Posts Tagged ‘UBS’

Tax Roundup, 2/11/2013: Suing the driver of the getaway car for not going fast enough.

Monday, February 11th, 2013 by Joe Kristan

When a convicted criminal feels he has been ill-used by an accomplice, the normal recourse tends to involve unpleasant events in the prison gallery.  Lawyers are rarely consulted.  But when international tax cheating is involved, it apparently works differently.

A group of clients of Swiss bank UBS who claim that bad things happened to them as a result of their Swiss accounts sued UBS.  Seventh Circuit appeals judge Posner was distinctly unsympathetic (my emphasis):

The plaintiffs are tax cheats, and it is very odd, to say the least, for tax cheats to seek to recover their penalties (let alone interest, which might simply compensate the IRS for the time value of money rightfully belonging to it rather than to the taxpayers) from the source, in this case UBS, of the income concealed from the IRS. One might have expected the plaintiffs to try to show that they had forgotten they had accounts with UBS (though that would be preposterous, for these were significant investments for each of the plaintiffs). Or that UBS had told them that income earned in those accounts was somehow tax exempt and moreover that the accounts themselves were somehow not foreign bank accounts within the meaning of the tax code and so the plaintiffs didn’t have to acknowledge having accounts with UBS. They don’t make any of these feeble arguments. They do argue, as we’ll see, that UBS was obligated to give them accurate tax advice and failed to do so, but not that it gave them inaccurate, as distinct from no, advice.

While the IRS offshore compliance programs have abused many innocent Americans who have foot-fault violations, that doesn’t appear to be the case here.  A U.S. resident who set up a Swiss bank account probably didn’t do so to ensure tax compliance.

At worst, UBS, as we’re about to see, violated an agreement with the IRS designed to prevent the kind of evasion that the plaintiffs engaged in. That might conceivably make UBS an aider or abettor of the plaintiffs’s tax evasion and so make this case a distant relative to Everet v. Williams (Ex. 1725), better known as The Highwayman’s Case and eventually reported under that name in 9 L.Q. Rev. 197 (1893). A highwayman had sued his partner in crime for an accounting of the illegal profits of their criminal activity. The court refused to adjudicate the case, and both parties were hanged. Minus the hanging and with certain exceptions (such as contribution and indemnity) irrelevant to this case, the principle enunciated in The Highwayman’s Case applies to accomplices in civil wrongdoing, as noted in our recent decision in Schlueter v. Latek, 683 F.3d 350, 355-56 (7th Cir. 2012). In The Highwayman’s Case one accomplice was seeking a bigger share of the profit from the crime from the other one; here one accomplice is seeking a smaller share of the costs of the crime from the other one. The principle is the same; the law leaves the quarreling accomplices where it finds them.

The moral?  Your banker isn’t your tax advisor, and when you are cheating, you are on your own.  At least in Judge Posner’s court.

More coverage: TaxProf, Posner:  Tax Cheats Suing UBS for Not Stopping Them From Cheating Like Suing Parents for Not Raising Them to be Honest


Overwhelming?  A Tax Analysts story on the fallout from the Loving decision overturning the IRS preparer regulation program reports:

“There is overwhelming support for registration” among EAs, said Frank Degen, president of the National Association of Enrolled Agents. While preparers are watching to see what an appeals court will do — as the IRS said it would file an appeal soon — “most practitioners are just interested in cranking out those 1040s right now,” Degen said.

I’d want to see some polling showing that “overwhelming” support.  The preparer regulation program strikes me as potentially fatal for the Enrolled Agent brand.  EA’s, who have to pass a much stricter test and more stringent continuing education requirements than the registered preparers would have to, already have difficulty marketing their additional qualification.  The IRS blessing of a competing bargain brand could easily bury the EA designation.  At the very least, I see no overwhelming support for the preparer registration program from EA-bloggers Jason Dinesen and Russ Fox.


To your health!  Compliance with ObamaCare Estimated to Take 127.6 Million Hours (Kyle Pomerleau, Tax Policy Blog).

Martin Sullivan, State of the Union: Stasis or Progress on Taxes? (  My bet is on stasis.

Doom.  What You Should Know About the Budget Outlook (William Gale, TaxVox).:

Even if seemingly everything goes right – in economic terms and in political terms – we are still on the edge of dangerously high debt and deficit levels with little room to spare.

Nah, we’re over the edge:



Jana Luttenegger,  Social Media and Other Digital “Assets” After Death. (Davis Brown Tax Law Blog)  If I die, please take me out of my high school reunion Facebook group.

William Perez,  IRS Announces Start Dates For Processing Some Tax Returns.  Y0u can file a return with depreciation starting today, and one with education credits starting Thursday.

Claudia Hill, Can This Tax Filing Season Be Saved? (Via @janetnovack’s Twitter Feed).

