Another UBS Client Pleads -- With the Baggage of Illegal Income (9/27/11)

Michael A. Hase, a former comptroller for the U.S. Agency for International Development, has pled guilty to Theft of Government Property and Tax Perjury. The bullet points are below, but I caution the reader that this is an illegal source income case where the Government's main angst is about the conduct underlying the Theft Count. This limits the ability to make inferences to legal source income as is the bulk of the cases involving the current offshore financial account initiative. Notwithstanding that, since the tax Guidelines produced the highest offense level, the tax Guidelines governed with one level added for the theft crime. I link the Information here, the Plea Agreement here, the Statement of Facts here, and the USAO Press Release here.

Taxpayer: Michael A.Hase
Bank : UBS AG and its predecessor Swiss Bank Corporation Jersey Islands;
Entities: No
Guilt: By Plea Agreement - 2 counts - theft of government property 18 USC 641 (one count); tax perjury (Section 7206(1)) (1 count covering 10 years).
Maximum Incarceration Period: 13 years (10 years on theft count; 3 years on tax count)
Admits: Failure to File FBARs but not charged or pled
Unreported Income: $909,156.66
Tax Loss: $254,564.14
FBAR Penalty: $1.937,934.53 + (Based on 50% of the indicated highest balance of $3,875,934 in 2006).
Offense Level (Before AOR): 21 (20 for tax count plus 1 for multiple offense)
Offense Level After AOR: 18 (Criminal History I).
Guidelines Range: 27 - 33 months
Restitution: $36,325.52 (for theft count)
Court: D DC.
Judge: ?
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Yet another plea deal for UBS Depositor (8/6/11)

Taxpayer: Michael Reiss
Bank : UBS AG; two other unidentified Swiss bank, but one is pseudonymed "Swiss Bank No. 1"
Swiss Enabler: Beda Singenberger (see blogs here)
Entities: Yes (sham foundation and apparently sham corporation)
Guilt: By Plea Agreement - False FBAR (1 count)
Maximum Incarceration Period: 5 years.
Admits: Other false FBARs and failure to file FBARs
Tax Loss: $400,000 (at least)
FBAR Penalty: $1,200,000 + (FBAR penalty; perhaps 50% of highest balance for one year).
Court: SD NY
Judge Accepting Plea: Henry B. Pitman, Magistrate Judge, USDC SDNY
Read more »

Yet Another Plea Deal on UBS Offshore Accounts (8/3/11)

Taxpayer: Robert E. Greeley (prior blog here).

Bank : UBS AG
Swiss Enabler: Renzo Gadola (see blogs here)
Entities: Yes
Guilt: By Plea Agreement - tax perjury (Section 7206(1)) - 1 count for 2008.
Maximum Incarceration Period:  3 years.
Admits: Failure to File FBARs but not charged or pled
Unreported Income: $734,000 (Interest) (all relevant conduct years between 2002 and 2008)
Tax Loss: ?
FBAR Penalty: $6,800,000 + (FBAR penalty; unclear whether 50% of highest balance for one year).
Court: ND CA (San Francisco)
Judge: Charles R. Breyer

Article.
David Voreacos, Ex-UBS Client Greeley Admits to Concealing $13 Million in U.S. Tax Dodge (Bloomberg 8/3/11).

Another UBS client Pleads Guilty (7/15/11)

Taxpayer: Anton Ginzburg
Banks : UBS AG
Entities: ?
Guilt: By Plea Agreement - failure to file FBAR (maximum incarceration 5 years).
Tax Loss: Not specified in the press release.
FBAR Penalty: $1,552,606.50 (50% of highest amount (which readers will recall is standard for plea deals).
Court: ED NY
Judge: U.S. Magistrate Judge Robert Levy

The USAO ED NY press release is here. 

News Reports:
Thorn Weidlich, Ex-UBS Customer Pleads Guilty to Hiding Swiss Bank Account (Bloomberg 7/14/11)

I will try to get the court documents and supplement this information and the spreadsheet later.  I will also probably post links to other news reports or comments.

A New UBS Depositor Plea in SDNY (6/27/11)

The USAO SDNY press release is here. The plea agreement is here. 

Taxpayer: Kenneth Heller, Age 81.
Banks : UBS AG and Wegelin & Co.
Entities: Yes.
Guilt: By Plea Agreement - tax evasion (3 counts - maximum potential incarceration 15 years).
Other Charges and Potential Charges: If from the underlying conduct they are either dismissed if charged or will not be charged. But, "this Agreement does not bar the use of such conduct as a predicate act or as the basis for a sentencing enhancement in a subsequent prosecution including, but not limited to, a prosecution pursuant to 18 U.S.C. §§ 1961 et seq."
Tax Loss: Not specified, but plea agreement requires that, by sentencing, defendant file accurate returns for 2007 and 2008. The agreement further requires defendant pay taxes "on such terms and conditions as will be agreed upon between the defendant and the IRS."
Civil fraud penalty: Defendant stipulates to the civil fraud penalty.  (This is oddly worded; the parties have not agreement upon the civil tax liability to which the civil fraud penalty applies; there is often some portion of the civil tax liability that is not subject to the civil fraud penalty; it is unclear whether the defendant will be able to so assert, but I think the language used will permit him to do so.)
FBAR Penalty: The plea agreement says 50% of highest amount (which readers will recall is standard for plea deals).  The plea agreement says, based on information then available, is $9,816,000. This amount can be adjusted for other information. (This is curious because the DOJ Tax press release says that $26,420,822.43 went into one of the accounts.)
Sentencing Factors: Base offense level of 20 (based upon tax loss of between $400,000 and $1,000,000); sophisticated means +2; acceptance of responsibility -3 (but Government can contest if by and during allocution he does not accept responsibility); criminal history category I; indicated sentencing range 30-37 months; the Government agrees that a sentence below the Stipulated Guidelines Range is warranted in this case.
Court: SD NY
Judge: P. Kevin Castel

Additional
Thomson Reuters Press Report of 6/27/11.

Another UBS Charge and Guilty Plea - Husband and Wife (6/21/11)

Yet another plea was entered yesterday. The DOJ Tax Press Release is here. The key facts form the DOJ Tax Press Release and the Plea Agreements (below) are.

