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Switzerland’s Oldest Bank Indicted on U.S. Tax Charges
The US Attorney’s Office for the Southern District of New York recently announced the first ever indictment of a Swiss bank. The indictment, returned by the grand jury and unsealed on February 2, 2012, alleges that Wegelin & Co. conspired with US taxpayers and others to hide from the Internal Revenue Service (IRS) more than $1.2 billion in secret assets and the income these accounts generated.
Concurrent with this indictment, the US government seized more than $16 million from Wegelin’s correspondent bank account in the United States, in accordance with a civil forfeiture complaint and seizure warrant. Wegelin is charged in a superseding indictment with Michael Berlinka, Urs Frei and Roger Keller, three client advisers at the bank who were previously charged with the same conspiracy.
The government alleges that the defendant’s conspiracy in this case corresponds with Swiss banking giant UBS’ announcement on or about July 17, 2008 that it was closing its US cross-border banking business. UBS thereafter began notifying clients that they could continue to maintain undeclared accounts at Wegelin and certain other Swiss private banks. It was at this time that Wegelin’s executive committee, including its managing partners affirmatively decided to capture the illegal US cross-border banking business lost by UBS by opening new undeclared accounts for US taxpayer clients fleeing UBS.
The defendants in this case are currently only charged with conspiracy. However, their alleged conduct in the indictment could open them up to various other offenses. For example, the indictment alleges the transmission of a long list of checks and wire transfers from Wegelin to US taxpayers for the purpose of repatriating funds from these undeclared accounts. This list of transactions shows that most of the amounts transferred were under the $10,000 reporting requirement and sent to the same recipient over relatively short periods of time. Such behavior, if proven to have been undertaken to evade reporting requirements, is known as structuring, or “smurfing,” and is prohibited under the anti-structuring statute. The indictment also alleges that Wegelin instructed clients to carry cash and to avoid taking more than $10,000 with them on international flights, all to allegedly avoid reporting requirements. According to the statute, each such transaction can be charged as a separate and distinct offense. Therefore, defense counsel will have to take into consideration the possibility of a multi-count superseding indictment against the defendants when negotiating with prosecutors.
Another interesting observation for defense counsel to consider is the fact that the US taxpayer clients are identified as co-conspirators but have not yet been named as defendants themselves. These unindicted co-conspirators might have provided the US government with information about Wegelin’s alleged wrongdoing in exchange for proffer letters or non-prosecution agreements. Alternatively, the government may have merely agreed to delay the return of any such indictments to see how cooperative or useful these co-conspirators prove to be against Wegelin. When weighing the multitude of factors impacting the defendants’ decisions to accept plea agreements, defense counsel should recognize that all such witnesses will be particularly susceptible to cross-examination should this case go to trial.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
Patient Recruiter Pleads Guilty in Louisiana Health Care Fraud Scheme
On July 15, 2010 a federal grand jury in the Middle District of Louisiana named Fred Belcher, among others, in a five-count indictment. The indictment specifically charged Mr. Belcher with (1) Conspiracy to Commit Health Care Fraud and (2) Conspiracy to Defraud the United States and to Receive and Pay Health Care Kickbacks. On January 31, 2012 Mr. Belcher pled guilty to one count of Conspiracy to Commit Health Care Fraud, effectively dropping one of the conspiracy charges against him in return for his plea.
Mr. Belcher’s plea admitted to the court that he worked as a recruiter for Healthcare 1 LLC, Medical 1 Patient Services LLC, and Lifeline Healthcare Services Inc., Louisiana-based companies that fraudulently billed durable medical equipment (DME) to the Medicare program from 2004 to 2009. He and other recruiters were hired to obtain prescriptions for DME such as leg braces, arm braces, power wheel chairs, and wheel chair accessories. Specifically, Belcher recruited Medicare beneficiaries to attend “health fairs” that he organized at churches and other locations in the beneficiaries’ communities. At these fairs, he obtained information from the beneficiaries and paid a doctor to prescribe medically unnecessary DME for the beneficiaries. Belcher then sold these prescriptions to the three Louisiana companies listed above to bill Medicare.
Unlike traditional criminal cases, defendants involved in criminal activity related to government health care programs (i.e. Medicare, Medicaid, etc.) must be conscious of potential enforcement actions by the Office of Inspector General (OIG) of the U.S. Department of Health & Human Services (HHS) in addition to any criminal consequences. OIG’s mission is to protect the integrity of HHS programs as well as health and welfare beneficiaries. The OIG accomplishes this primarily by conducting audits, investigations, and evaluations. Perhaps most importantly, OIG has the power to exclude persons from participating in or providing services for or on behalf of HHS programs such as Medicare and Medicaid. In essence, to be excluded by the OIG means being black-listed from the medical industry.
