Del Monte Brings Suit Challenging FDA Import Alert

On August 22, 2011, Del Monte Fresh Produce N.A., Inc. (Del Monte) brought suit against the U.S. Food and Drug Administration (FDA), seeking to invalidate an import alert the agency placed on cantaloupes imported from Guatemala. The challenged Import Alert, found here, was issued after the FDA concluded that cantaloupes being imported from Guatemala were the source of a Salmonella Panama outbreak that left several people ill. In its complaint, Del Monte alleges the FDA had insufficient evidence that Del Montes cantaloupes were the source of this outbreak.

Under the Food, Drug and Cosmetic Act (FDCA), the FDA has the authority to inspect various types of goods being offered for import into the United States. While routine inspections may provide a basis for imported goods to be detained and even refused entry into the country, an import alert, like the one challenged by Del Monte, can cause goods to be detained without having to undergo any inspection at all.

Because import alerts can prevent shipments from entering the country without an allegation that the specific goods are unsafe, it is not uncommon for companies to challenge the bases for these alerts. For example, we previously reported on a case brought by Seagate, in which we successfully challenged the legality of an import alert. As in the case of Del Monte, FDA detained a series of Seagates shipments without alleging that the specific products were contaminated. In that case the FDA released the detained products soon after we filed suit. In this case, however, it is unclear how the FDA will proceed.

For more information on FDA enforcement measures or import compliance, please contact us at contact@fidjlaw.com.

Facebook Changes Its Policy Regarding Pharmaceutical Companies’ Public Comment Walls

On August 15, 2011, Facebook changed its policy regarding public comments on the Walls of pharmaceutical companies Facebook pages. In the past, Facebook granted pharmaceutical companies the privilege of disabling comment Walls on their company pages, which prevented the public from posting or viewing comments. The new policy, however, no longer allows companies to hide public comments. This change applies to pharmaceutical company pages and company-sponsored pages that are geared toward a specific disease or patient community. The new Facebook policy, however, does not apply to any pages dedicated to a specific prescription product.

Many pharmaceutical companies did not join the Facebook community until the social-networking site granted them the special privilege of disabling comment Walls. This change in Facebooks policy has raised concerns among pharmaceutical companies because it permits the public to make comments that may not be favorable to drug makers. Under the new policy, the public can comment about adverse side effects, promote off-label uses, or make inappropriate statements about pharmaceutical products. Companies fear that comments about adverse reactions or negative experiences could inevitably force them to file adverse event reports with the U.S. Food and Drug Administration (FDA). For these reasons, pharmaceutical companies are worried that Facebooks new Wall policy will attract unwanted attention from government regulators.

Facebooks new Wall policy has received a mixed response from pharmaceutical companies. Concerns over risks associated with an open Wall and the possible added expense of policing their own Facebook pages has led some drug companies to completely shut down their pages. For example, AstraZeneca, the producer of a major antidepressant, Seroquel, shut down a page dedicated to depression. Some companies have announced new public commenting guidelines, while others have expressed intent to increase monitoring of their company pages.

Fuerst Ittleman will continue to monitor issues facing the pharmaceutical industry. For more information, please contact us at contact@fidjlaw.com.

Arizona Naturopathic Doctor Pleads Guilty to Selling Stem Cells

On August 18, 2011, Fredda Branyon, a naturopathic physician in Arizona, entered into a plea agreement with the U.S. Attorneys Office in Houston, Texas regarding charges of illegally selling stem cells. In late July, prosecutors filed charges against Ms. Branyon for allegedly selling stem cells in violation various federal law. In the charging document, the government alleged that Branyon, the operator of a clinic in Scottsdale, engaged in a conspiracy whereby she caused the stem cells to be introduced into interstate commerce in violation of the federal Food, Drug, and Cosmetic Act (FDCA). Additionally, Branyon was charged with ten counts of mail fraud, one for each shipment of stem cells from her clinic in Arizona into the State of Texas. Violations of the FDCA are punishable by up to 3 years imprisonment while violations of the mail fraud statute are punishable by up to 20 years imprisonment. According to the plea agreement, Branyon pled guilty to just one charge of violating the FDCA. The rest of the charges will be dismissed at her sentencing hearing. The plea agreement can be reviewed by clicking here.

