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Switzerland Begins Providing Account Information of Thousand of UBS Clients to U.S.

idrabkin — Fri, 27 Aug 2010 18:11:37 +0000

Igor S. Drabkin, J.D., Former IRS Attorney

On August 26, 2010, the Swiss government said it had reviewed approximately 4,450 UBS client accounts and that half of the data had already been handed over to the United States. Switzerland also said that it was optimistic that the U.S. would definitively withdraw legal action over tax fraud that threatened to bring down UBS, Switzerland’s largest bank. The U.S. government agreed in August 2009 to drop tax evasion charges against UBS when Switzerland agreed to coordinate the transfer account information on roughly 4,450 of American UBS clients. “Both parties are optimistic that the U.S. authorities will receive most of the agreed account information within a reasonable period of time and that the U.S. authorities will definitively withdraw the civil action (John Doe Summons) brought against UBS,” the ministry said. “The data delivery will be largely concluded by autumn 2010,” Switzerland said. The deal between UBS and U.S. was in limbo after the Swiss ourt ruled in January that UBS could not disclose account information to the United States. The uncertainty, however, was removed after Swiss parliament gave its support in June and ruled out a referendum on the issue.

With the news that UBS has begun disclosing account information to the U.S. authorities, it becomes an issue of timing for many U.S. taxpayers. The IRS has always had a policy of voluntary disclosure, which allowed taxpayers to voluntarily come forward and truthfully disclose unreported tax, and in exchange, avoid criminal prosecution. Such disclosure, however, is deemed timely only if it happens before the IRS has learned about the taxpayer and begun its own investigation of the taxpayer. Disclosure of the UBS accounts to the U.S. makes it critical for those taxpayers with undisclosed Swiss accounts to decide if they want to make a voluntary disclosure immediately.

Former IRS Tax Attorneys at Holtz Slavett & Drabkin are available to assist you with your offshore account tax issues and may be reached at (310) 550-6200.

Author: Igor S. Drabkin, J.D., Former IRS Attorney.

Swiss Court Allows Disclosure of UBS Account Information

idrabkin — Thu, 22 Jul 2010 23:33:29 +0000

On July15, 2010, Switzerland’s Federal Administrative Court rejected a UBS account holder’s complaint that sought to prevent the release of her client information to the U.S. tax authorities. The verdict may not be appealed. The ruling, which was made public on July 19, 2010, said that the taxpayer’s account satisfied the requirements for a turn-over under the Switzerland-U.S. agreement signed in August 2009. Under that agreement, the Swiss authorities agreed to hand over the account information on 4,450 persons with undisclosed accounts at UBS. The court also noted that the Switzerland-U.S. agreement was binding as it was ratified by Swiss parliament on June 17, 2010.

The ruling is significant because it signals the likely end-game for UBS account holders with undisclosed accounts who had sought to prevent their account information from being delivered to the IRS.

Former IRS Tax Attorneys at Holtz Slavett & Drabkin are available to assist you with your offshore account tax issues and may be reached at (310) 550-6200.

Author: Igor S. Drabkin, J.D., Former IRS Attorney.

HSBC Bank Cleints Targeted in Tax Evasion Probe

idrabkin — Thu, 08 Jul 2010 18:12:07 +0000

HSBC appears to be the next target of U.S. government in its fight against offshore tax evasion. On June 21, 2010, the Department of Justice issued letters to HSBC clients informing them that they are subject to a criminal investigation. The letter did not mention HSBC by name by stated that the DOJ had “reason to believe” the person had an interest in a foreign account that wasn’t reported to the Internal Revenue Service on either a tax return or a special tax form used to report foreign accounts. “ The letters were signed by Kevin Downing, a senior Justice Department litigator, who also oversaw the UBS investigation.

Based on some calls received from potential clients, there is a reason to believe that at this stage the investigation focuses on HSBC accounts in India, Hong Kong and Singapore, but it’s likely that the probe will expand in scope. A wide-ranging investigation by the IRS and Department of Justice into UBS accounts in Switzerland has gained a lot of publicity in the past year, but the U.S. government has been indicating for a while that they intend to go beyond UBS and Switzerland in its effort to investigate undeclared offshore accounts. It appears that HSBC is the next step in the U.S. fight against offshore tax evasion.

Former IRS Tax Attorneys at Holtz Slavett & Drabkin are available to assist you with your offshore account tax issues and may be reached at (310) 550-6200.

Author: Igor S. Drabkin, J.D., Former IRS Attorney.

