Switzerland’s oldest bank was indicted back on February 02, 2012 for conspiring with U.S. taxpayers and others to hide more than $1.2 billion in secret offshore foreign banks and financial accounts and the income they generated from the IRS. It was the first time in history that an overseas bank was indicted by the United States for facilitating tax fraud by U.S. taxpayers.
In a Manhattan court room on April 24, 2012, U.S. District Judge Laura Taylor Swain for the Southern District of New York allowed the Government to seize $16 million from Wegelin’s correspondent bank account maintained with UBS AG in Stamford, Connecticut pursuant to a warrant in rem. The decision was a default judgment because Wegelin & Co. was a no show and did not send a representative to defend it.
The indictment alleges that senior management at Wegelin affirmatively decided to capture the illegal business that fled UBS in the wake of widespread news reports that the IRS was investigating UBS in efforts to obtain names of U.S. Taxpayers with undeclared foreign bank accounts. It alleges that Wegelin was undeterred by the crystal clear warnings it got when it learned that UBS was under investigation for identical practices that they planned to implement.
Three senior managers Michael Berlinka, Urs Frei, and Roger Keller were previously charged with the same conspiracy. The indictment alleges that the conspirators engaged in actions including falsely declaring that sham entities were the beneficial owners of certain accounts, when in fact the accounts were owned by U.S. taxpayers; permitting code names and numbers to be used to maintain undeclared accounts; and separating transactions into batches of checks or multiple wire transfers in amounts that were less than $10,000 to reduce the risk that the IRS would detect undeclared accounts.
The charges and allegations contained in the indictment are just accusations, and the defendants are presumed innocent unless and until proven guilty. The allegations contained in the civil forfeiture Complaint and seizure warrant are merely accusations.
At Abajian Law we believe that what transpired with Wegelin is a prime example of the United State Government’s expanding reach, ability, and authority to both criminally and civilly pursue offshore activity in a globalized world. Wegelin believed itself to be free from the jurisdiction of the United States courts because it lacked assets in the United States and deferred from doing business here. Nevertheless, Switzerland’s oldest bank was forced to disband after 271 years of business.
The silver lining is that U.S. Taxpayer assets can be repatriated legally through a new program commonly known as the 2012 OVDP (offshore voluntary disclosure program), the penalty framework requires individuals to pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure. That is up from 25 percent in the 2011 program. Some taxpayers will be eligible for 5 or 12.5 percent penalties; these remain the same in the new program as in 2011. Still others may be better off “opting out” of the program because their violations are not willful. The analysis of a taxpayer’s options is case sensitive, nuanced, and fact specific. Abajian Law, a Los Angeles tax attorney has been successful is negotiating lesser penalties in many cases.
The Government in engaged in an ongoing aggressive effort to find out the names of U.S. Taxpayers with undisclosed foreign bank accounts and assets. Proposed legislation known as FATCA can make it easier for the Government to access the names of taxpayers out of compliance. The criminal risks and civil penalties facing taxpayers that are discovered by the Government are extremely higher than the penalties under the program. The 2012 OVDP is not available to taxpayers already known to the IRS. Thus, timing of a disclosure is very important.
Vic Abajian, a former IRS tax attorney, continues to assist taxpayers with FBAR penalties and foreign asset issues before the IRS and Franchise Tax Board. He currently represents several clients with offshore bank accounts within the IRS OVDP and those that are involved in civil audits. He also represents several clients who have received grand jury subpoenas requesting information related to offshore bank accounts. To learn more about your options and how to make a voluntary disclosure of an offshore bank account (pursuant to the 2012 offshore voluntary disclosure program OVDP or otherwise), please contact Abajian Law at 818-396-5059.