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.

Wealth Protection Structures

Written by Dr. Allan Le Roux
Date: 18 October 2010

The world is constantly changing and it has become increasingly important to ensure that the correct structures are in place allowing protection and flexibility in the international market. International Organizational Structuring for the purpose of wealth protection supported with financial and tax benefits have become a necessity for every international organization and its shareholders.

The structures you apply will determine the jurisdiction and Tax Model imposed and its attached implications.  It is very important to understand that the country of residence generally determines the Tax Model imposed. The well known saying, 'The highest trees normally catch the most winds' is quite true. The level of visible wealth and cash components in various unstructured bank accounts normally draw the most attention. This visible wealth is what the Tax Authorities are using to start investigations to ensure or enforce Tax compliance.

Generally, 98% of all international organizations have a lack of experience, understanding and/or knowledge when adhering to proper tax structures in their countries of trading, even in their own country of residence. What's more, the expert advice needed is normally very difficult to obtain. This is what catches most organizations off guard and has a detrimental implication on their wealth generating companies in trading. The correct structures are normally determined by the level of wealth generation and the level of international exposure of its shareholders. The tax model will therefore be determined by the structure implemented. It is important to explore various opportunities and choose the correct structure that complies with the need. This structure will determine the Tax Model and the level of Wealth Protection with Financial and Tax benefits.

International Tax Structures and their implications are very complex and important when obtaining professional advice. Using Tax-Haven Countries to hide wealth is foolish and illegal. If you get caught you will either face heavy fines or possibly end up in jail. The two most common legal enforcement's that are used by countries are Tax evasion and money laundering. It is however important to note that most governments have entered into an exchange of information agreement and have agreed to support each other in investigating all possible cases of Tax evasion.

Governments are losing millions and have therefore committed to clamp down on Tax-haven countries or any involvement of their citizens to hide assets in this regard. There is nothing wrong in using Tax-haven countries, but it is important to understand that all Tax-haven countries comply with the information exchange treaty. Therefore it is only a matter of time before your local authorities will become aware of your assets in hiding. If wealth is not declared to the local authorities, the Tax-haven country will have an obligation to notify the authorities of your country of citizenship of the assets held by them, they will be investigated, and the Tax-haven country will have an obligation to declare all information without notice to the asset owner.

Some books make mention of Nil-Tax Haven countries, which in our view is a myth and does not exist.  The Tax-haven countries have always some kind of method to generate revenue for themselves by providing these services which could then in turn have a detrimental effect on the ill-informed customer. In some Tax-haven countries, you will not know the restrictions until you want to move your money to a different country.  It is therefore very important to design the correct structures to suit your flexibility and purpose.

Bank employee info transfer to US 'illegal'

A Geneva court has ruled that Credit Suisse's decision to provide US tax authorities with information on an employee was illegal, according to the ruling made public on Monday.

In April 2012, the Swiss government gave 11 Swiss banks the go-ahead to accommodate a US tax evasion probe and hand over the names of thousands of their employees and consultants working with American clients.
 
Fearful of harsh US penalties and prosecution, the banks then met Washington's demands, handing over personal information about numerous staff members, and reportedly also making personal documents, emails and details of telephone calls available.
 
But in a ruling reached on May 28th and made public on Monday, a Geneva court found in favour of a former Credit Suisse employee, who had challenged Switzerland's second largest bank over the information about her given to US authorities in 2012.
 
The woman, who was not named, had not been informed at the time that information concerning her was being shared — something that ran counter to Switzerland's long cherished bank secrecy practices, which are currently under international pressure.
 
In the first Swiss court ruling on the controversial practice, the Geneva court noted "the unlawfulness of Credit Suisse's communication to US authorities, outside an international process of mutual assistance, documents containing data" on the former employee, making it possible to identify her.
 
The court found that the woman, who was not named, "can legitimately consider that she will be at risk if she travels to the United States," and ruled that this impacted her "freedom of movement, (and) constitutes a deprivation of (her) personal liberty".
 
Lawyer Douglas Hornung, representing the former employee, described the ruling as "an important first-step victory."
 
It could have implications for the some 400 other current and former employees of Swiss banks who his law firm represents in similar cases.
 
Credit Suisse, which as a result of the US probes was slapped with a $2.8-billion fine last year after pleading guilty to having helped rich Americans evade taxes, said it had taken note of the Geneva court ruling.
 
"We plan to appeal," spokesman Jean-Paul Darbellay wrote in a statement sent to AFP.
 
"The court has decided on an individual case and has not determined that the cooperation under the authorization by the Swiss Federal Council is generally illegal," he said.

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AFP (news@thelocal.ch)

Rothschild Bank to pay $11.5m penalty

BY CARLA MAIN, BDlive

NEW JERSEY — Rothschild Bank, the Zurich-based private bank of the Rothschild financial dynasty, has become the latest Swiss bank to be fined by the US justice department for helping Americans conceal assets offshore.

The firm, overseen by Baron David de Rothschild and majority-owned by Paris Orleans, would pay a penalty of $11.5m, the department said on Wednesday.

Banca Credinvest, with headquarters on Lake Lugano, had agreed to pay $3m, it said.

The two banks join seven other Swiss firms that have settled with the US on condition that they reveal how they used shell companies and bank secrecy to conceal undeclared assets. More than 100 firms entered the programme at the end of 2013.

