Swiss bankers in the news-

  1. Former UBS Swiss banker Bradley Birkenfeld’s record-breaking $104 million dollar IRS whistleblower award is analyzed by Swiss fume at U.S. “hypocrisy” over whistleblower’s payout; and at the National Whistleblower Center’s website.
  2. The August 27, 2012 article Julius Baer Says Employee Stole German Offshore Client Data noted that “U.S. and European authorities are analyzing information from thieves, whistle-blowers and client disclosures to probe the alleged role of Swiss banks in fostering tax evasion by wealthy customers.”  As a Reuters article implied, this suspected theft could involve the sale of whistleblower tips by a Swiss banker to tax investigators from the German state of North-Rhine Westphalia.
  3. Credit Suisse Bankers in U.S. Tax Probe Said to Seek Dismissal of Charges published November 21, 2011, discussed the Swiss bankers indicted for supposedly helping US taxpayers hide assets during tax frauds.  The Court’s docket report related to that case, seems to show that these bankers are still the subjects of unexecuted arrest warrants:

Copyright 2012 Fred L. Abrams

As a FAQ webpage demonstrates, qualified intermediary withholding agreements, (“qi agreements”), with the IRS can obilgate foreign financial institutions to withhold tax monies and report about a U.S. taxpayer’s offshore financial account.  The qi agreement between the IRS and UBS AG played a critical role in the UBS John Doe summons case.  A February 6, 2009 declaration filed in the case, revealed UBS failed to supply information about U.S. taxpayers with secret Swiss bank accounts, despite UBS’ qi agreement with the IRS.

The declaration asserted that the IRS sought the Swiss bank account information through alternative means, by serving its John Doe summons upon UBS.  UBS’ qi agreement has also been a substantial element in at least four other U.S. lawsuits:  Olenicoff, et al. v. UBS AG, et al., No. SACV08-01029 AG (RNBx) (C.D. Cal.), Thomas, et al. v. UBS AG, No. 1:11-cv-4798 (N.D. II), LeBars,  et al. v. UBS AG, No. 2:12-cv-00424-MPK (W.D. Pa.), and Roberts et al. v. UBS AG et. al, No. 1:12-cv-00724-LJO-SKO (E.D. Cal.).

These lawsuits asserted claims against UBS sounding in fraud, disgorgement, breach of fiduciary duty, malpractice and breach of contract; and were filed by U.S. taxpayers seemingly penalized for not disclosing their UBS Swiss financial accounts to the IRS.  Among other things, the taxpayers argued they sustained the IRS penalties because UBS supposedly failed under its qi agreement to advise about the tax reporting requirements.

Only the LeBars and Roberts cases are however, still pending.  On April 10, 2012, the Court dismissed the Olenicoff lawsuit against UBS, partly because the qi agreement between UBS and the IRS “had no bearing on UBS’ duties to Olenicoff”.  The Thomas lawsuit was too dismissed by the Court which explained at its June 21, 12 Opinion & Order, that UBS owed no duty to the taxpayers, under the qi agreement.

Copyright 2012 Fred L. Abrams

Hiding assets in secret foreign bank accounts:

  1. On July 20, 2012, the  U.S. Court of Appeals for the Fourth Circuit, issued its decision in USA v. J. Bryan Williams, Opinion 102230.U.  The decision concentrated on former senior Mobil Corp executive Bryan Williams, who earlier applied two Swiss bank accounts to hide $7 million from the IRS.  The July 20th decsion discusses the IRS’s right to collect civil penalties against U.S. taxpayers who fail to file a TDF 90-22.1, Report of Foreign Bank and Financial Accounts (“FBAR form”).
  2. Similar to Mr. Williams, Greendale, Wis. neurosurgeon Arvind Ahuja failed to file the required FBAR form.  An August 23rd press relase announced that Dr. Ahuja was convicted of tax fraud / maintaining secret HSBC India bank accounts in India and the Balliwick of Jersey.  According to a September 27, 2011 superseding indictment, two bankers at a now closed HSBC India office in New York City, conspired with Dr. Ahuja to facilitate the tax fraud.  An alleged interview memorandum regarding a former employee of another HSBC India office, was also part of Mr. Ahuja’s case.  The memorandum was written by an IRS Criminal Investigation Special Agent.  Its 22nd paragraph suggests that HSBC India customers in the U.S. were able to access their offshore account balances via “print screen[s]”, (i.e. screen shots), e-mailed by HSBC India employees:

(Click On The Image Above, To Read The Memo)

 

Copyright 2012 Fred Abrams

Attorney Jack Blum’s law practice focuses on whistleblower representation, anti-money laundering compliance, international tax evasion and the representation of victims of financial crime and fraud.  He has been an expert witness for the U.S. Department of Justice and the Internal Revenue Service.  Mr. Blum additionally served as associate counsel, or assistant counsel, or special counsel to three U.S. Senate committees or subcommittees; and been quoted by or mentioned in thousands of newspaper and magazine articles around the world.

Since he resigned at the end of 2008,  as “Of Counsel” to Baker & Hostetler’s Washington, DC office, Mr. Blum practices part-time for a select group of clients.  Two of Mr. Blum’s clients are whistleblowers Rudolf Elmer and Heinrich Kieber.  As described by “Swiss Banker Blows Whistle on Tax Evasion”, Mr. Elmer provided tips to the IRS, a U.S. Senate subcommittee and the Manhattan District Attorney’s Office, about suspected tax cheats with offshore bank accounts.  At a January 17, 2011 Frontline Club Press Conference, Mr. Elmer also supplied WikiLeaks with this same kind of information.

Mr. Elmer’s whistleblowing ultimately led to his criminal prosecution by Swiss authorities, on charges that he violated Swiss bank secrecy law.  Although not a Swiss banker like Mr. Elmer, Heinrich Kieber was a computer specialist for Liechtenstein’s private banking and asset management firm, the LGT Group.  Mr. Kieber became a whistleblower by handing domestic tax authorities data concerning suspected tax cheats who maintained offshore bank accounts at LGT.  As mentioned by the 2008 article “ Tax Whistleblower Sold Data to the US ”, German authorities paid Mr. Kieber nearly $7.4 million for this data and put him in a witness protection program.

At the same time, authorities in Liechtenstein accused Mr. Kieber of stealing the data from LGT Group and Interpol issued a red notice, (i.e. an international arrest warrant), for him.  A Time.com post even reported that some said there was a $10 million bounty on Mr. Kieber’s head.  Mr. Blum will be discussing these cases at the September 27th NYC Bar Association program “The Ins & Outs Of Recovering Assets Via Whistleblowers & Other Tipsters”.  During the  program, Mr. Blum will emphasize that attorneys must counsel their whistleblower clients of the risks of blowing the whistle.

(Last Edited September 2, 2012)

Copyright 2012 Fred L. Abrams

A money laundering investigation and a Turkish letter rogatory:

(To Read The Letter Rogatory, Click Above)

 

¹The letter rogatory has been sanitized for privacy reasons.

Copyright 2012 Fred L. Abrams

Reporter Lynnley Browning’s 2009 article “Names Deal Cracks Swiss Bank Secrecy” mentioned the settlement of the UBS John Doe Summons case.  Pursuant to that settlement, UBS supplied the IRS with the names of about 4,450 suspected U.S. tax cheats alleged to have opened secret Swiss bank accounts.  The settlement was reached through two agreements, one of which is available here:

(Click On The Image)

A June 27, 2012 press release announced what could be another blow to Swiss bank secrecy law.  As this press release explains, the Swiss will soon permit their financial intelligence unit MROS, to fully participate in information sharing with Egmont Group financial intelligence units across the globe.  This means that during an investigation of money laundering or other suspicious financial activity, the financial intelligence units could share information about Swiss bank accounts despite Swiss bank secrecy laws.

Copyright 2012 Fred L. Abrams

Peter Madoff’s $4 million dollar co-op and the effort to recover assets from Peregrine Financial Group, Inc.