Taxpayers: Sean Roberts & Nadia Roberts, husband and wife.
Banks : UBS AG, an unnamed Isle of Man Branch of UK bank, an unnamed Lichtenstein bank, an unnamed Hong Kong bank, an unnamed bank in New Zealand and an unnamed bank in South Africa.
Entities: Yes.
Guilt: By Plea Agreement - Tax Perjury (one count).
Tax Loss:  $709,765 (includes relevant conduct beyond the year of conviction)
Restitution: $709,675 (joint between the two; will be credited to tax due)
Cooperation:  Agreement to cooperate in (i) determining tax liability for 2003 forward (note the tax loss and restitution are just a floor.); and (ii) in "investigation and proseuction of other individuals involved in possible violation of federal and state law."  The latter is coupled with the usual non-committal 5K1.1 departure for cooperation.
Enablers (in addition to the banks):  Isle of Man cororate and trust services company; UBS BANKER C.U.; ACCCOUNT MANAGER B.S., owner of a Zurich based financial services company.  (Substantial in U.S. activity by the individuals.)
FBAR penalty: 50% of highest amount for one year.
Court: ED CA.
Judge: Anthony W. Ishi.

Documents:
Husband Information
Husband Plea Agreement
Wife Information
Wife Plea Agreement

HSBC India Developments (4/14/11)

As expected, in tax filing season, DOJ Tax takes actions to encourage taxpayers to do the right thing.  There are two HSBC India developments. We previously covered the John Doe summons to HSBC India here. The new developments are:

1. One depositor in HSBC India, Vaibhav Dahake, who was indicted previously (see discussion of indictment here). Dahake pled guilty to one count of conspiracy on April 11, 2011 pursuant to a plea agreement he had entered November 18, 2010. (I speculate that the timing of the actual plea in court was related to the HSBC John Doe summons proceeding, or, perhaps, had something to do with the HSBC related enablers.)  The plea agreement is here, and a Reuters article is here. The plea agreement is fairly standard, with the stipulated sentencing factors being: (i) a tax loss between $30,000 and $80,000 producing a BOL of 14, (ii) sophisticated means 2 level upward adjustment, (iii) acceptance of responsibility 3 level (2+1) downward adjustment and (iv) deriving an offense level of 13. One unusual provision is the following related to immigration:
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Another Plea for Taxpayer with UBS & Credit Suisse Accounts

There is another plea for a taxpayer. The DOJ Tax press release is here. The key facts (which may be supplemented as I learn additional key facts) are:

Taxpayer: Jeffrey Chatfield
Banks : UBS AG (actually UBS Bahamas Ltd.) & Credit Suisse
Entities: Yes
Guilt: By Plea Agreement - one count of tax perjury
FBAR penalty:
Court: SD CA
Judge: Anello, Michael N.

I will fill in more facts when I get them and will then update the spreadsheet.

Addendum 3/16/11:

I downloaded the judgment from Pacer here.  Other documents such as the plea agreement that might offer key information not evident from DOJ's press release were not available.  There are some provisions in the judgment that might be worthy of note, although they are too cryptic for me to put in context.  These are:
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Another Plea for Taxpayer with UBS & Credit Suisse Accounts

There is another plea for a taxpayer. The DOJ Tax press release is here. The key facts (which may be supplemented as I learn additional key facts) are:

Taxpayer: Edward Gurary
Banks : UBS AG & Credit Suisse
Entities: Yes
Guilt: By Plea Agreement - one count of tax perjury
FBAR penalty: $473,000 (Reportedly 50% of high balance)
Court: ND Ohio
Judge: Polster, Dan

I have updated the spreadsheet.

Conviction in Foreign Account Plus Case

There is a recent opinion in United States v. Simon (ND IN No. 3:10-cr-00056) \about which I previously blogger here. The new opinion is here. The new opinion, dated 1/1/11, is short and cryptic -- assuming some familiarity with earlier rulings in the case to understanding the judge's exasperation. The new opinion rejects the defendant's post trial motion for judgment of acquittal and alternative motion for new trial. The Court's opening paragraph under Background, gives the reader an indication of how the court will rule:

A 23-count indictment was handed down in April 2010, charging Mr. Simon with filing false federal income tax returns (Counts 1-4), failing to file foreign bank account reports (FBARs)(Counts 5-8), mail fraud (Counts 9-19), and fraud involving federal financial aid (Counts 20-23). More than seventeen pretrial motions required four hearings, numerous oral rulings [Doc. Nos. 25, 33, 71 and 109], and three detailed written opinions and orders [Doc. Nos. 62, 74 and 100]. Trial began on November 2, 2010. Evidentiary objections were the rule, rather than the exception, during trial, and the court frequently had to restate earlier evidentiary rulings. Mr. Simon seemed to change his theory of defense mid-trial, requiring additional briefing.

The Government dismissed Count 5, and, after trial the jury convicted on all remaining counts except Counts 13, 14 and 16 (mail fraud counts). Not a good day for Mr. Simon.

The issue I previously blogged was the Court's rejection of the claim that the IRS's extension of time for signatories on foreign accounts to file delinquent FBARs by 6/30/11 operated to preclude prosecution for the original delinquencies which, if they occurred with the required willfulness, were criminal acts at the time. In this new opinion, the Court begins its Discussion as follows:

Mr. Simon's renewed motion for judgment of acquittal is premised on arguments previously raised, considered, and rejected.

And, the Court concluded its Discussion with the following:

The court carefully considered Mr. Simon's arguments, has given detailed reasons for rejecting them, and believes that it properly ruled on each of the issues raised. Mr. Simon hasn't presented any authority or identified any error or circumstance that would warrant reconsideration at this stage of the proceedings or a new trial.

Not a good opening or closing discussion for the defendant.

There is not a whole lot in between that I think particularly worthy of note for readers of this blog. The opinion is short so it might be worth scanning by those whose interest is piqued.  I mention the case only because the underlying scheme did involve foreign accounts and foreign entity intrigues and there were FBAR count convictions. The Government has another notch under its belt in this area. But, it is clear from this and the prior opinion that this was not a garden variety foreign account case. The facts underlying the federal financial aid fraud counts makes this case quite an outlier to the cases I have encountered involving foreign accounts. I just wonder whether, if facts had not involved federal financial aid fraud, the dispute between Mr. Simon and the IRS / DOJ Tax (which also had some other predicate intrigues) could not have been resolved short of criminal prosecution.

Swiss Enabler for Offshore Accounts Pleads Guilty

I reported last weekend on criminal charges against Renzo Gadola, a Swiss person, previously a UBS banker who served as an intermediary between U.S. depositors and at least one Swiss bank. The blog is here. The charges were presented by criminal information which often presages a plea agreement. The criminal information is here. Yesterday, Gadola pled guilty. The guilty plea and statement of facts are here and here. Just a few comments:

1. The guilty plea document itself is mostly standard fare. The plea is to the one conspiracy count charged in the criminal information. The parties' agreements as to the sentencing factors do strike me as unusual, so I will comment on them below.
2. The Statement of Facts appears to be a restatement, perhaps verbatim of most or all of the allegations in the criminal information. I summarized certain of the key allegations in my prior post.

