Government Indicts 3 Swiss Bankers

On January 3, 2011, the U.S. Department of Justice and US Attorney for the Southern District of New York announced the indictment of three Swiss bankers, who worked with Wegelin bank in Switzerland. See below for the press release. According to the indictment and DOJ press release,  the three defendants conspired with U.S. taxpayers and others to hide more than $1.2 billion in assets from the IRS in undeclared accounts of U.S. taxpayers at Bank A, which media sources report as Wegelin.

The indictment alleges that the three defendants opened and serviced dozens of undeclared accounts for U.S. taxpayers in 2008 and 2009, in an effort to capture business lost by UBS AG and another Swiss bank in the wake of widespread news reports that the IRS was investigating UBS for helping U.S. taxpayers evade taxes and hide assets in Swiss bank accounts.

Among the activities the defendants performed in further of the conspiracy were allegedly:  (1) telling various U.S. taxpayer-clients that their undeclared accounts at Wegelin would not be disclosed to the U.S. authorities due to its long tradition of bank secrecy; (2) opening and servicing undeclared accounts for U.S. taxpayer-clients in the names of sham corporations and foundations formed under the laws of Liechtenstein, Panama, Hong Kong, and other jurisdictions for the purpose of concealing the identities of the U.S. taxpayer-clients from the IRS; receiving and retaining at Wegelin documents that falsely declared that the sham entities were the beneficial owners of certain accounts, when in fact, U.S. taxpayers owned them; (3) allowing certain U.S. taxpayer-clients to open and maintain undeclared accounts at Wegelin using code names and numbers to minimize references to the actual names of the U.S. taxpayers on Swiss bank documents; (4) ensuring that account statements and other mail for U.S. taxpayer-clients were not mailed to them in the U.S.; and (5) sometimes communicating with U.S. taxpayer-clients using their personal email accounts to reduce the risk of detection by law enforcement.

Wegelin is reportedly one of the eleven Swiss banks under criminal investigation for its role in U.S. tax crimes.  The U.S. government is reportedly trying to make a settlement, similar to the one it made with UBS:  the Swiss banks agree to turn over all the information on the U.S. clients in agreement for some type of deferred prosecution, whereby the U.S. government agrees not to prosecute.  In addition, the Swiss banks would presumably agree to pay fines and penalties, disgorgement of profits, and undertake compliance activities subject perhaps to an independent monitor.  The Swiss government is participating in the settlement discussions and is trying to arrange non-prosecution for the bankers.  The new prosecution and prior ones may make this non-prosecution of the bankers' goal more difficult.

 

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