MANHATTAN (CN) - Federal prosecutors claim three Swiss bankers conspired to help U.S. taxpayers hide more than $1.2 billion from the tax man.
Defendants Michael Berlinka, Urs Frei and Roger Keller worked as client advisors at Wegelin & Co., the oldest private Swiss bank, and an institution that provides private banking, asset management and other services to well-heeled clients around the world, according to the 45-page complaint.
Uncle Sam says the three men and unnamed co-conspirators opened and serviced undeclared accounts for at least 100 U.S. taxpayers at Wegelin [identified in the complaint as "Swiss Bank A"] from 2005 through 2010.
These bank and securities accounts were "undeclared" because they were purposefully not reported to the U.S. Internal Revenue Service, the government says.
A common technique for keeping such accounts under the radar is by creating and selling to U.S. taxpayers sham corporations and foundations, which are used as vehicles for holding the undeclared account.
Prosecutors said that in addition to doing a lucrative business in such undeclared accounts, Berlinka, Frei and Keller, aided by accomplices, opened dozens of new undeclared accounts for U.S. taxpayers in 2008 and 2009 after UBS AG, another giant Swiss bank, closed its undeclared accounts business for U.S. taxpayers after "widespread news reports in Switzerland the United States that the IRS was investigating UBS for helping U.S. taxpayers evade taxes and hide assets in Swiss bank accounts."
Hoping to capture business that UBS had lost, prosecutors say, the defendants began opening new undeclared accounts for UBS clients spooked by the governmental scrutiny.
To solicit the business, prosecutors say Berlinka, Frei and Keller assured prospective clients that their undeclared accounts at Wegelin & Co. would not be disclosed because Wegelin "had a long tradition of bank secrecy and, unlike UBS, did not have offices outside Switzerland, thereby making Swiss Bank A less vulnerable to United States law enforcement pressure."
"As a result of this influx of former UBS U.S. taxpayer-clients clients, Swiss Bank A's undeclared U.S. taxpayer assets under management, and the fees earned by managing those assets, increased substantially," according to the complaint.
Prosecutors say Berlinka, Frei and Keller collectively managed "hundreds of millions of dollars" of undeclared U.S. taxpayer assets.
Prosecutors claim Berlinka, Frei, and Keller and others opened and serviced undeclared accounts for U.S. taxpayers in the names of phony foundations and corporations formed under the laws of several foreign countries, including Hong Kong, Liechtenstein, and Panama. They received and retained documents at those banks that falsely declared that the sham entities were the beneficial owners of the accounts. Alternatively, they permitted certain U.S. taxpayers to open and maintain undeclared accounts using code names and numbers (so-called "numbered accounts") so that their identifies would appear on a minimal number of bank documents in the event that documents or databases were stolen or otherwise fell into the hands of third parties.
The defendants ensured that account statements, account solicitations and other bank-related mail was not sent through the United States via the U.S. Postal Service, but was transferred by email and via Federal Express packages.
"At various times ... Berlinka, Frei, Keller and other client advisors communicated by email or telephone with U.S. taxpayer-clients who had undeclared accounts at Swiss Bank A," according to the complaint. "Advisors sometimes used their personal email accounts to communicate with U.S. taxpayers to reduce the risk of detection by law enforcement authorities."
This practice changed after they began to solicit the business UBS was losing in 2008, an unidentified managing partner telling the three men that if U.S. taxpayers wanted to conduct business in their undeclared accounts, they would have to travel from to Switzerland to do so, prosecutors say.
The three men, all of Switzerland, each face up to 5 years in prison, 3 years of supervised release and fines of $250,000.
Berlinka, Frei and Keller continue to work at Wegelin as they await extradition.
In a statement, the bank acknowledged the Justice Department's decision to press charges against its three employees, and said, "the employees concerned have taken on other tasks within the bank."
Wegelin said that all its dealings with U.S. clients have ended.
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