As discussed in the plea agreement, Branyon had been purchasing umbilical cord tissue (from which the cells were derived) from a birthing facility, where new mothers donated their cord blood for research purposes. After purchasing the donated tissue, Branyon recruited the services of a medical school professor, who then obtained the cells from the cord blood. Having in her possession viable stem cells, Branyon then entered into an arrangement with a Texas medical clinic to supply it with stem cells. While the arrangement on its face stated that the cells were “for research purposes only,” the plea agreement states that Branyon knew the cells were to be used to treat patients. In addition to the sale of the cells, the plea agreement emphasizes that Branyon had been operating various websites whereby she had advertised these stem cells for the treatment of certain diseases, including amyotrophic lateral sclerosis (ALS) and multiple sclerosis (MS).

Branyon, according to the plea agreement, also agreed to cooperate with the government against others involved with violations of the law.

Under the FDCA and U.S. Food and Drug Administration (FDA) regulations, it is against federal law to cause an unapproved new drug to be shipped into interstate commerce. The FDA has recently asserted that stem cells that are removed from the body for medical treatment of a patient are a new “drug”.  Fuerst Ittleman has attorneys with great experience in representing medical professionals and others involved in the use of human stem cells for the medical treatment of a variety of physical ailments. The regulation of stem cells and their usage is an evolving area of the law in which Fuerst Ittleman is deeply involved and constantly monitoring.

Two Telecommunications Executives Convicted by Miami Jury on all Counts for their Involvement in Scheme to Bribe Officials at State-Owned Telecommunications Company in Haiti

On August 5, 2011, Joel Esquenazi and Carlos Rodriguez, former executives of Terra Telecommunications Corporation (Terra), were convicted by a federal jury on all counts for their roles in a scheme to pay bribes to Haitian government officials at Telecommunications DHaiti S.A.M. (Haiti Teleco).

Esquenazi, the former president of Terra, and Rodriguez, the former executive vice president of Terra, were convicted of one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and wire fraud; seven counts of FCPA violations; one count of money laundering conspiracy; and 12 counts of money laundering. Terra had a series of contract with Haiti Teleco, the the sole provider of land line telephone service in Haiti, that allowed the companys customers to place telephone calls to Haiti.

The Foreign Corrupt Practices Act makes it a federal crime for U.S. persons or companies, along with their subsidiaries and agents, to bribe officials of foreign countries in return for some business advantage. The conspiracy to commit violations of the FCPA and wire fraud count carries a maximum penalty of five years in prison and a fine of the greater of $250,000 or twice the value gained or lost. The FCPA counts each carry a maximum penalty of five years in prison and a fine of the grater of $100,000 or twice the value gained or lost. The conspiracy to commit money laundering count and the money laundering counts each carry a maximum penalty of 20 years in prison and a fine of the greater of $500,000 or twice the value of property involved in the transaction.

According to prosecutors, the defendants participated in a scheme to commit foreign bribery and money laundering from November 2001 through March 2005. The telecommunications company paid more than $890,000 to shell companies to be used for bribes to Haiti Teleco officials. To conceal the bribe payments, the defendants used the shell companies to receive and forward the payments. The defendants also created false records claiming that the payments were for “consulting services,” which were never performed.

The purpose of the bribes was to obtain various business advantages from the Haitian officials for Terra, including the issuance of preferred telecommunications rates, reductions in the number of minutes for which payment was owed, and the continuance of Terras telecommunications connection with Haiti.

Sentencing for both defendants was scheduled for October 13, 2011. Esquenazi was remanded into federal custody immediately after the verdict, while Rodriguez remains free on bond.

The verdict is significant because most FCPA prosecutions are resolved prior to trial via plea agreements or deferred prosecution agreements with the government. The government is emphasizing prosecutions of the FCPA against individuals, not just corporations for the deterrent effect of prison sentences on other potential violators. Most FCPA prosecutions are conducted by a team of prosecutors and agents based in Washington dedicated to that task.

Lawyers at Fuerst Ittleman are experienced in representing individuals and corporations facing scrutiny from the government regarding foreign bribery and money laundering allegations. We also conduct internal investigations of businesses to determine whether those businesses are in compliance with the FCPA and money laundering laws when conducting their international business.