The agreement does not give us the Base Offense Level or the tax loss which drives the Base Offense Level. The Base Offense Level, of course, is the starting point for Guidelines calculations. The agreement does, however, give information from which the starting point can be derived, so let's see what the agreement says. Paragraph 10 provides:

10 The United States and the defendant agree that, although not binding on the probation office or the Court, they will jointly recommend that the Court make the following findings and conclusions as to the sentence to be imposed:
   a. Adjusted Offense Level: 12 (U.S.S.G §§ 2Tl.l(b))(2), 2Tl.9)
   b. Abuse of Position of Trust or Use of Special Skill: 2 (U.S.S.G. §3B1.3)
   c. Total Offense Level: 14

The Guidelines and its earlier iterations require that the Base and Adjusted Offense Levels be determined for conspiracies either under first under § 2T1.9.  However, the § 2T1.1 calculation may apply if it (i) "most closely addresses the harm that would have resulted had the conspirators succeeded" in the Klein conspiracy and (ii) produces an Adjusted Offense Level in excess of 10. The agreement does not spell out exactly how the Adjusted Offense Level of 12 was reached, but it appears that number was likely reached by applying § 2T1.1 (a signal may be the reference to 2T1.1 in paragraph 10.a. of the Plea Agreement). So, focusing on § 2T1.1, an adjusted offense level of 12 would mean that the Base Offense Level was 10, because the use of foreign accounts would require a sophisticated means enhancement of 2 under § 2T1.1(b)(2). (Actually, that is not technically correct, for the Base Offense Level could have been less than 10 and § 2T1.1(b)(2) would increase the adjusted offense level to 12, but bear with me on the assumption that the Base Offense Level is 10.) Now, what is the tax loss under the tax table, § 2T4.1, that produces a level of 10? It is between $5,000 and $12,500. (If the Base Offense Level were less than that range, of course, so would the Base Offense Level be less than 10, but § 2T1.1(b)(2) would then kick up the Adjusted Offense Level to 12.) So, we can conclude that the tax loss assumed in the Adjusted Offense Level was $12,500 or less.

That number -- $12,500 -- is very low for the type of conspiracy alleged in the criminal information and repeated in the Statement of Facts. Even just considering the family mentioned in the conspiracy, an intended tax evasion of only $12,500 or less would hardly have justified the efforts alleged and admitted. Moreover, Gadola was doing it for other U.S. Swiss bank depositors and their achieved and intended tax evasion would far exceed that number and would -- at least should -- be considered as relevant conduct. So, what does this mean? It means that the prosecutors and Gadola's lawyer gerrymandered the Guideline's factors in order to produce a sentencing range that would induce Gadola to plead. At least that is how I read the tea leaves; others may read them differently, and if so I hope they will comment.

Of course, there is the standard disclaimer that the Probation Office and the Court are not bound by their agreements as to the Guideline factors.  (Plea Agreement paragraph 10.)

Now, looking at the agreed Total Offense Level of 14, the defendant will likely qualify for the acceptance of responsibility downward adjustment of 2 (3 only if above 16). (The prosecutors agreed to recommend the acceptance of responsibility adjustment in paragraph 6 of the Plea Agreement.) So the sentencing level for applying the Sentencing Table in Chapter 5, Part A contemplated by the Plea Agreement is 12 which is a Zone C range of 10-16 months, requiring some actual incarceration. The Government agreed to recommend sentencing at the low end of the range. (Plea Agreement paragraph 6.) But the parties have agreed that they may argue for variance (Plea Agreement paragraph 3), so, presuming that Gadola does not stub his toe in this process, his lawyer may be able to make serious variance arguments.  Still, one has to wonder whether courts will find the enablers are attractive for mercy as the depositors who they enabled.

The Giffen Plea -- The Cost of Justice

James H. Giffen, the target of an extensive FCPA investigation and indictment (including two superseders), recently resolved at least criminal woes -- at least some of them -- through a plea agreement. I write on that plea agreement because the plea is to a tax count and it raises some interesting issues. The plea agreement and the information with the count of conviction pursuant to the plea are here and here. First I will just provide a summary of the plea agreement and then raise the issues that interest me.

Giffen pleads to the one information count charging "willfully failing to supply information regarding foreign bank accounts, in violation of Title 26, United States Code, Section 7203" for the year 1996. The reference is to the foreign account question on Schedule B of the 1996 return. Section 7203 is a misdemeanor with a maximum incarceration period of one year and, according to the plea agreement, a maximum fine of $25,000. Giffen waives the statute of limitations for the charge to which he pleads. That statute of limitations expired normally six years after the date he filed the return (approximately March 27, 1997, according to the information).
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Another UBS Client Bites the Dust

Today brings a new plea by a UBS client-- one Harry Abrahamsen.  This is going to be routine for the next few days, perhaps weeks, so I'll just summarize the key features of this particular plea:  (1) Plea to one FBAR failure to file count: (2) used an offshore entity to disguise his interest in the UBS account; (2) had at least two enablers -- a Swiss banker and a Swiss lawyer, named “UBS Swiss Banker 1” and “Swiss Lawyer 1”, respectively; (3) a family member, a daughter, was involved, but was not indicted although having an ownership interest; (4) the amounts deposited into the UBS accounts were "pre-tax" -- i.e., falsely deducted on U.S. income tax returns; and (5) must pay back income taxes and interest (articles do not address penalties on the income tax but presumably penalties will be required) and must pay FBAR penalty of 50% of the highest amount in the account.

On a side note, I did notice in the WSJ an article titled "UBS Forecasts Return to Profit."

Bloomberg

New York Times
Businessweek

Another One Bites the Dust - Plea regarding Undeclared Swiss Bank Account

On 2/16/10, according to a DOJ Tax announcement here, one Dr. Andrew Silva pled to a Klein / defraud conspiracy and to making a false statement (presumably 18 U.S.C. § 1001). On its face it would appear that DOJ Tax is upping the ante. (See also Main Justice discussion here.)  Previously all that was required was a single plea – the defendant could take his pick between a tax perjury count and an FBAR failure to file count. The maximum sentence for Dr. Silva's plea counts of conviction is 10 years in the aggregate (5 years each count). One might infer that DOJ Tax is ratcheting up as one way of telling the target community that it will get steadily worse as an inducement to come to the table sooner rather than later.

But this case has some wrinkles that may have made it more egregious. The first tip off is that the DOJ Tax announcement here states that the announcement is made by DOJ Tax, ICE, the U.S. Postal Service and the IRS. This was a significant coordinated effort that seems disproportionate for ordinary offshore tax cheating. And, the disproportion is a result of the wrinkles. (See also the Main Justice rehash of the announcement here.)