Paul Neiffer, Crop Insurance Proceeds on Feed Consumed by Livestock

And then pay your bill timely.  4 ways to be a better tax client (Kay Bell)

Patrick Temple-West, Higher payroll tax pinches those with the least to spare, and more

Jack Townsend, A Tax Curmudgeon Offers Ideas on Tax Compliance

Tax Trials,  IRS Releases Schedule UTP Statistics for 2011.  1,783 taxpayers filed forms disclosing Uncertain Tax Positions for 2011.  Seems low.

Peter Reilly,  Is IRS Persecuting Kent Hovind For Creationism ?  His tax planning shows little evidence of intelligent design, anyway.

Proposed by a guy wearing wing-tips, no doubt.  Lawmaker Proposes Sneaker Tax, Retailers Opposed (TaxGrrrl)


Tax Roundup, 9/12/2012: Would you trade your career and 2 1/2 years for $104 million?

Wednesday, September 12th, 2012 by Joe Kristan

$104 million awarded to UBS whistleblower. It took five years and 30 months in prison, but the man who blew open Swiss Bank UBS’s systematic assistance of tax evaders will get his reward.  From the Wall Street Journal:

A former UBS AG banker who helped the U.S. government unleash an international crackdown on tax evasion was awarded  $104 million in what is believed to be the largest-ever whistleblower payout to an individual.

Bradley Birkenfeld, 47 years old, began cooperating with U.S. authorities in 2007, while still at UBS. He provided prosecutors with detailed descriptions of the bank’s efforts to promote tax evasion and confessed to running errands for rich clients, including one instance when he sneaked diamonds into the U.S. in a toothpaste tube.

With a big assist from Mr. Birkenfeld, the IRS has wrecked Swiss banks as a tax evasion vehicle.

The huge award is possible under a 2006 law pushed by Iowa Senator Chuck Grassley that lets snitches share in 30% of IRS collections of evaded taxes.   While the IRS has been notoriously tight-fisted in paying out informant awards, this one could signal a big change in agency policy.

This well-publicized award has to frighten anybody out there engaging in big-time tax evasion.  When the numbers get large, you normally can’t do tax fraud alone.  Yet any accomplice now has a big incentive to turn, including lowly internal bookkeepers and outside accountants.  There is even a little industry to help match whistleblowers with their rewards.  Sure, a snitch will never find a job in the old industry again, but millions of dollars can ease the pain.  Mr. Birkenfeld isn’t likely very worried today about his next job in banking, anyway.

The TaxProf has a roundup.   More from Jack Townsend,  Kay Bell and Anthony Nitti.


Once you get your $104 million snitch award, it’s not a problem.  Just How Difficult Is It To Be a Recovering Alcoholic in Public Accounting Anyway?  (Going Conern)


Another guy who won’t be looking for further work in the financial sector anytime soon is Russell Wasendorf.  From the Des Moines Register:

Russell Wasendorf Sr., the broker accused of stealing more than $200 million from his customers over 20 years, is expected to serve up to 50 years in prison as part of a plea agreement with prosecutors.

The 64-year-old founder of the Cedar Falls-based Peregrine Financial Group had faced a maximum sentence of 155 years in prison.

These are federal charges, so Mr. Wasendorf can’t look to be released until he has served 90% of his sentence.  By that time he will be 109, which could limit his employment opportunites.

Peregrine benefited from a $1.24 million package of state incentives to move its now-defuct operations to Iowa.  Let’s hope the $107 million package for the Lee County fertilizer plant works out better.


 Jack Townsend,  Airline Pilot Shot Down at Sentencing:

Readers may recall that airline pilots have figured prominently in trying to evade taxes.  They were disproportionately represented among tax protestors in earlier periods, and an airline pilot played the central role in one of the leading tax cases, Cheek v. United States, 498 U.S. 192  (1991), which recognized that a sincerely held belief that taxes were not legally owed was a defense that should be submitted to a jury.  Perhaps pilots have too much time on their hands and do not get enough oxygen while in the air, so that they fall easy pray to these notions of tax invincibility.

Tax Update coverage here.


IRS: Agents Won’t Be Enforcers of Obamacare Mandate. (CNBC). Well, somebody has to to process those tax returns reporting those penalties and garnish the refunds of those who don’t buy required insurance.

Jim Maule,  Taxes, Citizenship, and Something More Than Shame

Peter Reilly,  Tax Court Denies Late Petition Sent FedEx Express Saver

Robert D. Flach has the latest Buzz.

Have a Nice Day.  Another Downgrade Looming. (William McBride, Tax Policy Blog). Don’t worry, we only have $16 trillion of debt to finance.


Shooting jaywalkers, coddling money launderers

Monday, November 21st, 2011 by Joe Kristan

Fresh off of terrorizing U.S.-born taxpayers who moved to Canada in infancy for not keeping the IRS informed of their bank accounts, the Government has shown how it deals with serious financial criminals. Form the Federal Tax Crimes Blog: “UBS Enabler, Renzo Gadola, Gets Sentencing Slap on the Wrist.”