U.S. Court of Appeals for the Second Circuit Overturns Gen Re and AIG Convictions

On Monday, August 1, 2011, the U.S. Court of Appeals for the Second Circuit overturned the 2008 convictions of four former executives of General Reinsurance Corporation (Gen Re) and one from American International Group (AIG). The Courts opinion can be found here.

In overturning the convictions, the Court declared that the trial judge erred in allowing prosecutors to offer evidence that was prejudicial to the executives and in improperly instructing the jury on causation. The Court ordered new trials for Ronald Ferguson, Gen Res former chief executive; Elizabeth Monrad, Gen Res former chief financial officer; Christopher Garand, Gen Res former senior vice president; Robert Graham, Gen Res former assistant general counsel; and Christian Milton, AIGs former vice president.

The five executives were accused of defrauding AIG investors early in the last decade by almost $600 million by masking losses to AIG. AIG later became known to the general public as a big beneficiary of the federal bailout, receiving $182.3 billion. The criminal case against the defendants arose out of investigations in 2005 by the Securities and Exchange Commission and the New York State Attorney Generals office into AIGs accounting. Prosecutors claimed the alleged fraud on the AIG investors centered on a “sham transaction to inflate AIGs loss reserves by $500 million, which preceded by several years the financial crisis of AIG.” The defendants were convicted of conspiracy, mail fraud, securities fraud and making false statements to the Securities and Exchange Commission and sentenced to terms ranging from one to four years.

However, the three-judge federal appeals court panel said that the trial judge erroneously let prosecutors display three charts with misleading AIG stock-price data. In its 77-page opinion, the panel said that the charts suggested that the “sham transaction” caused AIGs shares to plummet 12 percent during the relevant time period, and that suggestion was without foundation. The charts cast the defendants as causing an economic downturn affecting every family in America.

The Court ordered new trials for the defendants, causing a significant setback to the Department of Justice. The initial convictions in 2008 were seen as a milestone in the governments efforts to prosecute white-collar crime. However, recently, the government has declined to pursue or has failed to win convictions in a number of high-profile cases, particularly those stemming from the financial crisis.

For more information regarding Fuerst Ittlemans white collar criminal defense practice, contact an attorney today at contact@fidjlaw.com.

Court finds Florida’s Drug Abuse Prevention and Control Law Unconstitutional

On July 27, 2011, Judge Mary Scriven of the United States District Court for the Middle District of Florida declared Floridas Drug Abuse Prevention and Control law, § 893.13, Fla. Stat. as amended by § 893.101, Fla. Stat., unconstitutional. The Court found that the law violated due process because it eliminated mens rea as an element of felony delivery of a controlled substance thus making the law a strict liability offense. A copy of the opinion can be read here.

Mens rea, a Latin phrase meaning “guilty mind,” is best described as the intent one has to commit a crime. As described by Judge Scriven, the concept of requiring not only an actus reus, i.e. a criminal act, as well as a mens rea, i.e. a criminal intent, to obtain a conviction is a fundamental part of American and common law criminal jurisprudence. These two requirements are reflected in the principle stated by Sir Edward Coke that the “act does make a person guilty unless the mind be also guilty.”

However, over time, the federal and state governments have developed numerous criminal statutes that require no proof of criminal intent. In order to be found guilty of violating such laws, the government is only required to prove that a person did the prohibited act, even if the actions occurred by accident or mistake. Laws that do not require a mens rea element are known as strict liability or in some cases, general intent offenses. A majority of strict liability offenses are regulatory or public welfare offenses which are crimes that punish actions a reasonable person should know would seriously threaten a communitys health or safety. Examples of regulatory offenses include the misbranding and adulteration provisions of the FDCA. See 21 U.S.C. § 331. Recently, the rise of the proliferation of strict liability crimes was the subject of an article in the Wall Street Journal. A copy of that article can be read here.

Although legislatures can create strict liability offenses, they are generally disfavored by the courts. Courts will uphold such offenses as constitutional only if: 1) the penalty imposed in slight; 2) a conviction does not result in a substantial stigma to the offender; and 3) the statute regulates inherently dangerous or deleterious conduct. See Staples v. United States, 511 U.S. 600 (1994).