Key Points that I think are worthy of note are:
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Another UBS Depositor Pleads

Another UBS Depositor, Jack Barouh, has pled to tax perjury. The plea fits the mold previously created in the plea deals to date. The DOJ Tax press release with some of the details is here.  He funded the account with business skimmings.  He used nominee corporations to own the accounts and then, when he wanted to repatriate to the U.S., a "Swiss attorney, persuaded" him to create a Hong Kong account in the name of a nominee HK corporation which then nominally paid him a bogus consulting fee to push the funds into the U.S. "The Swiss attorney knew the defendant was not going to perform any consulting work." Sounds like the Swiss attorney may have some explaining to do.

Just one comment, in many of these situations where there are not entities involved but only directly owned Swiss accounts, there was often no discussion between the U.S. depositor and the Swiss banker about U.S. tax.  At best or worst (depending upon perspective), there was an unspoked understanding that that was the game being played.  But, as the situation in this plea indicates, at some point the Swiss enablers moved beyond unspoken understandings.

UPDATE 2/6/10

I have received the plea and statement of facts and include some of the items I think interested below:

1.  The parties agree to Sentencing Guideline components as follows:  (a) tax loss between $400,000 and $1,000,000 (actually stipulated to be $736,269, but the bracketed amounts are what is important for the guidelines calculations); (b) the crime involves sophisticated means, and (c) Government agrees to the standard acceptance of responsibility downward adjustments (2 or 3 as appropriate, which, of course, 3 is appropriate). The Guideline range I calculate on these components it is 46-57 months, which exceeds the maximum 3 year sentence for the crime of conviction (tax perjury).  The Government does agree "to recommend that the defendant be sentenced at the low end of the guideline range, as that range is determined by the court," provided only that the defendant cooperates and does not misbehave before sentencing.  I don't know what exactly that gets for the defendant other than that the Government signals to the court that the defendant may be a nice guy and perhaps that a downward variance might be appropriate. Of course, the courts have uniformly sentenced lower other offshore account recipients by Booker downward variance, so presumably that is the hope of the defendant.

2.  Defendant is required to cooperate in determination of his liability for taxes, penalties and interest. Further, "[n]othing in this agreement shall limit the IRS in its civil determination, assessment, and collection of any taxes, interest, and/or penalties that the defendant may owe." I wonder if the IRS will require the defendant to go to years earlier than 2002.  (I doubt it, so that to that extent, the defendant has profited from his offshore caper.)  Of course, as noted above, he does cap his FBAR exposure.

3. The defendant began the skimming and depositing in offshore banks since approximately 1976, so he has presumably achieved a substantial tax savings over the years and all of this would easily fall in the concept of relevant conduct that should have entered the tax loss for guidelines purposes.  Yet, it appears that, as usual, the Government and the courts will put blinders on for years earlier than 2002. I guess the Government is here to help.

4. The defendant used offshore enablers who are referred to a Swiss Money Managers #1 and #2 and Swiss Attorney #1. (Alright, technically, in the Statement of Facts, the first is sometimes referred to as Swiss Money Manger #1; but I assume that is a typo; and the reference to Swiss Attorney #1 without any further reference to #2, suggests that there may have been a #2 whose name dropped out in the negotiation process.)

5. Now, we have something really juicy (not sex, but almost as juicy). The Statement includes the following:

Between November 2003 and March 2004, SWISS MONEY MANGER #1 misappropriated more than $5 million from the Domilou account by transferring the funds to a UBS account in the name of another Panamanian corporation which was owned by SWISS MONEY MANAGER #1 and his wife.

Is there no honor among thieves?

6.  I wonder if the defendant got the benefit of an unclaimed deduction in the guidelines calculation of tax loss for the money stolen from him.  As readers have noticed before in my blogs, there is some variance (if that is a fair word) among the circuits as to whether unclaimed deductions can enter the guidelines calculations.

7. This is pretty juicy also:

Beginning in late 2007, the defendant asked SWISS ATTORNEY #1 and SWISS MONEY MANAGER #2 about making a voluntary disclosure and reporting his offshore assets to the Internal Revenue Service. On several occasions, the defendant was discouraged from doing so by SWISS ATTORNEY #1 and MONEY MANAGER #2. MONEY MANAGER #2 told the defendant that it would involve too much paper work to make a voluntary disclosure. SWISS ATTORNEY #1 told the defendant that it was not necessary to consult with a United States tax attorney because a Swiss attorney typically initiates a voluntary disclosure, that he was not on the list of people being reported by UBS, that the best thing to do was to move the money from UBS to another financial institution, and that, if he did not want to receive the "consulting fees" from Amery Investments Ltd., he could purchase a life insurance policy in order to repatriate the money to the United States after his death.

Get in Line Brother #26 - Another Plea to Encourage the Reticent and Risky

The Government posted another notch in its publicity belt yesterday which it went public with the squeeze it put on another hapless UBS depositor and thereby, it hopes, to squeeze the masses to come forward. The DOJ Tax announcement of the plea is here. I have received a copy of the plea agreement but have not yet posted it on the web. I may do that later or, hopefully, when someone else does, I will link to it. I offer here just a few brief comments on the plea agreement in the Cittadini plea. I will probably add to this and refine or revise it (particularly if errors are called to my attention).

1. The Plea Count. Cittadani pled to violation of 26 U.S.C. § 7206(1), often referred to as tax perjury. This means, in effect, that Cittadani admitted that he will told a material lie on the tax return with respect to his reporting and nonreporting regarding the UBS account.

2. Origin of the Account. The seed monies for the accounts was originally received from his family in Argentina and deposited in the UBS account in 1991.

3. Use of Entities to Disguise. In 2001, he created a Hong Kong Corporation to avoid QI requirements, with advice and assistance of Hansruedi Schumaker. The HK corp named Swiss lawyers A.M.R. and Matthias Walter Rickenbach as First Directors.

4. Enablers.

a. Identities. Identifies other Swiss enablers by name where they are already indicted (Shoemaker and Rickenbach) and by initials where not indicted (yet).

b. U.S. Activity. Meetings with one of the enablers were held in the U.S.

5. Relevant Conduct. It is unclear when the UBS account was closed or whether, if closed, the funds went into another offshore account or elsewhere offshore in order to hide from the IRS. The agreement is just silent, perhaps in order to channel the sentencing (i.e., as noted below, the agreement stipulates that the tax loss relevant to sentencing is limited to the years 2001 through 2003). The trend in these cases is certainly to cut off the opening date for relevant conduct consideration, but the truth really is that years prior to that opening cutoff date is relevant conduct. And, of course, a sweeter deal can be achieved if there is an ending date cutoff as there is here. The Government wants pleas and will get its pound of flesh (as well as the perceived needed publicity) by offering goodies to coax out pleas with enough there to permit a significant sentence if that is the sentencing judge's wish. (I should note, however, that he agrees to a single 50% penalty for the FBAR violations for the years 2001 through 2008, certainly suggesting that there was relevant conduct in years after 2003.)

