Preet Bharara, the United States Attorney for the Southern District of New York, Kathryn Keneally, the Assistant Attorney General for the Justice Department’s Tax Division, and Steven T. Miller, the Acting Commissioner of the Internal Revenue Service (“IRS”) today announced that U.S. District Judge William H. Pauley III entered an order authorizing the Internal Revenue Service to issue a summons requiring UBS AG (“UBS”) to produce information about U.S. taxpayers who may hold accounts at the Swiss bank Wegelin & Co. (“Wegelin”) and other banks based in Switzerland to evade federal income taxes. Specifically, the IRS summons seeks records of Wegelin’s United States correspondent account at UBS, which will allow the United States to determine the identity of the U.S. taxpayers who hold or held interests in financial accounts at Wegelin and other Swiss financial institutions that used Wegelin’s UBS account. Wegelin pled guilty in Manhattan federal court on January 3, 2013, to conspiring with U.S. taxpayers and others to hide more than $1.2 billion in secret Swiss bank accounts and to conceal the income they generated from the IRS. As part of its guilty plea, Wegelin agreed to pay approximately $20 million in restitution to the IRS and an additional $22.05 million criminal fine. In addition, Wegelin also agreed to a civil forfeiture of $32 million, $16.2 million of which was seized and forfeited by the Government from Wegelin’s correspondent account with UBS in Stamford, Connecticut (the “Correspondent Account”) in April 2012.
Manhattan U.S. Attorney Preet Bharara said: “This summons is the latest step in our efforts to identify and prosecute U.S. taxpayers who think they can evade their legal responsibility to pay taxes by secreting their money away in anonymous off-shore accounts at Wegelin and other banks, and to recover the hundreds of millions of dollars that is owed to the IRS. Wegelin’s recent guilty plea for facilitating this conduct – the first such plea by a Swiss financial institution - made it possible for us to take this step and our work continues in earnest.”
Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division said: “The Department of Justice will use all means available, and there are many, to pursue U.S. taxpayers who continue to attempt to evade their tax obligations by using foreign bank accounts. This John Doe summons is just one of many actions that we are taking. The world is shrinking, and time is running out for taxpayers to come into voluntary compliance before either the IRS or the Justice Department finds them.”
Steven T. Miller, IRS Acting Commissioner said: “The summons provides an important tool to help with international tax enforcement efforts and detect U.S. taxpayers hiding offshore accounts to evade taxes. This effort reflects a long-term strategy by the IRS and Justice Department to break through international bank secrecy and protect our nation's taxpayers.”
According to the Government’s Indictment and forfeiture Complaint:
Wegelin and at least two other Swiss banks used Wegelin’s Correspondent Account to covertly launder U.S. taxpayers’ funds from their undeclared accounts in Switzerland. As set forth in the papers filed with the district court, the IRS has reason to believe that these funds were transferred in a manner designed to reduce the risk of detection by U.S. authorities, so that the account holders could continue to avoid paying taxes due and owing to the IRS.
In this action, the Court granted the IRS permission to serve what is known as a “John Doe” summons on UBS. The IRS uses John Doe summonses to obtain information about possible tax fraud by individuals whose identities are unknown. This John Doe summons directs UBS to produce records identifying U.S. taxpayers with accounts at Wegelin and other Swiss banks that used Wegelin’s Correspondent Account. Wegelin has admitted that certain of its U.S. taxpayer clients were maintaining accounts at Wegelin in order to evade their U.S. tax obligations.
Federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide. U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds $10,000 at any time during the calendar year. A deliberate failure to report a foreign account can result in a penalty of up to 50 percent of the amount in the account at the time of the violation.
This case is being handled by the Office’s Tax and Bankruptcy Unit. Assistant U.S. Attorney Natalie N. Kuehler is in charge of this case.
U.S. v. Wegelin & Co. Signed Order
U.S. v. Wegelin & Co. Notice of Petition
U.S. v. Wegelin & Co. Memo of Law in Support of Petition
U.S. v. Wegelin & Co. Exhibit A - S1 Indictment
U.S. v. Wegelin & Co. Exhibit B - Forfeiture Complaint
U.S. v. Wegelin & Co Exhibit C - Plea Agreement
U.S. v. Wegelin & Co. Exhibit D - Guilty Plea Transcript
U.S. v. Wegelin & Co Exhibit E - Summons