U.S. Court Enters Final Forfeiture Order for over $16Million of Wegelin Correspondent U.S. Account

On April 24, 2012, Preet Bharara, the United States Attorney for the Southern District of New York, announced  that U.S. District Judge Laura Taylor Swain entered a default judgment and final order of forfeiture for over $16 million seized from the U.S. correspondent account of Wegelin & Co., a Swiss private bank.  The funds will be deposited in the Treasury Forfeiture Fund. 

WEGELIN was indicted in February, 2012 for conspiring with U.S. taxpayers and others to hide more than $1.2 billion in secret accounts and the income they generated from the IRS.  This was the first time an overseas bank was indicted by the United States for allegedly facilitating tax fraud by U.S. taxpayers.  U.S. District Judge Jed S. Rakoff is presiding over the case.

On the same day that WEGELIN was indicted, the Government filed an in rem forfeiture complaint (the “Complaint”) against the funds in WEGELIN’s correspondent account here in the United States, which was maintained at UBS AG in Stamford, Connecticut (the “Stamford Account”).  The Government seized all funds in the Stamford Account – more than $16 million – pursuant to an arrest warrant in rem.  According to the Complaint, WEGELIN and at least two other Swiss banks used the Stamford Account and the funds therein to covertly launder funds held in undeclared accounts in Switzerland so that their U.S. taxpayer-customers could get access to their funds without being detected by U.S. authorities, thereby continuing to avoid paying taxes owed and due to the IRS. WEGELIN was provided notice of this forfeiture action, but did not file a claim to challenge the forfeiture of the funds in the Stamford Account.

The use of in rem forfeiture simultaneous with a criminal indictment for tax violations is not so common.  It indicates the growing convergence between tax law and other areas of law (e.g., forfeiture).

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