Federal Criminal Defense Blog : Georgia Federal Criminal Defense Lawyer & Attorney : Gillen Withers & Lake Law Firm : White Collar Crime, RICO, Trial : Atlanta, Savannah, GA

We knew it was coming, but Bloomberg reports today that Switzerland's Federal Tax Administration has said that it expects to deliver account data on almost 4,450 U.S. clients of UBS AG to the IRS in exchange for the IRS' withdrawal of a "John Doe" summons served on UBS and accompanying lawsuit. The IRS had sought information on approximately 52,000 UBS accounts, however the agency and UBS entered into a settlement in August 2009 in which UBS would provide information on 4,450 accounts. UBS also paid the U.S. government $780 million as part of the settlement. UBS was alleged to have aided wealthy U.S. citizens in evading taxes from 2000 to 2007.

The article notes that, since February 2009, the Justice Department has filed criminal tax charges against 17 U.S. clients of UBS clients, two UBS bankers and three others accused of aiding tax evasion.

And in Georgia tax news, the government has sued two tax preparers in Cobb County, Georgia, seeking to put them out of business, according to a press release. A complaint was filed in the U.S. District Court for the Northern District of Georgia against Christopher Musyoki, Samuel Nganga and Musyoki’s tax preparation business, Simba Consultants Inc., alleging that the defendants allegedly underreported their customers' income on tax returns and made false claims for earned income credits, child tax credits and fuel tax credits.

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As reported in the South Florida Business Journal, Lewis B. Freeman, one of the best-known forensic accountants in South Florida was indicted yesterday in the U.S. District Court for the Southern District of Florida on charges of conspiracy to commit mail fraud. Freeman is alleged to have misappropriated funds from fiduciary accounts from 2000 through 2009 by writing checks to himself and his firm, Lewis B. Freeman & Partners, and depositing the funds into the firm's operating account. Freeman is alleged to have misappropriated some $6 million in funds by writing approximately 162 unauthorized checks and using the proceeds to support a lavish lifestyle.

Freeman put his firm into receivership last fall during the federal criminal investigation. The firm previously did millions of dollars in business. The government alleges that out of the $6 million misappropriated, some $2.6 million of clients' monies were lost. Freeman, oddly, worked routinely as an expert for the court in liquidating the assets of companies. According to Freeman's counsel, he turned himself in and is cooperating with authorities. His counsel have stated that he made "serious mistakes," and will "accept the consequences for his actions.” 

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Trevor Cook was 37 year-old Minneapolis, Minnesota-based investment advisor. He is alleged to have defrauded investors of at least $130 million. U.S. District Judge Michael Davis found Cook in contempt of an order by the Court requiring Cook and his associates to turn in investor assets to a receiver, according to an article in the Minneapolis Star-Tribune. Cook invoked his Fifth Amendment privilege against self-incrimination in response to questions regarding money, assets and offshore accounts. U.S. Marshals took Cook into custody yesterday. The Court ordered Cook to remain incarcerated until he cooperates with the receiver and surrenders monies and assets, including a houseboat and a submarine. Cook is also ordered to assist in the recovery of a computer and other records.

Cook pitched currency investments to investors. The alleged scheme was promoted by Cook and Pat Kiley in a widely broadcast radio program called "Follow the Money." Cook used a vast array of business entities and bank accounts to funnel monies from investors, including eight accounts in the U.S. and 19 foreign accounts in a dozen countries. The structuring of the transactions and the fact that some of the foreign accounts are in countries noted for being bank secrecy havens has made the monies difficult to locate. Cook has not yet been indicted.

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The Federal government is building criminal cases against more than 150 U.S. citizens holding overseas bank accounts with Union Bank of Switzerland (UBS), as reported by Reuters and the Banking Times. The criminal investigations are part of a Federal crackdown on tax evasion by means of overseas accounts and were facilitated by a settlement between U.S. and Swiss authorities earlier this month in which Switzerland agreed to disclose the identities of some 5,000 U.S. citizen account holders, contrary to Switzerland's longstanding tradition of banking secrecy. UBS has already settled charges that it assisted U.S. customers in evading taxes for $780 million.

