Swiss asset manager settles US tax evasion charges

 Business Law and order

The Geneva asset management firm Prime Partners has agreed to pay $5 million (CHF4.8 million) to the United States to settle charges for tax evasion and assisting US taxpayers in opening and maintaining undeclared foreign bank accounts from 2001 to 2010. 

A US Department of Justice (DOJ) statement external linkon August 15 said the firm had entered a non-prosecution agreement and agreed to pay $5 million to the US for helping US taxpayer-clients create and maintain undeclared foreign bank accounts.

Under the agreement Prime Partners handed over 175 client files for non-compliant US taxpayer-clients. The DOJ said the firm would not be criminally prosecuted and had offered ‘extraordinary cooperation’.

Prime Partners forfeited $4.32 million, representing fees that it earned by handling US taxpayer-clients’ accounts, and paid $680,000 in restitution to the Internal Revenue Service (IRS), representing unpaid taxes arising from the tax evasion by Prime Partners’ US taxpayer-clients.

Acting Manhattan US Attorney Joon H. Kim said: “Prime Partners admits to helping its clients conceal their ownership of foreign bank accounts to avoid their US tax obligations. They created sham entities and even counselled their clients to use pay phones and prepaid debit cards to avoid detection of their tax fraud scheme.”

The DOJ said the Geneva firm had admitted its wrongful conduct, notably that it knew certain US taxpayers were maintaining undeclared foreign bank accounts with the assistance of Prime Partners in order to evade their US tax obligations, in violation of US law.

It also acknowledged that it helped certain US taxpayer-clients conceal from the IRS their beneficial ownership of undeclared assets maintained in foreign bank accounts by creating sham entities with no business purpose, advised the US taxpayer-clients not to retain their account statements and to destroy any faxes they received from Prime Partners.

The US justice authorities say that, in early 2009, Prime Partners voluntarily implemented a series of remedial measures to stop assisting US taxpayers in evading federal income taxes. Following the settlement, it must continue to cooperate with the US for at least three years.
Numerous Swiss banks and financial institutions have been caught up in a long-running tax dodging dispute between Switzerland and the US.

In 2009, UBS became the first Swiss bank to be punished by the US for helping clients evade taxes. It was hit with a big fine, as were later Credit Suisse, Julius Bär and other banks. The collapse of Wegelin prompted Swiss legislators to bring down the curtain of banking secrecy and negotiate a non-prosecution agreement with the US for a number of financial institutions caught up in the tax evasion spat.

The DOJ closed its "Swiss Bank Programexternal link" in January 2016, having netted $1.36 billion in fines from 80 Swiss or Swiss-based banks.
A handful of other banks, including Pictet and the Basel and Zurich cantonal banks, could still be subject to criminal convictions and heavy fines.

BY PRESS RELEASE - University Professor sentenced to Prison for Hiding over $220 Million in Offshore Banks

Former University Business Professor sentenced to Prison for Hiding over $220 Million in Offshore Banks

A now retired business school professor, who amassed a $220 million fortune in secret foreign accounts, was sentenced to seven months in prison today for conspiring to defraud the United States and to submit a false expatriation statement to the Internal Revenue Service (IRS), announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney Dana J. Boente for the Eastern District of Virginia. He also has been assessed and paid a $100 million civil penalty for his concealment of these accounts.

“For 15 years, Dan Horsky stashed assets and hid income offshore in secret bank accounts,” said Acting Deputy Assistant Attorney General Goldberg. “That scheme came to an abrupt end when IRS special agents came knocking on his door. The days of hiding behind shell corporations and foreign bank secrecy laws are over. Now is the time for accountholders to come in, accept responsibility, and help ensure that the lawyers, financial advisers and other professionals who actively facilitated offshore evasion also are held accountable.”

“Hiding assets and creating secret accounts in an attempt to evade income taxes is a losing game,” said U.S. Attorney Boente. “Horsky went to great lengths to hide assets overseas in order to avoid paying his share of taxes to the IRS. Today’s sentence shows that we will continue to prosecute bankers and U.S. citizens who engage in this criminal activity. I want to thank IRS-Criminal Investigation and our prosecutors for their work on this important case.”

“Mr. Horsky’s criminal actions to evade his federal income tax obligations were particularly flagrant and unacceptable,” said Chief Richard Weber of IRS Criminal Investigation (CI). “Together with our law enforcement partners, IRS-CI will continue to unravel complex financial transactions and hold those accountable who hide assets offshore and dodge the tax system. IRS-CI special agents are the best financial investigators and we will continue to follow the money trail wherever it may lead.”

According to documents filed with the court and statements made during the sentencing hearing, Dan Horsky, 71, formerly of Rochester, New York, is a citizen of the United States, the United Kingdom and Israel who served for more than 30 years as a professor of business administration at a university located in New York. Beginning in approximately 1995, Horsky invested in numerous start-up companies, virtually all of which failed. One investment in a business referred to as Company A, however, succeeded spectacularly. In 2000, Horsky transferred his investments into a nominee account in the name of “Horsky Holdings” at an offshore bank in Zurich, Switzerland (the “Swiss Bank”) to conceal his financial transactions and accounts from the IRS and the U.S. Treasury Department.

