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 firstname.lastname@example.org.