In this case, Mackel Shelton was convicted of delivery of cocaine, a controlled substance, in violation of Floridas Drug Abuse Prevention and Control law found at § 893.13, Fla. Stat. Under the statute, a person is guilty of a drug offense if: 1) he delivers any substance, and 2) the substance is a controlled substance under the act. Additionally, Floridas Drug Abuse Prevention and Control law expressly states that “knowledge of the illicit nature of a controlled substance is not an element of any offense under this chapter.” See § 893.101, Fla. Stat. As a result, a defendant could be convicted of deliver of cocaine “without regard to whether he does so purposefully, knowingly, recklessly or negligently.” Such was the basis of Mr. Sheltons conviction.

In finding that § 893.13 violates due process under the United States Constitution, Judge Scriven found that the statute failed all three prongs of the Staples analysis. First, the Court found that because the penalty associated with delivery of cocaine was a maximum of 15 years imprisonment, the penalty was too harsh to be enforced without the State being required to prove that Mr. Shelton acted with criminal intent. The Court noted that “no strict liability statute carrying penalties of the magnitude of Fla. Stat. § 893.13 has ever been upheld under federal law.” Second, the Court found that because a conviction under the statute was a second degree felony with a 15 year sentence, the statute “gravely besmirches an individuals reputation.” As a result, the Court ruled that the statute violated principles of due process because a conviction would result in a substantial stigma to the offender. Finally, the Court found that the statute violated due process as an unconstitutional strict liability offense because it criminalized inherently innocent conduct, namely the delivery of any substance. The Court explained that “where laws proscribe conduct that is neither inherently dangerous nor likely to be regulated, the Supreme Court has consistently either invalidated them or construed them to require a proof of mens rea in order to avoid criminalizing Ëœa broad range of apparently innocent conduct.”

The Courts Order provides a detailed analysis which can serve as a roadmap to criminal defendants and their attorneys seeking to challenge strict liability convictions. The white collar criminal defense lawyers at Fuerst Ittleman are experienced in handling even the most complex cases where clients are facing allegations of criminal actions. The attorneys of Fuerst Ittleman have defended clients in cases involving numerous general intent and strict liability offenses including, money laundering violations found at 18 U.S.C. § 1957, the operation of unlicensed money transmitting businesses found at 18 U.S.C. § 1960, and violations of the FDCA under 21 U.S.C. §§ 331 and 333 as well as prosecutions of corporate officials for FDCA violations under the Park Doctrine. For more information regarding Fuerst Ittlemans white collar criminal defense practice, contact an attorney today at contact@fidjlaw.com.

Office Of Financial Regulation Report Finds That Money Services Businesses Help Facilitate Ongoing Workers’ Compensation Premium Fraud

On August 2, 2011, the Financial Services Commission of the Florida Office of Financial Regulation issued a report to the Governor and his Cabinet regarding workers compensation fraud in the State of Florida. The report revealed that money services businesses have played an active, critical, and sometimes unknowing part in defrauding the workers compensation insurance market. Money Services Businesses are regulated by the Office of Financial Regulation pursuant to Chapter 560, Florida Statutes. A copy of the Office of Financial Regulations report can be read here.

According to the report, the scheme is designed to allow uninsured subcontractors to procure contracting jobs while avoiding paying workers compensation insurance premiums and payroll taxes on the money earned. (Florida law requires that subcontractors possess a valid workers compensation policy in order to obtain contracts from a general contractor).

The scheme works as follows: First, individuals, known as “facilitators” incorporate “shell” companies, i.e. companies with no business operations, labor force, or physical location other than a P.O. Box, designed to appear as subcontractors on paper. Often times, the facilitators identity is completely unknown as fictitious owners are listed as the owners and officers of the corporation. Next, the shell company obtains a minimal workers compensation insurance policy. Once the shell company has obtained insurance, it proceeds to “rent” its certificate of insurance to uninsured subcontractors. The facilitators allow the uninsured subcontractor to use the shell companys name and workers compensation policy in return for a fee. Uninsured subcontractors who have “rented” the shell company will then have paperwork that appears to be compliant with state law, thus allowing them to enter into construction contracts with General Contractors.

The MSBs involvement in the fraud scheme occurs upon completion of the contract between the subcontractor and the general contractor.  Once the work is completed by the uninsured subcontractor, payment is made to him by the general contractor via check made payable to the “rented” shell company. It is at this stage where an MSB, often a check casher, enters into the scheme because, unlike banks, which normally require that checks made payable to a business or third party be deposited directly into the payees account, a check casher will pay out business-to-business checks, if cashed by persons authorized by the payee. According to the report, “these Ëœauthorized persons are usually the facilitator, and others designated by the facilitator, introduced to and known by the owner/operator of the MSB.”

