U.S. Attorney Announces 30-Count Indictment Charging Garment-Manufacturing Executive With Tax Fraud Scheme, Masking Millions In Payroll
Damian Williams, the United States Attorney for the Southern District of New York, Stuart M. Goldberg, the Acting Deputy Assistant Attorney General for Criminal Matters of the Justice Department’s Tax Division, and Jim Lee, the Chief of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today the filing of criminal charges against Swiss Bank, BANQUE PICTET ET CIE SA (“BANQUE PICTET” or the “Bank”) for conspiring with U.S. taxpayers and others to hide more than $5.6 billion in 1,637 secret bank accounts in Switzerland and elsewhere and to conceal the income generated in those accounts from the IRS.
As part of today’s resolution, BANQUE PICTET entered into a Deferred Prosecution Agreement (“DPA”) and agreed to pay approximately $122.9 million to the U.S. Treasury. Today’s resolution is one of a series of cases brought by the Department of Justice in connection with its investigations since 2008 into facilitation of offshore U.S. tax evasion by foreign banks. The case has been assigned to U.S. District Judge Edgardo Ramos.
U.S. Attorney Damian Williams said: “As it has admitted today, Banque Pictet knowingly conspired to conceal from the IRS the income generated by accounts which held more than $5.6 billion. Thanks to the hard work of the career prosecutors of this Office and our law enforcement partners, Banque Pictet has agreed to pay more than $122.9 million and will continue to cooperate with the Department of Justice. Rooting out financial malfeasance remains a priority for this Office, and we encourage companies and financial institutions to come to us to report wrongdoing before we come to you.”
Acting Deputy Assistant Attorney General Stuart M. Goldberg said: “Today, Banque Pictet et Cie admitted to actively helping U.S. taxpayers use coded accounts, foreign trusts and entities, nominee beneficiaries and other deceits to conceal their income and assets abroad. For this criminal conduct the bank will be paying nearly $122.9 million in restitution, disgorgement of fees and a financial penalty, and is required to fully cooperate with investigations relating to these secret accounts.”
IRS-CI Chief Jim Lee said: “This case should provide a clear message to others who try to hide their assets and income offshore. Our special agents are experts in following the money, and they are the best at uncovering schemes that try to defraud the U.S. tax system. Offshore tax evasion is a priority for IRS Criminal Investigation, and today’s deferred prosecution agreement with Bank Pictet collects more than $120 million owed to the U.S. government.”
According to documents filed today in Manhattan federal court:
The Pictet Group was founded in 1805 and is a privately held Swiss financial institution headquartered in Geneva that has historically operated as a general partnership and, since 2014, as a corporate partnership. A limited number of managing partners, generally eight or fewer, collectively known as “The Salon,” own and manage the Pictet Group.
As of December 31, 2014, the Pictet Group had approximately 3,800 employees in various locations, primarily in Switzerland, but also in Luxembourg, Hong Kong, Singapore, and the Bahamas. The Pictet Group operates two main business divisions: institutional asset management and private banking for individuals.
From 2008 to 2014, the Pictet Group’s private banking division was operated by the group’s following banking entities: the Swiss bank (BANQUE PICTET & CIE SA); Pictet & Cie (Europe) SA, headquartered in Luxembourg; Bank Pictet & Cie (Asia) Ltd. in Singapore; and the Bahamian bank, Pictet Bank & Trust Ltd. The Pictet Group provided offshore corporation and trust formation and administration services to certain U.S. taxpayers, first through the Estate Planning and Trust Services unit and later through a wholly owned subsidiary called Rhone Trust and Fiduciary Services SA (Rhone).
As of December 31, 2014, the Pictet Group’s private banking division managed or held custody of approximately $165 billion in assets under management (“AUM”). From 2008 to 2014, the Pictet Group served approximately 3,736 private accounts that had U.S. taxpayers as beneficial owners, whose aggregate maximum AUM, including declared assets, was approximately $20 billion.