6. Sentencing Factors.

a. Tax Loss (including all relevant conduct): "the tax loss associated with the accounts at UBS that were disclosed to the Government pursuant to the Deferred Prosecution Agreement with UBS, and of which the defendant was the beneficial owner for the tax years 2001 through 2003.” See my comments above.

b. Sophisticated means. A no-brainer.

c. Acceptance of responsibility. A no-brainer.

7. Cooperation.

a. 5K1. Requires cooperation with a possibility of 5K1

b. No Deception. The plea contains this apparently targeted paragraph:

Defendant understands that the United States will tolerate no deception from him. If, in the estimation of the United States Attorney or the United States Department of Justice Tax Division, information or testimony provided from the date of the Plea Agreement proves to be untruthful or incomplete in any way, regardless of whether the untruthfulness helps or hurts the United States' case, the United States may consider that Defendant has breached this Plea Agreement.

c. Use of Information During Cooperation. Not a strange paragraph, but apparently a concern:

d. The parties agree that information provided by Defendant in connection with this Plea Agreement shall not be used to determine Defendant's sentence, except to the extent permitted by USSG § IB1.8.

USSG 1B1.8 provides that information divulged pursuant to plea cooperation agreements contains the usual suspects designed to make the cooperation more effective, but also contains the following exceptions permitting the Government to disclosure: "(5) in determining whether, or to what extent, a downward departure from the guidelines is warranted pursuant to a government motion under §5K1.1 (Substantial Assistance to Authorities)."

d. Cooperation and Rule 6(e). The agreement does not contain an express waiver of Rule 6(e) as seen in other plea agreements but does contain the following:

The defendant further agrees that any evidence, including statements and documents, provided to the United States by the defendant pursuant to a Proffer Agreement, without any limitations, can be utilized by the United States in its civil examination, determination, assessment, and collection of income taxes related to his income tax returns and any related corporate/entity tax returns, or any other civil proceeding.

It is unclear precisely when the proffer(s) occurred, but if they occurrred pre-indictment, I think they have the Rule 6(e) problem that, I am sure, they would prefer to avoid. (I have previously commented on this here.) Certainly, the IRS can get that evidence from him, assuming they formulate the right requests and asks the right questions (based on information independent of the grand jury investigation), but I think it is highly suspect for the "United States" to turn over that information so imbued with the grand jury investigation which was the only investigation DOJ can conduct in a tax case.

Another UBS Related Plea Agreement

Juergen Homann pled guilty. The DOJ press release is here. The key points are:

1. The plea agreement is to one count of willful failure to file the FBAR in violation of 31 U. S. C. §§ 5314 and 5322(a). This is a 5 year count.

2. The defendant is relieved of criminal prosecution for tax crimes related to his UBS accounts. For my students, I offer some nuance on this. Normally, one U.S. Attorney's office (USAO) cannot bind other USAOs, but this agreement joins DOJ Tax as a contracting party. DOJ Tax must approve tax and tax related crimes. Thus, as a practical matter, this binds the DOJ (which includes all USAOs). Nice. But, in true cautionary fashion, the agreement later provides that the agreement is limited only the USAO for DNJ and "cannot bind other federal, state or local authorities." The Government will, however, "bring this agreement to the attention of other prosecuting offices, if requested to do so."

3. The judge may order restitution. Note that the plea is to a nontax crime. Restitution is not allowed for a tax crime unless contractually agreed to in the plea agreement or imposed as a condition to some sentencing benefit. The other parts of the agreement suggest that the "victim" -- the United States -- may be paid before sentencing, so restitution may not be a practical issue.

4. The Government retains the right to bring appropriate sentencing factors to the sentencing court (subject to the stipulated sentencing factors discussed below). The form of this agreement is:

Rights of the Offices Regarding Sentencing
Except as otherwise provided in this agreement, the Offices reserves its right to take any position with respect to the appropriate sentence to be imposed on Juergen Homann by the sentencing judge, to correct any misstatements relating to the sentencing proceedings, and to provide the sentencing judge and the United States Probation Office all law and information relevant to sentencing, favorable or otherwise. In addition, the Offices may inform the sentencing judge and the United States Probation Office of: (1) this agreement; and (2) the full nature and extent of Juergen Homann's activities and relevant conduct with respect to this case.

5. As noted, the parties stipulate as to certain sentencing factors, but the Government reserves the right to avoid any stipulation that it subsequently determines to be untrue. Furthermore, the stipulations do not prevent the Government from responding to questions from the Court or correcting misinformation provided to the Court.

6. The civil income tax aspects are not resolved in the plea. However, the civil liability for the FBAR penalty is resolved by an agreement to pay 50% of the highest amount in the account for 1 year in the period from 2001 through 2007. Note that the FBAR penalty exposure at least for the years after 2004 is 50% of the highest amount in the account, so this civil settlement is quite a deal for this convicted FBAR felon. Note in this regard that the civil penalty is in no way limited by the fact that the defendant pled to only one count involving one year.

7. The parties stipulate as follows: "Pursuant to U.S.S.G. §2S1.3(c)(1), since this offense was committed for the purposes of violating the Internal Revenue laws, the applicable guidelines are U.S.S.G. §§ 2T1.1 and 2T4.1." I have previously addressed before concerns I have about this particular genre of stipulation to funnel the sentence into the tax guidelines, so shall not repeat them now. The bottom-line, of course, is that, if this stipulation is accepted, Homann gets sentenced the same as if he had entered plea to the common tax crime used in this context -- tax perjury under § 7206(1) -- except that his potential sentence is 5 years rather 3 years. Of course, just focusing on the Guidelines, his amount involved may be low enough that the risk involved in the extra exposure is not that great. (Note that according to my calculations below, Homann may be close to the 36 months (depending on where the judge sentences in the guidelines range), that the plea to a 5 year rather than a 3 year count could make a difference.)

8. In the stipulations, the parties agree to a tax loss for sentencing purposes of between $400,000 to $1,000,000. That tax loss under the Guidelines produces a Base Offense Level of 20. Curiously, the parties limit that stipulate to a specific UBS account disclosed to the Government pursuant to the UBS deferred prosecution agreement. Were there other accounts that, presumably, Homann should have disclosed to the Government and should disclose to the Probation Office and be considered by the sentencing court in determining the tax loww? Are the parties attempting to push such other accounts, if they even exist, under the rug?

9. The parties stipulate, rightly, that the sophisticated means 2 level enhancement applies. Nothing unusual here.

10. The parties stipulate that the 2 level acceptance of responsibility reduction applies and that defendant will be entitled to the additional 1 level acceptance of responsibility if applicable. Nothing unusual here.