Upon cashing the check in the name of the shell corporation, two fees are taken out. First, the check casher takes 1.5 to 2% for itself as the fee for cashing the check. Next, a 6-8% fee for the facilitator is taken out as the “rent” paid by the uninsured subcontractor for using the shell companys name and insurance policy. The remaining goes to the uninsured subcontractor as payment for his services. In some cases, the check casher is unaware that its actions are part of a larger fraudulent scheme. Often times in such situations, the check casher becomes an unknowing part of the scheme because of a lack of due diligence in its AML compliance programs.

However, the report also indicated that in some cases the facilitators are actually the MSB owners themselves who act in concert with contractors to find uninsured subcontractors for construction contracts. Additionally, the report noted that in some cases complicit MSBs would falsify Currency Transaction Reports in order to protect the identity of the facilitator by naming the fictitious owners in the CTR. In accordance with the Bank Secrecy Act and its implementing regulations, an MSB is required to file a CTR for every transaction in currency in excess of $10,000. The failure to file a CTR or the falsifying of a CTR violates both state and federal law. More information on BSA requirements for MSBs can be found on FinCENs website here.

As a result of this scheme, “rent” paid to the shell company is not reported to the shells insurance carrier and is not subject to payroll taxes because the payments appear on paper as legitimate contractor-to-insured-subcontractor payments. Additionally, because uninsured subcontractors save money by avoiding workers compensation insurance premiums, they are able to charge a significantly cheaper rate for their services to their co-conspiring general contractors. These general contractors are then able to lower their bid prices and win construction contract jobs away from legitimate businesses. The report estimates that contractors who participate in the “renting” scheme are able to charge up to 20% less then competition for the same work. The practical effects are far reaching. First, legitimate contractors have difficulty winning bids on construction jobs because they cannot quote prices as low as the conspiring contracting companies. Second, none of the ill-gotten gains are assessed workers compensation insurance premiums or payroll taxes, resulting in a loss of revenue for the state.

Additionally, this scheme makes clear the importance of MSBs having robust AML compliance programs in place so that the MSB does not become an unknowing facilitator of fraud. MSBs must ensure that they maintain detailed and up to date records as required by law. MSBs must also ensure that their employees are properly trained in AML compliance in order to spot suspicious transactions and activities.

If you have questions pertaining to the Office of Financial Regulations, the BSA, anti-money laundering compliance, or how to ensure that your business maintains regulatory compliance at both the state and federal levels please contact us at contact@fidjlaw.com.

D.C. District Court Rules Against Challenger of Embryonic Stem-Cell Funding

On July 27, 2011, the case of Sherley v Sebelius drew to a close as U.S. District Judge Royce Lambeth of the United States District Court for the District of Columbia granted the United Statess Motion for Summary Judgment. As we have previously reported, Sherley v Sebelius challenged the legality of government funding of human embryonic stem cell research. As a result of this decision, the Department of Health and Human Services (“HHS”) and the National Institutes of Health (“NIH”) may continue to provide federal funds for the study of embryonic stem cells. A copy of the District Courts Order can be read here.

The origins of Sherley v. Sebelius can be traced back to Executive Order 13,505 issued by President Obama which removed previous limitations on NIHs ability to fund human embryonic stem cell research and directed the NIH to publish new guidelines to govern federal funding of embryonic stem cell research projects. Upon issuance of the Guidelines by the NIH, the plaintiffs, Drs. Sherley and Deisher, brought suit to prohibit the NIH from funding research using human embryonic stem cells and alleged that the NIH Guidelines violated the 1996 Dickey-Wicker Amendment, which prohibits funding for research “in which a human embryo or embryos are destroyed.” The plaintiffs also alleged that the promulgation of the Guidelines violated the APA by failing to address several comments in opposition to the proposed guidelines.

On October 27, 2009, the D.C. District Court dismissed the plaintiffs case for lack of standing. However, in June of 2010, the United States Circuit Court of Appeals for the District of Columbia Circuit reversed, because an “actual, here-and-now injury” was present, and that both plaintiffs met the requirements for standing under Article III of the Constitution. As such, the D.C. Circuit Court of Appeals remanded the case back to the District Court.