Though the Pictet Group adopted early measures to confirm that U.S. clients complied with U.S. law, from 2008 through 2014, the Pictet Group assisted certain U.S. taxpayer-clients with Pictet Group accounts in evading their U.S. tax obligations and otherwise hiding undeclared accounts from the IRS.
In total, from 2008 through 2014, the Pictet Group held 1,637 U.S. Penalty Accounts, with aggregate maximum AUM of approximately $5.6 billion in January 2008, on behalf of U.S. taxpayer-clients, who collectively evaded approximately $50.6 million in U.S. taxes.
The Pictet Group assisted U.S. taxpayer-clients with evading their U.S. taxes by opening and maintaining undeclared accounts for U.S. taxpayer-clients at the Pictet Group, either directly or through external asset managers. The Pictet Group also maintained accounts of certain U.S. taxpayer-clients within the Pictet Group in a manner that allowed the U.S. taxpayer-clients to further conceal their undeclared accounts from the IRS. The Pictet Group and certain of its employees knew or should have known that some of their U.S. taxpayer-clients were evading U.S. taxes. In every instance, managing partners approved the opening of new private client relationships and were informed of the closing of U.S. taxpayer-clients’ accounts, which included some undeclared accounts.
As further detailed below, the Pictet Group used a variety of means to assist U.S. taxpayer-clients in concealing their undeclared accounts, including by:
The $122.9 million BANQUE PICTET agreed to pay to the U.S. Treasury pursuant to the DPA consists of (i) $52,164,201 to the United States, which represents gross fees (not profits) that the bank earned on its undeclared accounts between 2008 and 2014; (ii) $31,844,192 in restitution to the IRS, which represents the unpaid taxes resulting from BANQUE PICTET’s participation in the conspiracy; and (iii) a $38,950,998 penalty. The penalty considers the nature and seriousness of the Pictet Group's conduct, the Bank’s extensive internal investigation, the Bank’s substantial provision of documents to the Justice Department, and the Bank’s facilitation of witness interviews. The Bank further implemented remedial measures to protect against the use of its services for future tax evasion.
In addition to the payment, BANQUE PICTET also agrees under the DPA to accept responsibility for its conduct by stipulating to the accuracy of an extensive Statements of Facts. BANQUE PICTET further agreed to refrain from all future criminal conduct, implement remedial measures and cooperate fully with further investigations into hidden bank accounts. Specifically, the Bank is required to cooperate fully with ongoing investigations and affirmatively disclose any information it may later uncover regarding U.S.-related accounts. The Bank is also required to disclose information consistent with the Justice Department’s Swiss Bank Program relating to accounts closed between January 1, 2008, and December 31, 2022. The agreements provide no protection from criminal or civil prosecution for any individuals.
If BANQUE PICTET continues to comply with its agreement, the United States has agreed to defer prosecution of BANQUE PICTET for a period of three years, after which time the United States will seek to dismiss the charge against BANQUE PICTET.
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Mr. Williams praised the outstanding investigative work of the special agents of IRS-CI.
The prosecution of this case is being handled by the Justice Department’s Tax Division and the Complex Frauds and Cybercrime Unit of the U.S. Attorney’s Office for the Southern District of New York. Senior Litigation Counsel Nanette Davis of the Tax Division and Assistant U.S. Attorneys Daniel G. Nessim and Olga Zverovich are in charge of the prosecution.
 An “undeclared account” was a financial account beneficially owned by an individual subject to U.S. tax obligations and maintained in a foreign country that had not been reported by the individual account owner to the U.S. Government on an income tax return or an FBAR—a Report of Foreign Bank and Financial Accounts, FinCEN Form 114 (formerly known as Form TD F 90 22.1).
 “U.S. Penalty Accounts” are defined as U.S. accounts valued over $50,000 that the parties agree should be subject to a penalty for the offense conduct.
The IRS Form W-8BEN is a tax form that identifies the foreign status of non-U.S. persons for U.S. tax withholding purposes.