Andrew Joseph Stack, 53, appears to have flown his Piper Cherokee plane into an IRS (tax authority) building in Austin, Texas intentionally, say authorities in the city, after setting his house on fire 18 February. Two people died in the crash into a building where 200 people work, and two others were injured. Firefighters had contained most of a fire started by the crash but were working during the night to put it out completely. Stack’s web site appears to reflect a long-held grudge against the US government and the IRS in particular.
Alexandria, Virginia, USA (GenevaLunch) - Details are emerging of the case of Dr Andrew Silva, who pleaded guilty 16 February in US District Court in Virginia to “conspiring to impede the United States” and to making false statements. Silva inherited $250,000 from him mother in 1997. The money, never declared to the US tax authorities, the IRS, was in a British-owned bank in Switzerland. The money grew to $268,000 by the time he tried to take the money out in 2009 when the bank said it was closing his account, a time when a number of banks in Switzerland began to close accounts held by US citizens both outside and in Switzerland. to avoid problems with US authorities.
The US Justice Department Tuesday issued a press release on his case, noting that Silva, a nose and throat specialist and surgeon, could face up to 10 years in prison and a maximum fine of $500,000. He was released on his own recognizance.
“We are capable of thwarting offshore banking schemes because of the increased cooperation among ICE, Postal Service, and the IRS,” says Neil MacBride, US Attorney for the Eastern District of Virginia says in the Justice Department release. “The tax charges in this case came to light because agents caught Mr Silva structuring cash to avoid reporting requirements, and that kind of coordination is making it possible for us to discover Americans who conceal their wealth overseas and make them pay for their actions.” Structuring cash is a term that describes bundling a large amount into several smaller ones, all under $10,000, to slip them into the US to avoid detection or without having to declare the money to customs authorities.
The Justice Department points out that “United States law prohibits individuals from structuring mailings of US currency into the United States in amounts less than $10,000 if the purpose of the structuring was to evade the requirement to file a CMIR.” The CMIR form’s longer name is: FinCen Form 105, Report of International Transportation of Currency or Monetary Instruments, and it must be filed with the US Bureau of Customs and Border Protection.
The government’s description of how Silva tried to get the money out of Switzerland:
Alexandria, Virginia, USA (GenevaLunch) - A doctor based in Virginia in the US pleaded guilty Tuesday 16 February to conspiracy to evade taxes. This is reportedly the first IRS (US tax authority) case where a non-US bank other than Switzerland’s UBS is cited as providing advice about how to evade taxes.
Update 16:55 (links added) Bern, Switzerland (GenevaLunch) - The Swiss government Wednesday said it will ask Parliament to approve the August 2009 double taxation agreement with the US, raising it to the status of a tax treaty. The process will take time and, in the meantime, the government says it will continue to hold talks with the United States to resolve a five-day-old impasse over requests by the US for judicial assistance on 4,450 UBS clients’ accounts.
A high court decision last Friday, which cannot be appealed, limits the federal government to providing assistance in only 250 of the cases pending, where clear evidence of fraud under Swiss law appears to be present. Eveline Widmer-Schlumpf told journalists Wednesday that Switzerland has shared information on six accounts to date. The court’s ruling is based on three arguments, says the cabinet:
- that the agreement from August is an understanding only and does not carry the same weight as the 1996 double taxation treaty which is still in effect
- that the double taxation treaty makes a clear distinction between tax fraud and fraud-like activities versus tax evasion, even when carried out over time and involving large amounts of possible tax money owed
- that the August agreement cannot override the existing treaty.
The court itself suggested that the Federal Council ask for parliament’s approval of the agreement, which would then give it the force of a new treaty – as long as the US Congress also accepts it.
IRS sets up Global High Wealth Industry Group, seeks joint audits with other governments
UBS boss says governments must sort it out
by Sean Ecker with Ellen Wallace
Bern, Switzerland (GenevaLunch) – The Swiss government meets Wednesday 27 January to review the impact of a court’s decision last Friday, which asks the Federal Tax Administration to review the case of at least 25 UBS bank clients whose names were slated to be handed over to US tax authorities. The court ruled that a client’s failure to supply a bank with the American tax W9 form does not in itself constitute fraud (Ed. note: the US penalty for failing to supply the taxpayer identification number form is $50).