As the IRS states on its website, under the agreement, the IRS will receive information on accounts of various amounts and types, including bank-only accounts, custody accounts in which securities or other investment assets were held and offshore company nominee accounts through which an individual indirectly held beneficial ownership in the accounts. UBS will give account holders notice if information relating to the acocunt holders is included in the IRS treaty request. "Information provided to the IRS through this process will be thoroughly examined for all potential civil and criminal tax violations." "The IRS will also recommend criminal prosecution in those cases where the facts warrant such an action."

Four U.S. clients of UBS, three in Florida and one in California, are already being prosecuted based on the information provided by UBS. And the number of investigations and prosecutions are expected to grow. In a press release,Tax Commissioner Doug Shulman claimed that the U.S./Swiss agreement "puts in place an apparatus for the IRS to obtain information on thousands of offshore accounts. Further the Swiss government is prepared to work with us regarding similar U.S. requests, if any, involving other financial institutions." U.S. and Swiss authorities are reportedly negotiating for the disclosure of thousands of additional names of U.S. account holders. Commissioner Shulman stated that international tax evasion is a "top priority."

Commissioner Shulman stated that the IRS has set a "voluntary disclosure" deadline of September 23, 2009, for UBS customers with unreported, offshore income, and advised persons to contact a tax professional. Customers receiving notification from the bank may come forward under the voluntary disclosure program--however "once the Swiss government sends [the IRS] the name, all bets are off." UBS customers with any reason for concern should strongly consider promptly contacting tax and legal professionals.

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As reported by the International Business Times and Reuters, the U.S. and Switzerland entered an agreement last week under which UBS, Union Bank of Switzerland, would disclose the identities of approximately 4,500 to 5,000 holders of secret Swiss bank accounts.

The Internal Revenue Service had filed suit against UBS in February in the U.S. District Court for the Southern District of Florida, accusing UBS of aiding and abetting U.S. citizens in tax evasion and demanding disclosure of the identities of approximately 52,000 U.S. citizens who hold Swiss accounts, upon which the Swiss government ordered UBS to disclose the identities of 250 account holders, bypassing UBS' customer appeal process, in order to settle criminal charges. UBS also paid the U.S. a $780 million fine. The Swiss People's Party has called the U.S. government's actions "blackmail." However, after negotiations with the U.S., the Swiss government held an extraordinary special session last Monday to discuss settlement of the case.

The agreement between the U.S. and Switzerland will supposedly leave Switzerland's banking secrecy intact and UBS will not have to pay a fine. However, under the terms of the agreement, Switzerland is obliged to assist the U.S. if the U.S. seeks its help in a criminal investigation. Swiss accounts below a certain size will not have to be reported, however the precise limit will be kept confidential, leaving account holders without notice as to whether they might be vulnerable. Account holders threatened with disclosure would, however, be able to challenge disclosure in Swiss courts. The U.S. government supposedly backed off its original demands because the U.S. Treasury did not want to cause UBS to fail.

The total amount of fines which the 4,500-5,000 U.S. citizens are estimated to be charged is estimated at $3.74 billion. On April 2, Steven Michael Rubenstein of Boca Raton, Florida, an accountant for a yacht company, became the first U.S. citizen to be arrested for tax evasion as a result of UBS' disclosures.

UBS is the world's largest manager of private wealth assets, and is the second-largest bank in Europe in both market capitalization and profitability. UBS operates in 50 countries nationwide, including the U.S., and has offices across the country. Since 2007, after UBS incurred huge losses, the bank's single largest sharholder has been the Government of Singapore Investment Corporation. Last November, Raoul Weil, Chairman and CEO of UBS' Global Wealth Management and Business Banking and member of UBS' Group Executive Board, was indicted in the Southern District of Florida.

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