On August 23, 2010, the District Court granted the plaintiffs motion for preliminary injunction, stopping the NIH from funding embryonic stem cell research. However, as we previously reported, on April 29, 2011, the Court of Appeals for the D.C. Circuit vacated the preliminary injunction finding that plaintiffs would not likely prevail on the merits of their claims. In reaching its conclusion, the D.C. Circuit engaged in a Chevron analysis and found that the term “research” was ambiguous in the Dickey-Wicker Amendment as it could describe either a discrete project or an extended process. As a result, the Court found that the NIH reasonably concluded that “although Dickey-Wicker bars funding for the destructive act of deriving an [embryonic stem cell] from an embryo, it does not prohibit funding a research project in which an [embryonic stem cell] will be used.” These findings would serve as the bases for the District Court ultimately dismissing the case. The Court of Appeals then remanded the case to the D.C. District Court to be decided on its merits.

In granting the governments Motion for Summary Judgment and dismissing the plaintiffs case Judge Lamberth first found that the NIH Guidelines, which provide for spending federal funds on research involving human embryonic stem-cells, do not violate the Dickey-Wicker Amendment for several reasons. First, Judge Lambeth found that the determination that the term “research” in the Dickey-Wicker Amendment is ambiguous by the Circuit Court of Appeals is binding upon the District Court. As a result, the Judge Lamberth stated “this Court, following the D.C. Circuits reasoning and conclusions must find that defendants reasonably interpreted the Dickey-Wicker Amendment to permit funding for human embryonic stem cell research because such research is not Ëœresearch in which a human embryo or embryos are destroyed. . . .” Second, because Dickey-Wicker is ambiguous as to whether embryonic stem cell research is research in which a human embryo or embryos are knowingly subjected to risk, “[t]he NIH reasonably concluded that the Dickey-Wicker Amendment . . . did not prohibit research projects, such as embryonic stem cell research, that do not involve embryos and so cannot knowingly subject them to risk Ëœin the research.”

The District Court also found that the promulgation of the NIH Guidelines did not violate the APA. The plaintiffs argued that the NIH Guidelines violated the notice and comment requirements of the APA by: 1) “failing to respond to relevant and significant public comment;” and 2) entering rulemaking with an “unalterably closed mind.” However, the Court rejected these arguments. First, President Obamas Executive Order directed the NIH to develop standards for funding embryonic stem cell research, not to determine whether embryonic stem cell research should be federally funded. As a result, “the NIH wasnt obligated to respond to comments [such as the plaintiffs] on the topic of whether to fund human embryonic stem cell research.” Additionally, because the NIH was tasked solely with developing standards for embryonic stem cell research and not with the question of whether to federally fund embryonic stem cell research, NIHs failure to consider comments regarding whether to fund such research reasonable and the NIH did not act with an “unalterable closed mind.”

Fuerst Ittleman will continue to closely monitor the progress of issues regarding funding for stem cell research. If you have any questions pertaining to new NIH guidelines, or the application process for receiving NIH grants, contact Fuerst Ittleman PL at contact@fidjlaw.com.

Beda Singenberger Charged with Swiss Account Conspiracy

Swiss financial advisor Beda Singenberger, 57, was charged with helping more than 60 U.S. taxpayers hide over $184 million in Swiss bank accounts and then avoid U.S. authorities by moving assets from UBS AG to other Swiss banks. The indictment came on the same day that U.S. authorities separately charged several Credit Suisse bankers with helping Americans evade taxes and nearly 2 ½ years after UBS paid a $780 million penalty settlement with the U.S. to avoid prosecution.

According to the indictment filed last Thursday in Manhattan federal court, Singenberger, a Certified Public Accountant, conspired to hide clients income from the IRS from 1998 to 2009. To further his conspiracy, in 2001 he allegedly began creating sham corporations, “foundations, and “establishments,” under the laws of Hong Kong, Liechtenstein, and other foreign jurisdictions to conceal accounts. Several of these entities were named in earlier federal cases against UBS clients.

Then, upon learning in 2008 that U.S. authorities were investigating UBS, Singenberger allegedly helped his U.S. clients move their funds to other Swiss banks without a physical U.S. presence. According to the indictment, he also provided various Swiss banks with fictitious IRS forms which stated that undeclared accounts at those banks were not U.S. clients.