The court decision raises questions about the 4,450 names Switzerland has agreed to review for the IRS tax authority: people who are suspected of having committed tax fraud, as opposed to tax evasion.
Bradley Birkenfeld (photo: National Whistleblowers Center)
Miami, Florida, USA (GenevaLunch) – UBS manager turned informer Bradley Birkenfeld will go to prison 8 January after a judge turned down his appeal for clemency Monday 4 January. US District Judge William Zloch also refused to consider further appeals, reports Swissinfo, in a feature on the impact of Birkenfeld’s case and that of a French former HSBC employee. Both have given their governments information on clients held by banks based in Switzerland, a crime under Swiss law.
Birkenfeld has argued that he should not be sent to prison because he brought the IRS, US tax authority, information on some 19,000 clients. But prosecutors have argued that “he failed to disclose his own crimes”, says Swissinfo.
His request to receive whistleblower awards that could amount to several million dollars is under consideration by the IRS Whistleblower Program. The National Whistleblowers Center’s attorneys have been representing Birkenfeld. They issued a statement 30 December calling on all Americans to write to the attorney general to stop Birkenfeld going to jail, saying it will send the wrong message.
Links to other sites: US National Whistleblower Center, Swissinfo
New York, NY, USA (GenevaLunch) - Bradley Birkenfeld, the former UBS bank wealth manager who shared 19,000 bank client names with the IRS, US tax authority, appeared on CBS television Sunday night, lamenting his prison term. Birkenfeld is scheduled to go to prison 8 January to begin serving a 40-month prison sentence for his part in defrauding the IRS. He could exit prison a wealthy man thanks to rewards from the IRS Whistleblower programme. He told the television interviewer that he believes it is unfair he should be the only banker to go to prison in connection with the case.
Background, GenevaLunch
Links to other sites: CBS 60 Minutes show, TSR (Fre)
Miami, Florida, USA (GenevaLunch) – Bradley Birkenfeld, the former UBS wealth manager in the US who set off a court case between the US tax authority, the IRS, and Switzerland’s largest bank, says he is ready to give more evidence. Birkenfeld, who stands to benefit from the IRS Whistleblower programme, is scheduled to go to prison 1 January to start serving a 40-month sentence. He has asked a Florida court to delay the start of his sentence in exchange for cooperating more extensively with the IRS, reports Swiss news agency TXT/TSR.
Background, GenevaLunch
UBS New York headquarters
Zurich, Switzerland (GenevaLunch) – There will be no trial of the current and former heads of Swiss bank UBS, the Zurich prosecutor’s office announced Tuesday 15 December. Shortly afterwards, the UBS board announced that it would not press charges, either, against unnamed former senior executives. Swiss politicians have been calling for someone to take responsibility for the most serious banking debacle in Switzerland’s history.
The possibility that the bank might have collapsed at the end of 2008 in the wake of the US sub-prime catastrophe moved the Swiss government to inject billions of Swiss francs into the bank. The public prosecutor in Zurich said that in the case of the sub-prime losses and cross-border case that pitted UBS against US tax authorities, there was no evidence that Swiss law had been broken.
Bern, Switzerland (GenevaLunch) – The Federal Tax Administration (FTA) has finished reviewing the first 500 files of UBS clients suspected of tax fraud by the IRS, the US tax authority. The FTA announced 25 November that it has not communicated names to the IRS and will not, as stipulated in the Swiss-US agreement, until clients have exhausted the appeals process.
Bern, Switzerland (GenevaLunch) – “There is no guarantee that the IRS will have 4,450 names” when Switzerland finishes reviewing the 4,450 UBS bank accounts identified according to the criteria established by the United States and Switzerland, Folco Galli of the Swiss Federal Justice Department told GenevaLunch Wednesday 18 November. There is also no reason to believe the number will be close to this – or, on the other hand, far smaller. The US ambassador to Switzerland, Donald Beyer, last week commented that he expects the number to be far smaller, while the New York Times appears to have erroneously implied 17 November that Switzerland must turn over this many names to the IRS.
“At the moment, no one knows,” Galli says, because the accounts and names are being reviewed, a process that will take a year. And no one knows how many, if any, of the 14,700 individuals who came forward to the IRS under the amnesty programme, are part of the group of 4,450 UBS accounts, since those account holders are currently all known only to the bank itself. UBS, as part of the agreement, is filtering the identified accounts based on the governments’ criteria in order to turn data over to the federal administrative review.