11. The parties then stipulate that, with the foregoing adjustments, the sentencing level is 19 and further stipulate:

7. The parties agree not to seek or argue for any upward or downward departure, adjustment or variance not set forth herein. The parties further agree that a sentence within the Guidelines range that results from the agreed total Guidelines offense level of 19 is reasonable.

Note in this stipulation that the parties will not "seek or argue" for a "departure" (in the jargon a departure authorized by the Guidelines) or a "variance" (in the jargon a sentence outside the range otherwise determined under the post-Booker regime for sentences outside the Guidelines after departures). So that the apparent expectation is that the sentence will be within the range determined by the offense level of 19.

12. The parties do not stipulate a sentencing history, and this is curious to me. The parties do stipulate that they "reserve any right they may have under 18 U.S.C. § 3742 to appeal the sentencing court's determination of the criminal history category." This suggests that there is a sentencing history issue that the parties could not resolve.

13. So, given the offense level of 19, the indicated range under the 2008 Guidelines which the parties stipulated is: 30-37 months at Criminal History I or 33-41 months at Criminal History II.

14. It is lore among practitioners that the Government's particular prosecutorial angst will be directed against those persons who created additional subterfuge beyond the mere establishment of a foreign bank account. The DOJ Tax press release here spells this out with respect to Homann. With the assistance of a previously indicted Swiss enabler (Mattias Rickenbach), Homann established a foreign entity to appear as the nominal account owner. Further, with the assistance of Rickenbach, Homann "conducted a sham loan by transferring $5 million from an account in the name ELM Finance Limited to a second Hong Kong entity in order to obtain financing for Homann's U.S. business without alerting authorities that he controlled the assets in the ELM at UBS." Finally, "Rickenbach and a Swiss banker persuaded the defendant not to seek out and enter into the IRS's Voluntary Disclosure program."

15. The DOJ Press Release drums up business / revenue for the IRS as follows by reminding those with such offshore accounts that (i) the voluntary disclosure program is available to avoid prosecution and (ii) absent voluntary disclosure, they can be prosecuted. As further inducement, the release identifies those already prosecuted.

Get in Line Brother #18b - McCarthy Plea Guidelines Sentencing Range Calculations

I continue my discussion of the McCarthy UBS related plea. All installments of this discussion may be reviewed here. This blog discusses the Sentencing Guidelines calculations which, under Booker, must be considered although not mandatory.

1. Alternative Guidelines Regimes - Monetary Reporting or Tax?

a. The Monetary Reporting Calculations. The starting point under Chapter Two is Part S, §2S1.3. Following the pattern of Chapter Two, this section provides a Base Offense Level and adjustments for Specific Offense Characteristics. The Base Offense Level is determined under §2S1.3(a)(2) providing for a level of 6 plus the additional levels from §2B1.1 dealing with theft loss but using the "value of the funds" instead of the loss. In the case of the FBAR, the value of the funds would be the amount reportable on the FBAR -- i.e., the highest amount in the account during the year. The calculation is made for the year of conviction and all relevant conduct (a Guidelines concept that basically includes related activity whether charged or uncharged, convicted or acquitted or even outside the criminal statute of limitations). So, presumably, since McCarthy admitted willful failure to file FBARs for multiple years, the aggregate for all years for all foreign accounts would be used for the §2B1.1 calculation. The plea documents do not provide the information from which the Base Offense Level calculation can be made. With the inclusion of all years, however, the Base Offense Level might get up pretty high. After determination of the Base Offense Level, §2S1.3 provides Specific Offense Characteristics for adjustments to the Base Offense Level. The relevant Characteristics is §2S1.3(b)(2) which, in pertinent part, provides a 2 level increase if the conviction offense was “part of a pattern of unlawful activity involving more than $100,000 in a 12-month period.” I believe that that calculation will include FBAR reporting amount for the offense year of conviction and the years for which the FBAR willful failure to file was admitted even though not charged. Possibly also, it might include income tax loss (i.e., the tax loss stipulation (discussed below) and the agreement to a civil fraud penalty should suffice to be a tax loss admission under the preponderance of evidence standard for sentencing purposes). So, I think that a two level increase would apply if the amounts involved more than $100,000 as they almost certainly did for the FBAR violations. (Note if those nonconviction items were omitted from the calculation as not constituting a pattern of unlawful activity, McCarthy might qualify for a reduction of the offense level to 6. § 2S1(b)(3).) As noted, I cannot provide the calculations for the offense level because the plea documents do not provide the amounts that would permit calculation of the Base Offense Level.

b. The Tax Crimes Calculations. Notwithstanding the foregoing, if the tax crimes calculations would produce a higher offense level, then the tax crimes calculations apply. § 2S1.3(c). The pertinent tax crime calculations are made under Chapter Two, Part T, and specifically under § 2T1.1. The plea agreement assumes that the tax crimes calculations will be the applicable calculations. See e.g., the agreement as to tax loss in plea par. 12 specifically referencing §2S1.3(c). As often occurs in tax pleas, the parties try to pre-empt the sentencing factors, including tax loss, in the plea agreement. The parties stipulated to a tax loss ($200,000 - $400,000) which produces a Base Offense Level of 18 and then stipulated a Specific Offense Characteristic of “sophisticated means” requiring a 2 level increase. See §2T1.1(a) and (b). So the offense level coming out of Chapter 2 is 20. The parties then provide for the standard acceptance of responsibility reduction (2 if the offense level is 15 or less and 3 if, as indicated here, more than 15), so the indicated offense level is 17 considering only these matters. The plea agreement suggests that the offense level of 17 is what the parties contemplate / hope for. (See e.g., defendants’ waiver of appeal right so long the Court determines an offense level of 17 or below.) Level 17 indicates a Guidelines range of 24-30 months with a criminal history of I. Of course, the parties stipulations as to the factors are not binding upon the probation office or the sentencing court, but (i) it looks like 24-30 months is the Guidelines range the parties expect and, if the court sentences within the indicated range, it is common in tax cases to go to the lower end of the range and (ii) the court might even vary below the range upon a strong showing.

2. The Tax Loss Agreement.

I noted above that the parties stipulated the tax loss in order to derive the Base Offense Level under the tax Guidelines. Let's take a closer look at the stipulation:

a. Tax Loss: The relevant actual, probable, or intended tax loss under Section 2Tl.l of the Sentencing Guidelines resulting from the offense committed in this case and all relevant conduct is the tax loss associated with funds deposited into the COGS Eenterprises Ltd. (COGS) account at UBS AG that was disclosed to the U. S. Government pursuant to the Deferred Prosecution Agreement with UES AG, plus the tax loss on the net income earned on those funds for the years 2003 through 2007. The parties agree that the tax loss is more than $200,000, but less than $400,000 (exclusive of interest and penalties) for an Offense Level of 18 . See U.S. S. G. §§ 2S1.3(c), 2T1. 1, and 2T4. 1 (G).