Beda Singenberger operated the wealth management and tax advisory business called “Sinco Treuhand AG” (“Sinco”), which surfaced in connection with an August 2004 internal UBS memo that was released by the U.S. Senate Permanent Subcommittee on Investigations in 2009. The memo sent to Sinco stated, “We invite you to make a short presentation on the structures/vehicles that you recommend to U.S. and Canadian client who do not appear to declare income/capital gains to their respective tax authorities.”

If convicted, Beda Singenberger may face prison time and monetary penalties.

The upswing in indictments signals that U.S. enforcement against hidden offshore accounts is in full force, and that any taxpayers with undisclosed accounts should strongly consider taking part in the Offshore Voluntary Disclosure Initiative before the August 31, 2011 deadline.

The attorneys at Fuerst Ittleman have the expertise to guide you through any voluntary disclosure or Bank Secrecy Act compliance matter. Contact an attorney today at contact@fidjlaw.com.

U.S. Indicts Three Credit Suisse Bankers

Last Thursday, Federal prosecutors filed charges against Markus Walder, Susanne D. Rüegg Meier, Andrea Bachmann, and Josef Dörig for conspiring with other Swiss bankers to defraud the United States. The superseding indictment implicates the three Credit Suisse bankers and Swiss trust founder along with four other defendants who were charged February 23, 2011. Although the indictment refers to an “International Bank” and not Credit Suisse, details of the information point directly to the Swiss banking giant. The new charges mount pressure on offshore bankers and taxpayers alike as the U.S. toughens its stance on foreign banks that help Americans evade their taxes.

Credit Suisses managers and bankers are charged with engaging in illegal cross-border banking activities that were designed to help U.S. customers evade their income taxes by opening and maintaining secret bank accounts. Furthermore, the defendants allegedly utilized a representative office in New York City to provide unlicensed and unregistered banking services to U.S. customers with undeclared accounts. The defendants and others allegedly made false statements and provided misleading information to the Federal Reserve Bank of New York and to the IRS to conceal Credit Suisses cross-border banking business.

Specifically, the superseding indictment alleges the following:

  • Markus Walder, former head of North America Offshore banking and former senior Credit Suisse official, supervised the cross-border banking business;
  • Susanne D. Rüegg Meier, former Credit Suisse manager, provided unlicensed and unregistered banking services to U.S. customers with undeclared accounts at the bank;
  • Andrea Bachmann, former banker at a subsidiary of Credit Suisse, traveled to the United States to assist taxpayers in evading their U.S. taxes through the use of secret bank accounts; and
  • Josef Dörig, founder of the Swiss trust Dorig AG, was a preferred provider of Credit Suisse who assisted U.S. customers in forming and maintaining nominee tax haven entities and opening secret accounts at the bank and its subsidiaries in the names of the entities.

According to a Department of Justice press release ,

The defendants and their co-conspirators [allegedly] caused U.S. customers to travel outside the United States to conduct banking related to their secret accounts; opened secret accounts in the names of nominee tax haven entities for U.S. customers; accepted IRS forms that falsely stated under penalties of perjury that the owners of the secret accounts were not subject to U.S. taxation; advised and caused United States customers to structure withdrawals from their secret accounts in amounts less than $10,000 in an attempt to conceal the secret accounts and the transactions from American authorities; mailed bank checks in amounts less than $10,000 to customers in the United States; and advised U.S. customers to utilize offshore charge, credit and debit cards linked to their secret accounts and provided the customers with such cards, including cards issued by American Express, Visa and Maestro.

The superseding indictment charges that as of 2008, the Swiss bank held thousands of secret accounts for U.S. customers. Of the 35 clients cited, one “secretly transported approximately $250,000 cash from the United States to Switzerland by concealing the money underneath [her] clothes in pantyhose wrapped around [her] body.”

Last Thursdays indictments bring the total number of indicted Credit Suisse bankers to seven. The charges signal that U.S. investigations of hidden offshore accounts remain in full force, and that any taxpayers with undisclosed accounts should strongly consider taking part in the Offshore Voluntary Disclosure Initiative before the August 31, 2011 deadline.

The attorneys at Fuerst Ittleman have the experience to guide you through any voluntary disclosure or Bank Secrecy Act compliance matter. Contact an attorney today at contact@fidjlaw.com.