Update 20:25 Bern, Switzerland (GenevaLunch) – The Swiss government will not automatically hand over details of UBS accounts to the IRS, the US tax authority, without giving account owners a chance to defend themselves, Bern announced Tuesday 17 November: if Switzerland’s tax authority decides to turn over information to the IRS, account holders will first be notified and given a “chance to state their case.”
The announcement appears to be at odds with a remark attributed by the New York Times to Douglas Shulman, IRS commissioner, at a press conference held in New York Tuesday. He is reported to have referred to “‘the obligation that the Swiss have taken to the US government to produce 4,450 names’ to the IRS, he said.” But Switzerland says it will review the 4,450 accounts agreed upon and make a legal decision in each case about providing assistance to the IRS.
The Swiss government and the IRS Tuesday separately announced details of the process covered by their agreement, signed in August, concerning 4,450 UBS accounts where the IRS has asked for assistance as it chases tax evaders. Switzerland says the UBS affair will cost the government CHF40 million, with a team of some 40 legal and tax experts working fulltime for a year to decide in which of the cases Switzerland will provide assistance. Additional help from specialists will be called in if necessary.
The IRS’s Shulman also announced that more than 14,700 people had come forward under a tax amnesty that ended 15 October, for non-compliant taxpayers, well over the 100 or so who turn themselves in, in most years. He noted that the IRS case brought against UBS in 2008 will be dropped only if the US tax authority receives the names of 10,000 UBS clients, either through Swiss assistance or by the clients turning themselves in. The taxpayers who took advantage of the amnesty were from several countries and from many banks.
Tax adviser Gregory Dean of US Tax & Financial Services in Geneva Tuesday evening cautioned that “We should not lose sight that the voluntary disclosure programme still exists – the special programme promoted by the IRS closed October 15, but this has created the wrong impression that people can no longer come forward under the voluntary disclosure programme. This programme still exists, though the IRS approach to a post-October 15 disclosure is a little uncertain. What is certain is that voluntary disclosure is not available where the IRS has initiated an investigation of a taxpayer.”
Ed. note: The documents which make up the annex to the agreement between the two countries are available, but only in German, on the federal government’s web site.
Highlights of the agreement
Zurich, Switzerland (GenevaLunch) – Swiss bank UBS holds a regular Investors Day Tuesday 17 November in Zurich and speculation is running high among media and analysts about what it will say to them. The plan to move the bank back to profitability is undoubtedly high on the list, with Bloomberg suggesting that Oswald Gruebel, chairman, “will probably list hiring in fixed-income as a key element in his turnaround plan,” because the bank is likely to count on its investment bank’s trading of debt securities to pull it out of debt. The Wall Street Journal says investors will be watching Robert McCann, new head of the US wealth management unit, for signs of what the bank plans to do there, and whether Gruebel intends to sell off the unit at some point.
Mixed signals from banks, for US citizens in Switzerland
Updated 01:00 Geneva, Switzerland (GenevaLunch) - Swiss banks have become more cautious in their relations with US citizens in the wake of problems the country’s largest bank, UBS, ran into in 2008 with the IRS over unreported income on the part of some of its clients. GenevaLunch, in a survey of several Lake Geneva area banks, found that without exception the banks say they do not discriminate against US citizens, and they continue to welcome new accounts. Stories nevertheless abound in Switzerland of US citizens who received letters in early 2009 from their banks saying their accounts were being closed – but few of of these people will speak openly about such letters, in part because the IRS tax authority encourages citizens to report on others who are not “compliant” in filing taxes as well as listing all worldwide assets.
US Ambassador Beyer suggests UBS could turn over fewer names
A GenevaLunch reporting team this week spoke with several people to determine the extent to which the personal banking problem is real or a recent urban myth. The team talked to seven of the eight banks which returned its calls and to a number of US citizens resident in Switzerland, as well as with members of American Citizens Abroad (ACA). Some of those interviewed participated in an informal meeting in Geneva 12 November with the new US ambassador to Switzerland, Donald Beyer, where the banking problem was raised.