The tax loss agreement is curious because it limits the tax loss to tax attributable to the UBS account disclosed to the U.S. Government pursuant to the DPA. Why would it not at least include all similar tax loss for all foreign accounts. The statement of facts states that money was transferred into "UBS Accounts" (plural) and that defendant was discouraged from transferring money out of his "UBS Swiss bank accounts" (plural). Further, the statement of facts states that those transfers came from a Caymans bank account that defendant controlled. (In the next sentence, the statement refers to a UBS Caymans banking relationship, but the UBS identifier is missing from the statement as to the source of the transferred funds.) So why does the agreement attempt to limit the tax loss just to that related to the one UBS account? The plea agreement does not address that question.

Get in Line Brother #18a - the McCarthy Plea

We have another plea in the UBS mess. One John McCarthy has pled. In this blog and some subsequent blogs, I discuss a few points from the plea that I think are interesting.

1. Most importantly for those with foreign accounts who are considering joining the voluntary disclosure program, in announcing the plea, the IRS CI Chief cautioned that the McCarthy prosecution is "the tip of the iceberg." The IRS already has a number of names from UBS and is about to get many thousands more UBS names. Moreover, as I have previously noted, the Swiss justifications under the Swiss-U.S. double tax treaty would seem to permit similar disclosures by other Swiss banks. And, of course, the problem is not just a Swiss problem. All undeclared foreign bank accounts create great risk. I think it would be imprudent to assume that this is a Switzerland only or UBS only initiative.

2. The plea is in the Central District of California rather than in Florida which has been the center of DOJ's juggernaut against UBS, at least in terms of public activity. I speculate that this is an attempt by the Government to disperse these cases for even greater publicity and perhaps logistical reasons of just processing the number of defendants that will ultimately be involved. The current round of cases all appear to arise from the disclosures UBS made earlier in February. So, with these disclosures, the IRS and DOJ Tax can deliver up to a local U.S. Attorney office a package sufficient to coax an easy and relatively quick plea from the target, soon to be defendant. Indeed, I would not be surprised if DOJ Tax is not wanting to get as many pleas as quickly as possible to bolster the voluntary disclosure initiative and therefore may be making plea deals now that will not be available later.

3. Unlike the earlier pleas which were to tax perjury (§ 7207(1)), this plea is to one count "charging a violation of 31 U. S. C. §§ 5314 and 5322(a) , and 31 C. F. R. § 103. 24 for the year 2004." (Plea ¶ 2.) The elements of the FBAR failure to file crime are (Plea ¶ 2):

(1) defendant must have had a financial interest in, or signature or other authority over, a financial account in a foreign country with an aggregate value of more than $10, 000 at any time during 2004; (2) defendant must have failed to file, with the Department of Treasury, a Report of Foreign Bank and Financial Accounts (Form TD F 90-22. 1 "FBAR") , for the calendar year 2004, on or before June 30, 2005; and, (3) in failing to file the FBAR for 2004, defendant must have acted willfully.

4. In this context involving legal source income, the FBAR serves as a complement to the income tax system by encouraging taxpayers to report income from the foreign accounts. Not surprisingly, McCarthy's conduct implicates several tax crimes (evasion § 7201, tax perjury § 7206(1), probably tax obstruction § 7212(a), and others), as well as FBAR failure to file crimes for other years. McCarthy thus agreed to pay the civil tax fraud penalty on his income understatements (civil tax fraud is the same as tax evasion with a lower clear and convincing burden of proof) and admitted he had willfully failed to file the FBAR for his UBS Swiss bank accounts during the years from 2003 through 2008 (meaning, I think, for the tax years 2002 through 2007). These uncharged crimes will undoubtedly be considered at sentencing, but I will address sentencing in a later blog. I should note, however, at this point that uncharged or dropped counts as a result of a plea bargain often does not affect sentencing at all.

5. The maximum period of incarceration for the count of conviction (FBAR failure to file) is 5 years. The fine can be up to the greater of $250,000 or twice the gross gain or loss resulting from the offense. Id. In the prior pleas that I have discussed in this blog, the plea was to one count of tax perjury (§ 7206(1)) which carried a maximum period of incarceration of 3 years. Facially, therefore, the McCarthy plea carries the risk of a longer sentence (5 years rather than 3). The sentence will actually be governed by the sentencing court using the § 3553(a) factors and considering the Guidelines calculations. I will talk about these sentencing considerations in a subsequent blog, but for now I just want to emphasize that this plea ups the incarceration ante. Whether the potential for a 5 year sentence term as opposed to a 3 year term is material, of course, depends upon the sentencing factors. I shall cover them in the next blog.

To Be Continued . . . .

Get in Line Brother #14 - Another Plea in UBS

Another UBS client, one Jeff Chernick, pled guilty. These guilty pleas may become ho-hum after a while, so in the future I will post these items when they have some interesting twist or feature I want to discuss. These are the items I find interesting in the Chernick plea (taken from the Plea Agreement and the related Statement of Facts).

1. For context, the defendant's corporation represented Hong Kong and Chinese toy manufacturers for a number of years. Such arrangements with foreign payors offer an opportunity to have compensation flow off the U.S. radar screen. It did so here.

2. Beginning in about 1981, the defendant established foreign accounts for the purpose of concealing income from the IRS. The accounts appear to have been principally in the name of offshore entities that the defendant owned and controlled. One of these entities is identified as the owner of a UBS account. The defendant is identified as the owner of that entity in an "internal UBS Form A, Verification of the Beneficial Owner's Identity, dated April 19, 2002." There is no indication of the source for this particular "internal UBS Form." If indeed it is an internal UBS form, presumably neither the taxpayer nor the U.S. would have access to it through the normal course of events. Question: how did it surface? Good question. There is another indication in the plea agreement discussed below that the U.S. learned of this document through disclosures UBS made pursuant to the UBS deferred prosecution agreement.

3. Money came into these accounts. The defendant would take out significant amounts for various personal expenses (typically just under $300,000 per year). Notwithstanding that, by 2005, the account balance at one of the accounts (there were more than one) was $8,000,000. (This is an odd way to state it and leaves open the issue of how much there was in the other accounts.)

4. A Swiss bank executive serving as a manager for cross-border business assisted the defendant. That executive left UBS because he was concerned about UBS joining the U.S. qualified intermediary program. In 2003, that executive convinced the defendant to invest a portion of his assets in another Swiss bank that was smaller, had no presence in the U.S. and was not in the U.S. qualified intermediary program. The executive told defendant that this smaller Swiss bank could not be pressured to disclose his identity and account information to U.S. authorities.