Swiss Parliament Approves UBS Tax Deal

idrabkin — Fri, 18 Jun 2010 22:43:27 +0000

Igor S. Drabkin, J.D., Former IRS Attorney

On June 17, 2010, Swiss Parliament approved a Swiss-U.S. tax agreement that requires UBS AG to provide information to the IRS on 4,450 U.S. persons with undisclosed accounts at the Swiss bank. Parliament ratification of the UBS agreement came after the lower house of Swiss parliament backed away from requesting the matter be put to a national referendum, which would have caused Switzerland to miss an August 2010 deadline to disclose the information to IRS. “Parliamentary approval means that nothing now stands in the way of UBS client details being disclosed,” the Swiss Justice Ministry said. IRS Commissioner Doug Shulman said he expected the Swiss authorities to move swiftly to deliver the account information to the IRS.

Many UBS clients have taken advantage of the IRS Offshore Voluntary Disclosure program, which allowed taxpayers with offshore accounts to come forward and disclose their accounts and any unreported income to the IRS in exchange of a promise not to be prosecuted criminally and a reduced 20% penalty for the failure to file Foreign Bank Account Reports. That program expired on October 15, 2009, however, a long-standing voluntary disclosure policy of the IRS is still in effect and allows those taxpayers who come forward voluntarily to still avoid criminal prosecution. Taxpayers with UBS accounts who may have been relying on the Swiss courts to prevent UBS from disclosing their names to the IRS may rethink their strategy now and take advantage of the IRS voluntary disclosure program.

Former IRS Tax Attorneys at Holtz Slavett & Drabkin are available to assist you with your offshore account tax issues and IRS Voluntary Disclosure.

Author: Igor S. Drabkin, J.D., Former IRS Attorney.

UBS Agreement with IRS To Turn Over Names of U.S. Account Holders Hits Another Road Block

Gary Slavett — Tue, 15 Jun 2010 06:02:13 +0000

The lower house of the Swiss parliament has voted to reject the agreement with United States authorities that would resolve the legal troubles facing UBS.

On June 8, 2010, Swiss lawmakers voted against the measure. Lawmakers also voted in favor of putting the agreement to a referendum.

The rejection is not the final word on the agreement in the Swiss parliament, but it is expected to delay approval.

The August 19, 2009, agreement, which would permit the disclosure of client data on 4,450 UBS accounts to settle the U.S. John Doe enforcement action, passed the upper house of parliament June 3 and now returns to the upper house as the two chambers resolve their differences. A final vote is expected to take place before the end of the current parliamentary session on June 18.

Should the lower house insist on a referendum process, the agreement would be delayed for at least 100 days and would breach the August deadline for disclosures to be made under the agreement.

Parliamentary approval of the agreement is necessary following a January 21 decision by the Swiss Federal Administrative Court, which ruled that the agreement was insufficient to change the interpretation of “tax fraud and the like” in the Switzerland-U.S. tax treaty. Approval by the parliament would elevate the agreement to the level of a treaty and permit the government to complete the administrative assistance process.

The IRS responded to the news of the vote with a statement that it is ready to “pursue all legal options” if the Swiss government is unable to fulfill its commitments under the agreement.

“We have an agreement with the Swiss government. We expect that the Swiss government will continue to honor the terms of the agreement. We continue to monitor the events in Switzerland, and we stand ready to pursue all legal options available to us should the Swiss fail to provide the required information,” IRS spokesman Frank Keith said on June 8.

Sen. Carl Levin, D-Mich., chair of the Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations, also responded in a June 8 press release, saying that “the United States should reject any further attempts by the Swiss to delay the UBS case.”

“It is time to move forward with the summons in court and force UBS to provide the names and account information for all 52,000 suspected U.S. tax cheats,” Levin said.

Senate Finance Committee ranking minority member Chuck Grassley, R-Iowa, responded to the agreement’s rejection by asking the IRS to explain what steps it has taken to identify UBS account holders using information provided by former UBS employee Bradley Birkenfeld.

“While I understand that today’s vote in the lower chamber of the Swiss Parliament is not the final word, I am worried that the Internal Revenue Service (“IRS”) is doing next to nothing to identify tax evasion by U.S. taxpayers utilizing these accounts while waiting for ratification of the treaty,” Grassley wrote in a June 8 letter to Treasury Secretary Timothy Geithner and IRS Commissioner Douglas Shulman.

Former IRS Tax Attorneys at Holtz Slavett & Drabkin are available to assist you with your Offshore Voluntary Disclosure.

Author: Gary M. Slavett, J.D., LL.M., Former IRS Attorney.