Beyer later in the day told WRS public radio in Geneva that some 9,000 Americans took advantage of an IRS amnesty for citizens overseas that ended 15 October. He suggested in the radio interview that the number of names UBS will turn over to the IRS is likely to be lower than the numbers – up to 50,000 – tossed about earlier in 2009 by international media.
Zurich, Switzerland (GenevaLunch) - A retired sales manager at Boeing in Seattle, Washington, USA, is the eighth person to admit he held accounts at Swiss bank UBS to evade the US tax system. The US Justice Department announced Monday 5 October that Roberto Cittadini of Bellevue, Washington has pleaded guilty to filing false tax returns and to hiding $1.8 million from the IRS, the US tax authority. The department’s detailed press release notes that Cittadini was helped by a Swiss banker and Swiss accountant, both of whom were indicted for fraud in the US in August 2009.
In case of emergency, press button!
Update 23:35 Bern, Switzerland (GenevaLunch) – Switzerland is in the process of setting up a tax hotline, primarily for US citizens, to deal with an expected influx of questions once the US and Switzerland both sign the new double taxation agreement, GenevaLunch has been told by a government official. The date for the hotline to open is not yet set, nor are further details available yet.
The Swiss cabinet 11 September gave a green light to two ministries, foreign affairs and finance, to sign the agreement. They are currently working on details, the official says, and while no one can yet say when exactly the agreement will be signed, he would not exclude that this could be in the very near future. [Ed. note: a Swiss Bankers Association senior official said at a meeting in Geneva Tuesday evening that Switzerland is expected to sign the agreement tomoorw, 23 September].
Update 2 15:45 The IRS will extend the 23 September deadline,”a one-time extension of the deadline for special voluntary disclosures by taxpayers with unreported income from hidden offshore accounts. These taxpayers now have until Oct. 15, 2009″, the US tax agency announced 21 September.
The IRS announced Monday 21 September that it is pushing back its amnesty deadline for overseas US citizens and greencard holders to file some forms late. The complete announcement:
The Internal Revenue Service today announced a one-time extension of the deadline for special voluntary disclosures by taxpayers with unreported income from hidden offshore accounts. These taxpayers now have until Oct. 15, 2009.
Under special provisions issued in March, taxpayers with these hidden accounts originally had until Sept. 23, 2009 to come forward. Those taxpayers who do not voluntarily disclose their hidden accounts by the new deadline face much harsher civil penalties, where applicable, and possible criminal prosecution.
IRS officials decided to extend this deadline after receiving repeated requests from tax practitioners and attorneys around the country following an influx of taxpayer requests. By extending the deadline for a short period of time, the IRS is providing relief for those taxpayers who had intended to come forward prior to the deadline, but faced logistical and administrative challenges in meeting it. The extension will allow tax preparers and attorneys the necessary time to interview and advise their backlog of taxpayers with these hidden accounts, and prepare the necessary paperwork to qualify for the special penalty provisions.
The IRS also announced that there will be no further extensions.
Swiss Federal Tribunal, Bern
Updated 14:00 Bern, Switzerland (GenevaLunch) – The Swiss cabinet has agreed to allow up to five additional but temporary posts for Federal Administrative Tribunal judges, to allow the high court to handle a sudden increase in legal cases likely to arise in relation to UBS client names requested by US tax authorities.
Bern said Friday 18 September that it expects some 500 appeals by the end of the year in cases where the Swiss finance ministry agrees to provide judicial assistance to the IRS, the US tax authority. The request for assistance are being made by the IRS as par of a 31 August agreement between Switzerland and the US.
See also: part 2 – Taxes overboard! Americans reconsider the IRS at the Geneva T party
and part 1: US-Swiss treaty details may not come in time to help US citizens abroad
[Update 3, 21 September: note that the IRS has announced it will delay the deadline to 15 October 2009, from 23 September - details here; correction added to point 5 below] Geneva, Switzerland (GenevaLunch) – US citizens and greencard holders living outside the US should be aware of new tax rules, but also new enforcement procedures, according to several groups and tax experts who organized a taxpayers’ information evening 2 September in Geneva: American Citizens Abroad, Democrats Abroad and Republicans abroad. Many US taxpayers living in Switzerland and elsewhere have only gradually become aware during 2009 that the IRS (US tax authority) has imposed new rules, a six-month amnesty that ends 23 September and it is taking a tougher stance with “non-compliant” taxpayers. Rumours have been thick on the ground, but hard facts few.