Rothschild Bank, which had US-related accounts with an aggregate balance of a maximum $1.5bn, knew it was "highly probable" that some clients did not comply with income tax and reporting obligations, and that some were hiding behind sham entities in Liechtenstein, Panama and the British Virgin Islands, the justice department said.

Rothschild closed 296 accounts of US taxpayers from August 1 2008, to the end of 2013, and encouraged customers to disclose undeclared assets to the US Internal Revenue Service. It had also obtained waivers from some former US clients to circumvent Swiss secrecy laws that normally prohibit banks from giving client names to foreign authorities, the justice department said.

"Rothschild Bank is pleased to reach this agreement … because this brings this historical matter to a conclusion," company spokesman Kilian Borter said.

On an unrelated front, prosecutors investigating Brazil’s largest corruption scandal said they had notified the US of evidence that at least four foreign companies had paid bribes to win Petrobras contracts. The allegations were against units of Samsung Heavy Industries, Skanska, AP Moeller-Maersk and Toyo Engineering, senior prosecutor Carlos Lima said.

Companies might face charges in Brazil that would restrict local operations and possible sanctions under the US Foreign Corrupt Practices Act, he said last week.

Samsung Heavy Industries "has not been contacted by any law enforcement authorities regarding this issue", the South Korean company said. Toyo and its Brazilian affiliate "are entirely unrelated to the bribery scandal of Petrobras", the Japanese company said.

Maersk said bribes were strictly forbidden for any employee or third party, that commissions were paid within industry norms, and that it had found no indication of improper activity. The Danish company had not been contacted by authorities.

Skanska said it had zero tolerance for unethical business practices and is investigating internally.

Petrobras, which prosecutors see as a victim of individual executives, is controlled by the state and its employees are deemed to be public officials. The US department of justice declined to comment on its role in the investigation. Petrobras did not reply to requests for comment.

In other news on bank settlements with regulators, a trader fired by Deutsche Bank as part of its London interbank offered rate rigging settlement with the New York Department of Financial Services is suing the bank over bonus payments that may total more than £5m.

Yves Paturel filed the suit along with a second trader, Gavin Black, in a London court in January, according to the filing, made available by the court on Wednesday. The pair were dismissed in April. Black has withdrawn his claim.

Bloomberg

Baron David de Rothschild’s Bank Fined Over U.S. Tax Dodging

by Giles Broom

Rothschild Bank AG, the Zurich-based private bank of the Rothschild financial dynasty, became the latest Swiss bank to be fined by the U.S. Justice Department for helping Americans conceal assets offshore.

The firm, overseen by Baron David de Rothschild, 72, and majority-owned by Paris Orleans, will pay a penalty of $11.5 million, according to a statement by the Justice Department on Wednesday. Banca Credinvest SA, with headquarters on Switzerland’s Lake Lugano, agreed to pay $3 million, it said.

Rothschild and Banca Credinvest join seven other Swiss firms that have settled with the U.S. in exchange for revealing how they used shell companies and banking secrecy to conceal undeclared assets. More than 100 entered the Justice Department program at the end of 2013.

“More and more information is flowing to the IRS agents and Justice Department prosecutors going after illegally concealed offshore accounts and the financial professionals who help U.S. taxpayers hide assets abroad,” Acting Assistant Attorney General Caroline Ciraolo of the Justice Department’s Tax Division said in the statement.

David de Rothschild, who was born in New York, and his brother Eric transformed Paris Orleans into a holding company providing wealth and asset management services, merger advice and merchant banking. It was originally founded as a French rail company in 1838.

Sham Entities

Rothschild Bank, which had U.S.-related accounts with an aggregate maximum balance of about $1.5 billion, knew it was “highly probable” that some Americans weren’t compliant with income tax and reporting obligations, and that some were hiding behind sham entities in Liechtenstein, Panama and the British Virgin Islands, the Justice Department said.

Edmond de Rothschild group is a separate asset manager and private bank led by Ariane de Rothschild and Benjamin de Rothschild.

The U.S. probe of the Swiss financial industry has already hit the country’s biggest banks, UBS Group AG and Credit Suisse Group AG, for more than $3 billion. About a dozen others, such as Julius Baer Group Ltd. and the Swiss unit of HSBC Holdings Plc, still face separate criminal investigations that may result in fines.

Rothschild closed about 296 U.S.-taxpayer accounts between Aug. 1, 2008 and Dec. 31, 2013 and encouraged customers to voluntarily disclose undeclared assets to the Internal Revenue Service. It also obtained waivers from some former U.S. clients in order to circumvent Swiss secrecy laws that normally prohibit banks from giving client names to foreign authorities, the Justice Department said.

“Rothschild Bank is pleased to reach this agreement with the U.S. DoJ because this brings this historical matter to a conclusion,” Kilian Borter, a company spokesman, said by telephone.

BSI SA, one of the largest private banks in the program, reached the first non-prosecution deal on March 30. It paid $211 million, admitting that it managed about 3,500 U.S. accounts with a peak value of $2.78 billion in 2008.

Lombard Odier, Geneva’s oldest bank, and the Swiss units of Deutsche Bank AG and Schroders Plc are among dozens of other companies waiting to conclude a deal.

http://www.bloomberg.com/