5. From about 1998 through 2008, defendant had several meetings with that executive, other UBS executives and a Swiss lawyer in the United States to discuss the accounts at UBS and the other Swiss Bank. When traveling to the United States for these meetings the executive and Swiss lawyer would "dress as tourists to avoid detection." The executive "would falsely report to United States customs that he was coming to visit his brother." The account statements to be discussed at these meetings were mailed to a U.S. address rather than hand-carried in order to prevent their seizure by customs agents if carried with the Swiss persons. Further, the account statements would have the identifying information cut from them "so that they could not be tied to the defendant and his accounts."

6. In approximately 2004, defendant on Swiss attorney's advice entered a sham loan transaction in which defendant borrowed his own money from an offshore account to fund the purchase of property. Although knowing the transaction was a sham, defendant "instructed his United States tax return preparer to deduct the 'loan interest' he paid on his income tax returns." (Note that this admission alone admits guilt as to the crimes of tax evasion and tax perjury for the years in which the interest was claimed as a deduction.)

7. In 2008, as the U.S. ramped up the pressure on UBS, the defendant consulted with the Swiss attorney about his concerns that UBS would disclose his identity and account information to U.S. authorities and the possibility of repatriating the money to the U.S. The Swiss attorney then told the defendant that UBS was not disclosing his accounts to the IRS . The Swiss attorney represented that he had received this information from a Swiss official who must be paid $45,000 for it, and, with defendant's authorization, the Swiss attorney withdrew $45,000 to pay that amount. (Note that the defendant participated in the payment of a bribe to a Swiss official, but the agreement is otherwise silent as to that; I suppose it is equally consistent with the public documents that the Swiss attorney pocketed the amount he advised defendant was to be paid to the Swiss official.)

8. For the years 2002 - 2007, the defendant did not file FBARs and did not report the earnings from the foreign accounts on his U.S. tax return (Form 1040). Specific details are given for the 2007 1040. For all years, defendant knowingly and willfully failed to report the income from the foreign accounts. Note that these admissions admit guilt of tax evasion and/or tax perjury for each of these years and perhaps also guilt of failure to file the FBARs, although the language is not as crisp on that.

9. For this pattern of behavior (not all details recounted above), defendant pleads to a single count of tax perjury, § 7206(1), for 2007. His factual admissions do admit guilt of the behavior for all of the years from 2002 - 2007 (all of which are probably still open under the 6-year criminal statute of limitations, presuming that he filed the 2002 return on extension after 7/27/03). Yet he pleads to a single count. This is important, because the single count plea caps the sentence -- incarceration period -- at 3 years (subject to 15% good time credit).

10. The Guidelines advisory sentence range will be determined by including all of the relevant conduct. Relevant conduct is all conduct from the same pattern of behavior involved in the count of the conviction (here tax perjury for 2007). Here, the defendant has been conducting this pattern of behavior since 1981. This means that, for calculating the critical base offense level as the starting point for the sentencing calculations, all tax evaded since 1981 could be included in the "tax loss" calculation. Properly calculating relevant conduct, therefore, the Guidelines range would certainly exceed the 3-year maximum sentence for the single count of conviction pursuant to the plea and would mean that that defendant's Guideline sentence would be 3 years. Notwithstanding that truism, the Plea Agreement says:

a. Tax Loss: The relevant amount of actual, probable, or intended tax loss under Section 2T1.1 of the Sentencing Guidelines resulting from the offense committed in this case and all relevant conduct is the tax loss associated with accounts at UBS that were disclosed to the Government pursuant to the Deferred Prosecution Agreement with UBS, and of which the defendant was the beneficial owner for tax years 2001 through 2007.

Focus on what this agreement does. First, it signals that the U.S. discovered this defendant pursuant to UBS disclosures under the DPA. Second, it “limits” the tax loss calculation to considering only tax loss in the years 2001-2007 and then only the tax loss attributable to the UBS accounts. As noted above, the relevant conduct for sentencing purposes includes all such behavior for all years (here since 1981).

Quite frankly, I am stunned that the Department of Justice would enter an agreement that states something that is patently false. It is true that the Plea Agreement does state that this stipulation as to the relevant conduct tax loss is not binding on the probation office or the court, but it is still a falsehood -- let's call it a lie (which is a word DOJ Tax uses when taxpayers or their enablers engage in similar behavior) -- to state, as it clearly does, that the tax loss so constricted is

The relevant amount of actual, probable, or intended tax loss under Section 2T1.1 of the Sentencing Guidelines resulting from the offense committed in this case and all relevant conduct . . . .

11. The U.S. agrees to recommend a sentence at the low end of the Guideline range as determined by the court. As noted above, there is no low end of the Guideline range, properly calculated, that is less than the 3 year sentence, so on a properly calculated range, this defendant has an indicated Guidelines sentence of 3 years for the count of conviction. Of course, under Booker, the judge can vary downwards, but the facts admitted in the plea agreement do not seem to me to argue in favor of a downward variance. Undoubtedly, more relevant facts will come out in the sentencing process, so the sentencing judge may find some of those persuasive.

12. The FBAR civil penalties for the open years (2001-2007) are resolved by paying a 50% penalty for a single year "the one year with the highest balance in the account as of June 30 for calendar years 2001 through 2007." It is unclear what this means since he had multiple accounts but the agreement is as to what appears to be a single account. Even if all accounts are included, the limitation to one year is sweet indeed. Note that in trying to coax all other as yet undiscovered and possibly never to be discovered taxpayers absent voluntary disclosure into the voluntary disclosure program, the Government in its FAQs tries coax then into a single year 20% penalty by threatening a 50% penalty for each year. How is this a credible threat when it imposes only a single 50% penalty in a criminal case involving a pattern of behavior that is far more egregious that most cases? Couldn’t one reasonably conclude that if the worst befell, the worst case is really 50% for a single year, which is not that much more draconian than the 20% that the IRS insists on for voluntary disclosure? Is the signal that the real cost / benefit analysis for the voluntary disclosure program more skewed against joining the program than the IRS noises about?

13. The following provision of the plea agreement is curious:

D. The defendant further agrees that any evidence, including statements and documents, provided to the United States by the defendant pursuant to a Proffer Agreement, without any limitations, can be utilized by the United States in its civil examination, determination, assessment, and collection of income taxes related to his income tax returns and any related corporate/entity tax returns, or any other civil proceeding. The United States does not deem this, in any way, to be a waiver of the defendant's attorney-client privilege with respect to any attorney.

This raises the issue of whether the information provided pursuant to the Proffer Agreement is grand jury information. If it is, this portion of the agreement contemplates behavior that appears to violate FRCrP Rule 6(e) without an express Rule 6(e) order which cannot be obtained for a civil tax audit. I have previously blogged on this general issue here.