See also: part 1 – US-Swiss treaty details may not come in time to help US citizens
part 3 – What has changed for US taxpayers living abroad
[Update 3, 21 September: note that the IRS has announced it will delay the deadline to 15 October 2009, from 23 September - details here]
Geneva, Switzerland (GenevaLunch) - Many US taxpayers living in Switzerland and elsewhere have only gradually become aware during 2009 that the IRS (US tax authority) has imposed new rules, a six-month amnesty that ends 15 October and it is taking a tougher stance with “non-compliant” taxpayers. Rumours have been thick on the ground, but hard facts few.
The Geneva T for taxes party
The situation came to a head at a highly emotional meeting in Geneva Wednesday evening 2 September, when 200 American expatriates, citizens and green card holders, gathered at Webster University to learn about recent shifts in the tax situation, what has brought it about and what the implications are.
See also: part 2 – Taxes overboard! Americans reconsider the IRS at the Geneva T party
part 3 – What has changed for US taxpayers living abroad
[Update 3, 21 September: note that the IRS has announced it will delay the deadline to 15 October 2009, from 23 September - details here]
Geneva, Switzerland (GenevaLunch) - The Swiss government announced Friday 11 September that it is authorizing its finance and foreign affairs ministries to sign a new double taxation agreement with the US to replace the current one, which dates back to 1996. The step may ease nervousness among some Americans in Switzerland and elsewhere outside the US – as long as it means that details of the new treaty are published soon.
A Swiss government spokesperson told GenevaLunch 11 September that it’s impossible to know when the two Swiss departments will actually sign the treaty. Parliament retains the right to vote on it, as well, once the departments sign, and as yet there is no clear indication if parliament will or will not exercise this right.
Some US citizens and greencard holders who live overseas know that they are considered non-compliant under IRS (US tax authority) rules which are being more stringently enforced in 2009, and they are debating coming in from the cold. Others are only becoming aware they may not be fulfilling their US tax obligations, even though they assumed they were.
Geneva, Switzerland (GenevaLunch) – The US federal budget for 2010 covers an 8 percent funding increase for the IRS tax authority. The International Tax Review in its August issue notes that the “increased funding would allow for the hiring of approximately 800 new IRS enforcement personnel specifically focused on offshore tax avoidance and evasion.” The tougher stance on tax collection includes changes that affect US citizens living abroad. Those who live and bank in Switzerland have been increasingly vocal in recent weeks in their complaints about problems with the US tax system and the IRS tax authority.
New IRS requirements to list foreign bank holdings, IRS regulations that are scheduled to go into effect in January 2010 as well as the end 23 September 2009 to the “voluntary compliance initiative” have caused considerable confusion. A public meeting on US taxes takes place this evening 2 September in Geneva to address the issues. The meeting is sponsored by Democrats Abroad Switzerland (DACH), Republicans Abroad and American Citizens Abroad (ACA).
Public meeting for US taxpayers
American citizens and permanent residents living abroad will have a chance to participate in the Q&A session on double taxation, reporting requirements and penalties for non-compliance.
- Date: 2 September
- Location: LLC Room at Webster University in Bellevue, Canton Geneva
- Time: Doors open at 18:30.
Background: IRS Oversight Board commends IRS for five-year strategic plan (2009-2012)
Zurich, Switzerland and Miami, Florida (GenevaLunch) – Bradley Birkenfeld was sentenced Friday in Miami, Florida, USA to three years and four months in prison plus a $30,000 fine and three years on probation following his prison term. He is the former UBS banker whose revelations to the IRS, the US tax authority, set off an investigation that led to bank UBS being taken to court and the US and Switzerland negotiating a treaty whereby the Swiss government will authorize the bank to release details of more than 4,000 client accounts. Full story
Update 21 August Miami, Florida, USA (GenevaLunch) - A banker for NZB (Neue Zürcher Bank), Hansruedi Schumacher, and a Geneva and Zurich lawyer, Matthias Rickenbach, both Swiss, were indicted Thursday 20 August in Miami, Florida on charges of conspiring to defraud the US. The two are accused by the US of helping US residents to evade American taxes, including Jeffrey Chernick of New York and John McCarthy of Pasadena, California, two of four UBS clients who recently have been indicted for tax fraud after their names were given to the IRS in February 2009 by the bank, and who turned themselves in.
