A New York federal grand jury recently indicted a Swiss lawyer and bank executive for their roles in allegedly assisting US citizens with hiding assets in Swiss bank accounts, allowing the US citizens to evade income taxes. This is one in a line of criminal actions brought by the US Attorney’s Office in Manhattan (USAO) against foreign banks and tax advisors regarding use of offshore accounts to evade US tax reporting and payment obligations.
According to the indictment, Edgar Paltzer is a partner at an unnamed Swiss law firm and specializes in wealth management and tax matters; Stefan Buck held various positions at an unnamed Swiss bank (Swiss Bank 1) and is currently a member of its executive board. From 2000 to 2012, prosecutors claim that the pair opened and managed undeclared accounts at various Swiss banks on behalf of their clients, and took other measures to ensure that the Internal Revenue Service would not discover that US citizens beneficially owned the accounts. The indictment describes six unnamed clients of defendants who did not report their Swiss bank accounts on annual tax returns or foreign bank and financial account reports. The means the defendants allegedly advised their clients to employ to evade tax laws included repatriating funds from foreign accounts by (i) transferring the monies to intermediary offshore accounts held in the names of foreign corporate entities or trusts created for that purpose; (ii) structuring the sizes of transfers to avoid reporting obligations; (iii) making transfers to different individuals or entities to conceal the identity of the beneficial owner and (iv) converting the offshore funds into expensive jewelry and thereafter transferring it to the accountholder in the United States. Paltzer and Buck allegedly advised that these means would shield clients’ assets from financial reporting and income tax obligations.
The indictment further describes that in March 2009, the Department of Justice (DOJ) reached a deferred prosecution agreement with a different Swiss bank for substantially similar conduct. In February 2012, another Swiss bank was indicted and pled guilty to virtually identical charges. During the intervening period from 2009 to 2012, prosecutors allege that Paltzer and Buck actively courted clients from those banks, such that Swiss Bank 1 saw a 300% increase in customers who were US taxpayers.
Paltzer and Buck have each been charged with one count of conspiring with US citizens to evade taxes. The defendants reside in Switzerland and, at the time the indictment was made public, neither had been arrested. If convicted, they each face a maximum sentence of five years in prison, a maximum term of three years of supervised release, and a fine, which would be the greatest of (i) $250,000; (ii) twice the gross pecuniary gain derived from the offense or (iii) twice the gross pecuniary loss to the victims.
US v. Paltzer et al., No. 13-cr-282 (S.D.N.Y. Apr. 16, 2013).