UBS Case Update: Justice Department Continues Its Pursuit to Obtain American Swiss Bank Account Holders Who Evaded Taxes

In the case U.S. v. UBS AG, 09-cv-20423, the Justice Department argued in U.S. District Court, Southern District of Florida (Miami), that UBS should be forced to divulge the private and long-time regarded secret account information of Americans with Swiss Bank accounts who are evading taxes.

The DOJ argues approximately 52,000 names should no longer be held secret since UBS violated US laws on American soil, providing jurisdiction to authorities to pursue legal action in American courts against the tax evaders.

Justice Department filling stated “UBS has systematically and deliberately violated the laws of the United States on U.S. soil.” It further said UBS “regularly conducted business in secret” in the U.S. and routinely sent private bankers into the U.S. to solicit business." The UBS business “cost the U.S. Treasury hundreds of millions of dollars in unpaid taxes.”

Contrary to reports earlier this week about a settlement, the DOJ pushed forward with a lawsuit to force the Swiss bank giant to identify offshore clients since the estimated 52,000 Americans are suspected of using secret foreign accounts to hide nearly $15 billion in assets from the IRS.

The DOJ filing says UBS earned more than $100 million in fees in helping US clients set up secret offshore accounts and that the business cost the US Treasury hundreds of million of dollars in unpaid taxes.

UBS has resisted the request because it says it would violate Swiss bank secrecy laws. The lawsuit against UBS is being closely watched by the offshore banking industry amid a global crackdown on tax cheats.

UBS and the Swiss government have argued that any exchange of confidential banking information should be handled through existing legal treaties rather than in the courts. The Swiss government has said the lawsuit would “seriously jeopardize” efforts to revise a 1996 tax treaty. Under that treaty, Switzerland can turn over account data only on a reasonable suspicion of “tax fraud or the like,” according to a UBS court filing.

Unlike the U.S., the Swiss don’t view tax evasion as a crime.

UBS is facing a first court hearing July 13.

UBS agreed in February to pay $780m to avert criminal charges related to the tax dispute while UBS admitted it helped taxpayers hide money in Swiss accounts and provided the IRS more than 250 clients’ names. UBS also admitted that its private bankers marketed securities and banking services in the U.S., even though it didn’t have the required license from the Securities and Exchange Commission. Those bankers, UBS admitted, met with clients in the U.S. and communicated with them regularly as they traded securities in their accounts or transferred assets.

The Justice Department filing stated “UBS must disclose the identity of every U.S. taxpayer with an undisclosed UBS account” so they can “get right with their government." It further said “the United States has a strong national interest in making sure that all U.S. taxpayers comply with the tax laws.”

UBS is hoping for a settlement, which would be the bank's second with US authorities and would allow the world's biggest wealth manager to concentrate on a badly needed restructuring after it lost billions of dollars in the global financial crisis and had to be rescued by the Swiss state.

Sources:
Bloomberg News

Gulf DailyNews

412(i) Lawsuit Filed in New Jersey

A second 412(i) lawsuit has been filed in Essex County Superior Court in New Jersey.

It is believed to be the second lawsuit filed in New Jersey against the following defendants : Indianapolis Life Insurance Company, Matt Lang, Lorac Financial Services, Inc., Summit Enterprises, Economic Concepts, Inc., Kenneth R. Hartstein, Harold Dischino and Dischino & Associates.

In this transaction, Lang acted as the agent and Dischino was the accountant for the plaintiff.

The complaint asserts the Defendants not only engaged in a pattern and practice of misrepresentations and omissions relating to life insurance policies promoted and represented as suitable products to be used as part of a comprehensive retirement plan, but also engaged in racketerring activity in violation of New Jersey's RICO statute.

The complaint further alleges Defendants knowingly sold Plaintiffs an abusive tax shelter causing them to incur significant financial losses by working in concert with one another and devised a scheme to sell, promote and administer abusive and illegal tax shelters as retirement plans under the auspices of Section 412(i) of the Internal Revenue Code.

The complaint states Defendants knew or should have known that these arrangements would be heavily scrutinized by the IRS, be deemed abusive tax avoidance transactions by the IRS, and expose those participating in such arrangement to costly IRS audits, including substantial tax liabilities, penalties, and interest.

Moreover, Plaintiffs assert Defendants knew or should have known that their continuing representations and omissions they made after the issuance of an IRS ruling in 2004 regarding the tax-related consequences of 412(i) plans and how the policies should be funded in the future were intentionally misleading, deceptive and fraudulent.

For a copy of the complaint, contact Chris Hellums @ Chrish@pdhklaw.com

Pittman Dutton Kirby & Hellums currently represents individuals and small businesses against brokers, promoters, accountants, and in some cases attorneys, regarding the sale of 412(i) plans. If you have purchased a 412(i) or have any questions about this litigation, please do not hestitate to contact us.

Lawyers and others Indicted on Charges of Marketing Phony Tax Shelters

Bloomberg News and the Dallas Morning News are reporting that seven individuals, including attorneys at the now defunct Jenkens & Gilchrist law firm and executives at BDO Seidman LLP were among seven defendants indicted Tuesday on criminal charges of marketing phony tax shelters. The allegations included conspiracy and tax evasion in the marketing of fraudulent tax shelters


John DiCiccio, the acting assistant attorney general in the Justice Department's Tax Division, had this to say:


"Dishonest and fraudulent tax professionals, including accountants, attorneys and bankers, should stand up and take note of today's indictment,"

In 2007, Jenkens & Gilchrist admitted it developed and marketed tax shelters that generated more than $1 billion in phony losses. Jenkens and Gilchrist no longer exists, but most of the remaining lawyers and staff joined Hunton & Williams, a national law firm based in Richmond, Va., in April 2007, including Henry Gilchrist.

One of the attorneys indicted, Paul Daugerdas, 58 denies any wrongdoing. Source: http://amlawdaily.typepad.com/.a/6a00e55044cbaf883401156ff27763970c-pi



"Paul Daugerdas firmly believes that the tax advice provided to his clients was well within the scope of then-existing federal tax law," Margarite Wypychowski said in a statement. "He categorically denies any participation in or approval of any wrongdoing in connection with his rendering of professional legal services."

How many times have we seen such a statement from attorneys make massive sums of money marketing and promoting abusive tax shelters only to see them blow up in the faces of their clients who relied on their "expertise" in this area.

In January 2005, Jenkens agreed to pay $81.6 million to clients who had sued over its tax shelter advice.

I suspect that more indictments will be forthcoming on this sort of conduct.

Chris Hellums can be reached via email : ChrisH@pdkhlaw.com