The two are accused, among other things, of telling “a New York businessman they paid an unnamed Swiss government official a $45,000 bribe for information on whether the businessman’s account would be revealed to US investigators,” Associated Press reports court documents as stating. AP also says the two are in Switzerland and it is not clear if they have US attorneys to represent them.
The New York Times says the new indictments indicate “that the American authorities are starting to pursue smaller players that may have helped Americans hide their money.”
Bern and Zurich, Switzerland (GenevaLunch) – Highlights of the agreement between the US and Switzerland in the UBS out of court settlement, provided by the Swiss government, include (Ed. note: US Department of Justice page on the settlement):
Eveline Widmer-Schlumpf, Swiss minister for justice and police, press conference on UBS settlement
Update 4 23:15, Update 3 16:40, Update 2 16:27, Update 1 16:12
Ed. note: UBS shares dipped slightly during the afternoon, but began to rise slowly on the Swiss stock market during the press conference. In related news, Doug Shulman, the US Commissioner of Internal Revenue, who led comments by the US on the UBS case, took up his duties as the new chair of the OECD Forum on Tax Administration 18 August.
Bern and Zurich, Switzerland (GenevaLunch) - The seven members of the Swiss Federal Council (cabinet) Wednesday afternoon 19 August gave a press conference on the settlement in the UBS case. The government issued the following statement:
Shares up; Swiss bankers hire US lobbyist
Zurich, Switzerland (GenevaLunch) - It may be no more than rumour based on several unnamed sources being cited, but the financial world is now expecting the Swiss and US governments to sign on Wednesday an agreement involving Swiss bank UBS. The bank’s shares have continued to climb most of this week, reaching the level they were at in December 2008 before the bank agreed to hand some names to the IRS tax authority, in early February. UBS shares closed in Zurich at CHF16.90 Tuesday 19 August.
Once the agreement is signed by both parties, details can be released. Widespread speculation by industry observers and media has UBS delivering some 5,000 clients’ details to the IRS, but the figure could take on a new aspect with the IRS specifying Tuesday 19 August that it is now investigating for criminal activity 150 of the 252 client names provided to it by the bank in February 2009.
Update 18 August 12:10 Zurich, Switzerland and Los Angeles, California, USA (GenevaLunch) - John McCarthy of Pasadena, California last week became the fourth American citizen to turn himself into the US Justice Department as a client who had a secret offshore UBS bank account, set up to hide his real identity and to defraud the IRS tax authorities. His name was one of those in the group of clients whose account information was given by UBS to the IRS in February 2009. The details of the case where he is expected to plead guilty when he appears in court 14 September were published by the US Department of Justice’s California division.
According to the press release “McCarthy admitted that, with the assistance of UBS representatives and his Swiss lawyer, he directed the investment activities and transfers of funds into and out of the COGS UBS Swiss bank account, as well as from other UBS Swiss accounts he controlled.
Updated 17 August Geneva and Zurich, Switzerland (GenevaLunch) – International media are playing merry-go-round, speculating over the number of names of clients Swiss bank UBS will be required to hand to the IRS tax authority in the US, in the absence of any serious information: two Swiss newspapers, NZZ‘s Sunday edition and Sonntag over the weekend calculated that 4,500 to 5,000 names will be turned over, citing their own research – and US media.
The New York Times carried a story Friday 14 August where the number 5,000 was mentioned by a Washington, DC lawyer and former Justice Department official with no explanation for how he arrived at the figure.
Zurich, Switzerland (GenevaLunch) – The Swiss Socialist Party (PS) filed a criminal complaint Friday 14 August against Marcel Ospel and Peter Kurer, two former chairmen of the board of Swiss banking giant UBS.
The bank’s present difficulties with the US tax authorities, the IRS, can only have been undertaken with the knowledge of its top management, according to SP leader Christian Levrat. He said that if the terms of the agreement initialed between Switzerland and the US require UBS to hand over the names and details of thousands of clients, then it becomes clear that UBS has broken Swiss law, which does not allow tax fraud.