Exclusions are a serious and potentially devestating consequence of pleading guilty to criminal activity involving HHS programs. A quick search of OIG’s database on January 31, 2012 shows that Mr. Belcher has yet to be excluded from the Medicare program. This however, does not mean that he won’t eventually be excluded. OIG exclusions tend to happen subsequent to a guilty plea or criminal investigation and in addition to any imprisonment, forfeiture, or fines levied in the criminal case. In many ways, exclusion by the OIG can be worse for the defendant than many criminal consequences because it denies the defendant the ability to earn a livelihood in the only industry the defendant is familiar with.
Therefore, defense counsel should immediately engage in a dialogue with OIG on behalf of a client facing health care fraud charges to dicuss whether a potential exclusion is being considered. Exclusions are regularly for a term of years, thus there would seem to be room to negotiate more favorable terms for one’s client if an exclusion is inevitable. Moreover, defense counsel should be conscious of an individual client’s exposure to exclusion whenever a corporate entity in the medical field is being investigated or enters into a non-prosecution agreement. Even in instances where a particular client is not charged with criminal conduct, OIG may unilaterally move to have that person excluded from the Medicare program depending on the scope of the entity’s admissions about the client. Nonetheless, defendants in such cases must be made aware of the potential for exclusion so that they can make an informed decision about accepting a plea agreement or going to trial.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
Disadvantaged Defendants: Federal Conspiracy and U.S. Economic Sanctions
Conspiracy is frequently charged in federal criminal cases. In the simplest terms possible, a conspiracy exists whenever two or more people agree to commit a criminal offense. Since most white collar crimes involve multiple actors, U.S. Attorney’s commonly utilize conspiracy charges when indicting white collar defendants. For example, the federal government has recently indicted individuals and firms in the United Arab Emirates, France, U.S., and Iran for violating and conspiring to violate the Iran embargo and various U.S. export laws and fraud laws. Because the federal conspiracy law does not merge with the underlying offense being conspired, these defendants can serve sentences for both the underlying offenses and the overarching conspiracy charge. This is unlike other inchoates crime like attempt or solicitation, which merge into the underlying offense if the offense is actually completed. However, for many of the defendants in this case the possibility of serving time for a separate conspiracy charge is probably not the worst consequence of being charged with conspiracy.
The defendants in this case are most disadvantaged by the conspiracy charge because the government can now bring together at a single trial all defendants who were allegedly part of the conspiracy, including minor participants and those with little direct evidence against them. In a case as complex and far reaching as this one, a co-conspirator who served as a shipping clerk with little knowledge as to the scope of the conspiracy he was involved in can be tried alongside the sophisticated corporate officer who designed the entire scheme.
Another key disadvantage to defendants implicated in a large conspiracy is the expanded scope of evidence that can be used against them. First, the nature of a conspiracy charge expands the scope of relevant evidence that can be used against the defendants. For example, evidence as to any co-conspirators’ acts in furtherance of the conspiracy may be admissible in the trial that includes all the defendants. Second, co-conspirator statements made during and in furtherance of a conspiracy are admissible under the “co-conspirators exception” to the hearsay rule.
Additionally, a defendant charged with a conspiracy such as this one faces significantly expanded liability. This is because co-conspirators are often vicariously liable for the substantive offenses committed by other co-conspirators. In this case, the shipping clerk who signed forms with the understanding that the parts sent to France would end up in Iran would not only be liable for his own actions, but will also be liable for the actions of every other participant in the conspiracy, including any unlicensed money transfers, other willful evasions of the sanctions, frauds, etc.
The conspiracy also allows the government to bring the case in any district where the conspiratorial agreement was entered into or where any co-conspirator committed any act in furtherance of the conspiracy. This means that the government can choose to bring the case where it is most advantageous to the prosecutors or where it is least convenient for the defendants. In a global case such as this one, the government’s ability to choose from a long list of eligible sites for venue can be powerful.
Lastly, conspiracy also extends the the statute of limitations because the time does not begin to run until all the goals of the conspiracy have been accomplished or abandoned. For example, the statute of limitations for violations of IEEPA or the Iranian Transactions Regulations is five years, but as long as any one co-conspirator commits a single overt act every five years the conspiracy is considered ongoing and every co-conspirator remains indefinitely liable.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