In 2008, Horsky received approximately $80 million in proceeds from selling Company A’s stock. Horsky filed a fraudulent 2008 tax return that underreported his income by more than $40 million and disclosed only approximately $7 million of his gain from the sale. The Swiss Bank opened multiple accounts for Horsky to assist him in concealing his assets: including one small account for which Horsky admitted that he was a U.S. citizen and resident and another much larger account for which he claimed he was an Israeli citizen and resident. Horsky took some of his gains from selling Company A’s stock and invested in Company B’s stock. By 2015, Horsky’s offshore holdings hidden from the IRS exceeded $220 million.

Horsky directed the activities in his Horsky Holdings’ account and the other accounts he maintained at the Swiss Bank, despite the fact that he made no effort to conceal that he was a U.S. resident. In 2012, Horsky arranged for an individual referred to as Person A to take nominal control over his accounts at the Swiss Bank because the bank was closing accounts controlled by U.S. persons. The Swiss Bank later helped Person A relinquish that individual’s U.S. citizenship, in part to ensure that Horsky’s control over the offshore accounts would not be reported to the IRS. In 2014, Person A filed a false Form 8854 (Initial Annual Expatriation Statement) with the IRS that failed to disclose his net worth on the date of expatriation, failed to disclose his ownership of foreign assets, and falsely certified under penalties of perjury that he was in compliance with his tax obligations for the five preceding tax years.

Horsky’s tax evasion scheme ended in 2015 when IRS special agents confronted him at home regarding his concealment of his foreign financial accounts.

Horsky willfully filed fraudulent federal income tax returns that failed to report his income from, and beneficial interest in and control over, his foreign financial accounts. In addition, Horsky failed to file Reports of Foreign Bank and Financial Accounts (FBARs) up and through 2011, and also filed fraudulent 2012 and 2013 FBARs. In total, in a 15-year tax evasion scheme, Horsky evaded more than $18 million in income and gift tax liabilities.

In addition to the term of prison imposed, Horsky was ordered to serve one year of supervised release and to pay a fine of $250,000. As part of his plea agreement, Horsky also paid a penalty of $100 million dollars to the U.S. Treasury for failing to file, and filing false, FBARs and paid over $13 million in taxes owed to the IRS.

Acting Deputy Assistant Attorney General Stuart M. Goldberg and U.S. Attorney Boente commended special agents of IRS-Criminal Investigation, who conducted the investigation, and Senior Litigation Counsel Mark F. Daly and Trial Attorney Robert J. Boudreau of the Tax Division and Assistant U.S. Attorney Mark Lytle of the Eastern District of Virginia, who are prosecuting this case.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

Swiss bank UBS says annual profit plunged 46%

 

The results included 693 million Swiss francs in provisions
 Gulf News - Published: 17:18 January 27, 2017




ZURICH: Swiss banking giant UBS said Friday its net profit plunged 46 per cent in 2016 under the weight of restructuring costs and a downturn for its investment bank in difficult market conditions.


Switzerland’s largest bank reported its net profits for the year were 3.3 billion Swiss francs (3.09 billion euros, $3.3 billion).

The results included 693 million Swiss francs in provisions for potential legal costs and 1.4 billion in restructuring charges.

“Despite a very challenging market environment in 2016, we achieved solid results..,” chief executive Sergio Ermotti said in a statement.

“While we saw persistent client risk aversion and substantial cross-border outflows, we generated over CHF 40 billion of net new money in our wealth management businesses,” he added.

The bank said it had been able to reduce costs by 1.6 billion Swiss francs, nearly 50 per cent more than in the previous year, and was on track to achieve its target of 2.1 billion by the end of this year.

Ultra-low and negative interest rates in many nations have been hitting the ability of banks to earn money from traditional lending activities, while regulatory measures to improve their ability to absorb losses mean they have been forced to put more money aside.

Swiss banks have also been grappling with the impact of tighter regulation and the end of banking secrecy in Switzerland.

Despite continued macroeconomic uncertainty, geopolitical tensions and divisive politics, UBS said it had “begun to observe improved investor confidence, primarily in the US” and which could lead to better performance in its wealth management unit.

US stocks have rallied since the November election of Donald Trump as US president on hopes he will implement campaign promises to step up infrastructure spending, with Wall Street’s blue-chip
Dow index closing above 20,000 points for the first time on Wednesday.

It added that low and negative interest rates in Europe “may be offset by the effect of higher US dollar interest rates”.

The Federal Reserve has now raised interest rates twice since taking them to practically zero to overcome the effects of the global financial and economic crisis, and expect to raise rates three times this year.