UBS Deal Moves Closer to Approval by Swiss Parliament

idrabkin — Mon, 24 May 2010 22:45:42 +0000

Igor S. Drabkin, J.D., Former IRS Attorney

After an announcement by one of the Swiss main political parties, SVP, it appears that the road for approval of the UBS deal by the Swiss Parliament is wide open. The right-wing SVP party, which was firmly opposed to the deal, decided to change its position in exchange for reassurances from the government hat it will not sign similar deals in the future. The SVP’s backing gives a clear majority to those supporting the UBS deal in the parliament.

The Swiss government has been asking for parliamentary backing of the UBS deal for a while, arguing that it is needed to avoid a U.S. backlash and protect Swiss banks. The Swiss parliament is expected to vote on the issue in June. Support for the deal would end a Swiss legal deadlock and allow Switzerland to pass on to U.S. tax authorities the names of 4,450 U.S. clients of UBS holding secret accounts in Switzerland.

If you have questions about foreign bank accounts or offshore assets, please call Former IRS Attorneys of Holtz, SlavettDrabkin & . We can assist you to address tax compliance issues related to IRS enforcement of offshore bank accounts. You can contact us at (310) 550-6200.

Author: Igor S. Drabkin, J.D., Former IRS Attorney.

U.S. to Investigate Thousands More Offshore Tax Evaders

idrabkin — Mon, 10 May 2010 18:13:25 +0000

Igor S. Drabkin, J.D., Former IRS Attorney

The U.S. government expects to investigate thousands more cases of wealthy individuals dodging taxes through offshore bank accounts, in addition to the high profile and highly publicized case against UBS AG. It appears that in addition to probing the Swiss and Caribbean bank accounts, the U.S. may be looking at the Asian banks as well.

“We expect over the next couple of years, in addition to the UBS cases, to have somewhere between 4,000 and 7,000 more cases coming to us. These are from banks and governments cooperating,” said Kevin Downing, a senior tax attorney of the U.S. Department of Justice, in a lecture in Singapore. Some private banking clients are choosing to take cash from Swiss accounts and carry it by hand back to the United States, to avoid an electronic trail, only to be caught by U.S. law enforcement officers and penalized for tax evasion and illegal smuggling of money into the country, Downing said. “When they go in and close their accounts, they are picking up brand new $100 bills … that are coming in $100,000 shrink-wrapped bundles. Guess what? We can trace that money,” he said, adding such cash would be forfeited.

Downing and a U.S. Justice Department team visited Singapore in a tour of Asian cities, also including Hong Kong, Beijing and Shanghai. The tour featured meetings with financial and tax regulatory bodies and bankers discussing cross-border tax prosecutions. Downing said that since the start of the U.S. crackdown on tax evasion, money has moved from the Caribbean to Switzerland and Asia. Downing declined to say whether the Justice Department was investigating any other foreign banks. About 15,000 Americans with offshore accounts came clean under an amnesty program last year, giving them reduced penalties and a chance to avoid criminal prosecution while giving authorities a trove of information to assist their hunt. “We now have the ability to go back through with voluntary disclosures and really target the banks with witnesses and evidence that’s right in the United States,” Downing said.

U.S. Government Brings New Cases Against Offshore Tax Evaders

idrabkin — Tue, 20 Apr 2010 17:25:42 +0000

Igor S. Drabkin, J.D., Former IRS Attorney

Just as the April 15th deadline for filing income tax returns approached, the US government announced a bunch of new cases against the taxpayers who were hiding their assets in Swiss bank accounts. The parade of cases involved at least $145 million hidden in foreign bank accounts, according to the officials.

Seven former clients of UBS AG were charged with filing false tax returns, collectively hiding more than $100 million held offshore in Swiss accounts. Two of the seven pleaded guilty on April 15, 2010, in Manhattan federal court. One of the defendants, Jules Robbins, admitted to filing false income tax returns, knowingly failing to mention a UBS account and any income earned on that account, for the tax years 2003 to 2007.

Robbins, a resident of New York who owned and operated companies that distributed watches, was believed to have had as much as $40 million in the account. Robbins agreed to pay a civil penalty of $20.8 million and faces a possible prison sentence of between six months and 12 months following his guilty plea. Another of those charged, New York investment portfolio manager Federico Hernandez, pleaded guilty to similar charges. He faces a possible prison sentence of between 18 months and 24 months and a civil penalty of $4.4 million. In addition, a U.S. grand jury returned indictments against four other former bank clients, businessmen Ernest Vogliano, Shmuel Sternfeld, Richard Werdiger and a New York woman identified as Sybil Nancy Upham. U.S. prosecutors also charged a disbarred lawyer, Kenneth Heller.