  1. The NYC Park Avenue co-op which belonged to Bernard Madoff’s younger brother Peter, has just been listed for sale.  The $4 million dollar co-op is being sold as part of the asset forfeiture agreement connected to Peter Madoff’s June 29th guilty plea on securities fraud, tax fraud conspiracy and additional charges.
  2. As set forth at a press release, the U.S. Commodity Futures Trading Commission filed a July 10, 2012 civil complaint in U.S Commodity Futures Trading Commission v. Peregrine Financial Group, Inc., et. al., Index No. 12-cv-05383.  A July 17th order then appointed a temporary receiver in the case, with authority over assets beneficially owned by Peregrine’s founder, Russell R. Wasendorf, Sr.  To help recover assets, the order authorizes the receiver to hire former employees of Wasendorf Sr. or his companies.  Pages 5-6  ¶ I of the order indicates that these employees include a chief financial officer, a head pilot and the manager of My Verona, LLC, which is a restaurant:

Copyright 2012 Fred L. Abrams

Letters rogatory can be an invaluable tool for detecting assets concealed in multiple jurisdictions.  They may be utilized to gather competent evidence from foreign financial institutions and a variety of  witnesses residing offshore.  “Asset Search Tips For Divorce & Child Support Cases” talked about detecting assets by employing letters rogatory.  That post said:

“Many times a letter rogatory is sought pursuant to The Hague Convention, Taking of Evidence (1970) No. 20, as a “letter of request”.  Furthermore, a New York Court may issue such a request to a foreign court as mentioned by Fed. R. Civ. P. 28 (b); Fed. R. Civ. P. 4(f)(2)(B); and/or the N.Y. Civ. Prac. L & R:

Rule 3108. Written questions; when permitted. A deposition may be taken on written questions when the examining party and the deponent so stipulate or when the testimony is to be taken without the state. A commission or letters rogatory may be issued where necessary or convenient for the taking of a deposition outside of the state.”

28 U.S.C. § 1782 (a) additionally discusses letters rogatory and permits the Court to execute them in the U.S. on behalf of foreign or international tribunals.  The letter rogatory reproduced below seeks evidence  pursuant to 28 U.S.C. § 1782, from witnesses residing in Delaware.  The letter rogatory originates from prosecutors in Hungary and was filed in Delaware Federal Court on April 2, 2012.  It is geared toward tracking assets connected to a suspected embezzlement scheme with alleged elements in Hungary, Washington, D.C., New York and Delaware.

(Click On The Image To Read The Letter Rogatory)

Copyright 2012 Fred L. Abrams

The Holocaust-era assets of Hungarian Jews and the arrest of CEO Raymond Bitar:

  • A supplemental amicus curiae brief filed in Kiobel v. Royal Dutch Petroleum, U.S. Supreme Court, Docket No. 10-1491, mentions that according to the  Republic of Hungary, 500,000 Jews were killed during the Hungarian Holocaust.  The brief filed on behalf of the Hungarian Jewish victims, mentions how Jewish assets were frozen at banks; and that from April to December 1944, these victims were transported by train to Auschwitz and other concentration camps.  Page 1 of the brief also notes that “[t]o this date, these assets have not been returned nor has any compensation been paid for their taking.”  The brief can be reviewed by clicking here.
  • As Bloomberg.com and Wall Street Journal articles reveal, CEO Raymond Bitar of the Full Tilt Poker Internet gambling business, was arrested on July 2nd.  An indictment was first filed against Mr. Bitar on March 10, 2011, for alleged violations of gambling, bank fraud and money laundering laws.  A press release states that an eleven-count superseding indictment accusing Mr. Bitar of running a Ponzi scheme, was also unsealed on July 2nd.  The press release quotes an FBI official saying: ‘The on-line casino became an Internet Ponzi scheme.‘

Copyright 2012 Fred L. Abrams

Prosecutors handling financial fraud cases have long known that a foreign bank supplied with a compelled authorization or consent form, will sometimes release confidential bank records.  The prosecutors first seek a judicial direction requiring the bank signatory of the foreign bank account to execute the authorization form.

After the bank signatory executes this form, the prosecutors send it to the foreign bank witness, who might then release the requested bank records.  These forms can sometimes be used successfully as a countermeasure to bank secrecy or blocking laws in foreign jurisdictions.

Furthermore, the U.S. Supreme Court upheld the use of compelled authorization forms, as early as its decision in Doe v. United States, 487 U.S. 201, 108 S.Ct. 2341, 101 L.Ed.2d 184 (1988) (Fifth Amendment privilege against self-incrimination not violated by compelled authorization form).

Compelled authorization forms meanwhile, can be used in a variety of cases in which assets are hidden.  Below is a basic example of such a form, (sanitized and changed for privacy reasons), from one particular divorce proceeding:

Copyright 2012-2018 Fred L. Abrams