Gadola was sentenced today and received the barest slap on the wrist. The sentencing minutes are here. No jail time, 5 years probation. The Sealed Government’s Motion for Downward Departure was granted. Sweet.

Perhaps Gadola’s example could encourage other enablers to come forward with hopes of similar treatment or no indictment at all. Kind of like a sub rosa voluntary disclosure program for enablers.

Except with much more favorable treatment than unwitting violators got under the FBAR voluntary disclosure initiative.


IRS drawing a bead on another Swiss bank?

Monday, October 11th, 2010 by Joe Kristan

Phil Hodgen thinks customers of another Swiss bank might want to lawyer up.
Anybody who thinks UBS will be the only Swiss bank to crack and release names to the IRS is either an incurable optimist or hasn’t been paying attention.


Swiss craftsmanship

Monday, October 5th, 2009 by Joe Kristan

Reports of the death of Switzerland as a tax shelter may be exaggerated, reports Jack Townsend at Federal Tax Crimes blog:

Switzerland has demonstrated over and over that it will protect its premium franchise in the tax haven business, so that it can continue — perhaps not at the same level — to enable taxpayers in other countries evade taxes for a fee that includes a healthy share of the taxes evaded for its enablement services.

Not much comfort for the UBS account holders. By the way, the IRS offshore amnesty expires in another ten days.
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‘If they think this is just UBS, they’re mistaken’

Tuesday, September 29th, 2009 by Joe Kristan

The IRS has extended the offshore account reporting amnesty by another two weeks. Lee Sheppard reports in Tax Analysts ($link) that folks whose offshore accounts aren’t with UBS shouldn’t ignore the amnesty:

Another folk belief is that customers of banks other than UBS will get away with tax evasion. “If they think this is just UBS, they’re mistaken,” said [DOJ attorney Kevin] Downing. “UBS is not an anomaly. This is just the beginning. We’re going after foreign banks and professionals.” Countries the government is interested in include Hong Kong, Panama, and Singapore.

If you are interested in the amnesty, act now. Lawyers have been overwhelmed with amnesty cases, and they might not be able to take new clients who wait until the last minute.
UPDATE: Criminal tax defense attorney Jack Townsend has a cynical (but likely accurate) view:

DOJ Tax is on a public relations blitz to drum up business / revenue by incentivizing taxpayers with unreported offshore bank accounts to join the IRS voluntary disclosure initiative ending 10/15. A key facet of the blitz is the high profile indictments recently obtained. At last week’s ABA Tax Section meeting, DOJ Tax rolled out its mouthpiece, Kevin Downing himself at the forefront of the prosecution side of this juggernaut, to remind practitioners and, through them and the press attending, the public that they should pony up in the voluntary disclosure program.

If you have offshore accounts, the amnesty looks wise, but I suppose you don’t have to like it.

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21 days left in offshore amnesty. What then?

Wednesday, September 2nd, 2009 by Joe Kristan

Federal Tax Crimes Blog notes an ominous development for folks still not ready to bring their foreign accounts in from the cold:

In an article in today’s Tax Notes Today, David Stewart reports that the IRS is creating “a new group within its Large and Midsize Business Division to examine wealthy taxpayers who use offshore arrangements for tax evasion.”
The focus of the new group is “on examinations involving webs of entities and arrangements controlled by the high wealth taxpayer segment.”

That means the UBS settlement is the start, not the end, of the IRS crusade against offshore accounts.
This development should be considered by those still sitting on the fence as to whether to join the IRS’s voluntary disclosure initiative which ends 9/23/09. For those who had already decided to just hunker down for the long haul (hoping the statutes of limitations expire without discovery) rather than join the inititive, this might be a reason to reconsider that decision.

Folks pondering whether to own up to their offshore accounts need to get in touch with their lawyers quickly. Three weeks isn’t a long time.
Link: IRS Voluntary Disclosure Questions and Answers
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Another UBS client pleads guilty

Wednesday, July 29th, 2009 by Joe Kristan

Swiss bank secrecy let this man down:

Jeffrey Chernick, 70, today admitted in federal court in Fort Lauderdale, Florida, he didn


UBS flips

Thursday, February 19th, 2009 by Joe Kristan

Swiss bank UBS yesterday entered a “deferred prosecution agreement” on charges of assisting wealthy Americans avoid taxes via Swiss bank accounts. UBS will pay a $780 million fine.
This makes an otherwise very puzzling sentencing agreement from last April make more sense. California billionaire Igor Olenicoff had admitted to evading taxes of $52 million, and was set to receive an astonishingly light sentence of probation and a $3,500 fine. The Olenicoff plea led to a guilty plea by UBS banker Bradley Birkenfeld, and now to a huge fine by UBS, names of more potential tax evaders, and cooperation in going after them.
A lot of UBS customers presumably are getting very familiar with their lawyers.
The TaxProf has a comprehensive roundup.