On April 12, 2010, another U.S. client ofUBS AG pleaded guilty to filing false tax forms on income diverted to offshore Swiss accounts. Harry Abrahamsen pleaded guilty in federal court in New Jersey to failing to file a Report of Foreign Bank and Financial Accounts (FBAR) with respect to accounts valued at $1.3 million. Abrahamsen admitted he failed to report his account and a second one in his daughter’s name. He had transferred funds through a shell Panamanian company to hide funds from the Internal Revenue Service, according to the government.

Also on April 15, 2010, authorities arrested New York real estate developers Mauricio and Leon Cohen, father and son. In documents filed in the Southern District of Florida, the government alleges the two evaded taxes and failed to account for $45 million. They are also alleged to have failed to pay taxes on the sale of a New York hotel by using shell companies in tax havens. The government said the Cohens used a large international bank to hide the money. A source with knowledge of the case identified the bank as HSBC, Europe’s biggest bank. Interestingly, the name of HSBC was mentioned in the recent news with respect to the stolen data containing names of foreign account holders. This data was offered to, and apparently accepted by, the tax authorities of Germany and France. It will be interesting to see whether this case is the first of the string of HSBC cases that the US government may pursue, just as they pursued the UBS account holders.

If you have questions about foreign bank accounts or offshore assets, please call Former IRS Attorneys of Holtz, Slavett & Drabkin. We can assist you to address tax compliance issues related to IRS enforcement of offshore bank accounts. You can contact us at (310) 550-6200.

Author: Igor S. Drabkin, J.D., Former IRS Attorney.

Another UBS Client Pleads Guilty

idrabkin — Thu, 15 Apr 2010 23:05:05 +0000

Igor S. Drabkin, J.D., Former IRS Attorney

A U.S. client of UBS AG pleaded guilty on April 12, 2010, to failing to file FBAR forms with respect to income diverted to offshore Swiss accounts valued at $1.3 million. The case is the most recent of a slew of actions the government has brought against former clients of Swiss banking giant UBS. The individuals are accused of stashing assets abroad to escape the eyes of U.S. tax authorities. UBS client Harry Abrahamsen pleaded guilty in federal court in New Jersey to failing to file a “Report of Foreign Bank and Financial Accounts.” Abrahamsen admitted he failed to report his account and a second one in his daughter’s name. He had transferred funds through a shell Panamanian company to hide funds from the Internal Revenue Service, according to the government. The timing of the plea seems to indicate that the IRS wants to draw attention to taxpayers’ obligation to report assets held offshore before the April 15 tax-filing deadline.

IRS Starts New Wave of UBS Tax Cases

idrabkin — Wed, 07 Apr 2010 22:41:39 +0000

Igor S. Drabkin, J.D., Former IRS Attorney

It appears that U.S. prosecutors are about to begin a new wave of UBS-related tax evasion cases against individuals, and they plan to do it just before the April 15 tax-filing deadline. The first case in the new round of prosecutions — apparently intended to create a splash of media attention before tax day — was filed on Tuesday in the U.S. District Court for the Southern District of Florida, where many of the prior UBS-related cases have been prosecuted. The sources, who declined to comment on the record, said additional cases coming within days will charge individuals with evading U.S. taxes by using accounts at the Swiss bank and will be prosecuted in New York City and elsewhere.

The government has secured eight guilty pleas so far from UBS clients since the bank admitted that it helped taxpayers avoid U.S. taxes. Last year, UBS paid the government $780 million and gave information about 250 accounts to the U.S. authorities. Also last year, UBS settled the government’s civil case against it and agreed to hand over 4,450 more client names, though that deal is tied up in legal wrangling in Switzerland.

The Internal Revenue Service and its lawyers want to make a “big splash” to remind people of their duty to report offshore income, one source said. The cases prosecuted so far involved UBS clients with accounts in the range of $10 million and less. It appears that the new cases would be within that range. On April 5, 201, IRS Commissioner Doug Shulman said the agency is still working through an additional 15,000 records it received from individuals who took part in an IRS amnesty program for offshore income that ended in October of 2009. The agency is looking for patterns in the records to identify other banks and advisers that helped wealthy individuals avoid taxes. That area will be “the next wave,” of the investigation, Shulman said, without naming other banks.

Former IRS Attorneys of Holtz, Slavett & Drabkin can assist you to address tax compliance issues related to offshore bank accounts. You can contact us at (310) 550-6200.

Author: Igor S. Drabkin, J.D., Former IRS Attorney.