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.

Mistrial Declared in Foreign Corrupt Practices Act Case After Jury Could Not Reach Verdict

On Thursday, July 7, 2011, U.S. District Judge Richard Leon of the District of Columbia declared a mistrial in a criminal foreign bribery case under the Foreign Corrupt Practices Act (“FCPA”) involvingallegations of a corrupt deal to sell $15 million in supplies to Gabon’s Ministry of National Defense.  Prosecutors from the Department of Justice alleged that defendants John Wier III, Pankesh Patel, Lee Allen Tolleson and Andrew Bigelow tried to bribe Gabonese officials to win contracts. 

The government built its case through an undercover operation where undercover FBI agents met with the defendants and purportedly agreed to participate in the illegal deal. The case is significant because the four individuals are the first to go to trialoutof 22 military and law enforcement equipment industry executives arrested in July 2010 as part of an FBI sting. This case marked the first large-scale use of undercover techniques, commonly seen in drug or fraud cases, in an FCPA bribery investigation and it is the largest prosecution of individuals since the government began enforcing the FCPA over 30 years ago. 

The purpose of the Foreign Corrupt Practices Act is to make it unlawful for certain classes of U.S. persons and entities to make payments to foreign government officials to assist in obtaining or retaining business. Specifically, the anti-bribery provisions of the FCPA prohibit any willful or corrupt offer, payment, promise to pay, or authorization of the payment of money or anything of value to any person, while knowing that such money or thing of value will be offered to a foreign official to influence the foreign official in his or her official capacity to do an act in violation of his or her lawful duty, or to secure any improper advantage in order to assist in obtaining or retaining business.

Throughout the trial, the defense focused on and impeached the credibility of the prosecution’s top informant, to show the jury that he was unreliable and unsavory.  Richard Bistrong, the informant who helped carry out the FBI’s sting operation, had his own history of past bribery crimes, among other assorted wrongdoing. 

The jury began deliberations on June 28, and on July 7, indicated that it was “hopelessly deadlocked.”  As a result, the judge declared a mistrial, meaning no verdict; however, the prosecution intends to retry the case against all four defendants in front of a different jury. This case is an example of the energized enforcement of the FCPA, in support of which the government is willing to employ undercover operatives to engage in sting operations to sniff out violations of the FCPA. So far, although it engaged in these new investigative tactics, and despite having taken the case to trial, the government was not able to obtain convictions.

General Reinsurance Corp. Settles With OFAC Over Alleged Violations of Iranian Transactions Regulations

On June 29, 2011, the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury announced that it had reached a settlement with General Reinsurance Corporation (“General”) over alleged violations of the Iranian Transaction Regulations (“ITR”). The alleged violations of the IRT highlight the broad reach and complexity of the sanctions on trade with Iran. General information regarding economic sanctions against Iran can be found at OFACs website here.

The ITR, which are found at 31 C.F.R. part 560, were promulgated pursuant to the International Emergency Economic Powers Act and are administered by OFAC. 31 C.F.R. § 560.206 prohibits U.S. persons from “financing, facilitating, or guaranteeing” goods, technology or services to Iran. Additionally, 31 C.F.R. § 560.208 prohibits U.S. persons from approving, financing, facilitating, or guaranteeing any transaction by a foreign person where the transaction performed would be prohibited under the IRT if performed by a U.S. person.

Similar to our previous reports of IRT settlement agreements, although General did not directly engage in business with Iran, due to the nature of its business relationships with other entities who were engaged in business in Iran, General was found to be in violation of the IRT. OFAC alleged that the violations consisted of two reinsurance claim payments to the Steamship Mutual Underwriting Association Limited for losses arising from vessel operations of the National Iranian Tanker Company which Steamship Mutual insured. According to OFAC, General made these excess of loss claim payments pursuant to its facultative reinsurance obligation to Steamship Mutual for the coverage period of June 16, 1998 to February 20, 2002. (Reinsurance is an insurance policy taken out by an insurance company on an insurance policy. Reinsurance is usually purchased by the original insurer to mitigate its own risks associated with payment of policies. The reinsurance is used to cover and pay the original policy. In a facultative reinsurance agreement the reinsurer assumes all or part of the risks associated with a particular policy.) Consequently, due to the broad reach of the IRT, and even though General had no direct business relationships with any Iranian business, Generals reinsurance activities were deemed by OFAC to be a violation.

OFAC announced that General has paid $59,130 in penalties for its violations. According to OFAC enforcement guidelines, the base penalty associated with such a violation is $131,424. However, this penalty was lowered because: 1) General voluntarily disclosed its violations and substantially cooperated with OFAC; 2) General is the largest reinsurer in the United States; 3) the violations were the result of personnel violating Generals policies and procedures; and 4) General has not previously been subject to OFAC penalties. Additionally, General has installed enhanced sanctions compliance software and implemented new training programs regarding sanctioned transactions. A copy of OFACs announcement can be read here.

For more information regarding OFAC and strategies on maintaining compliance with federal regulations, please contact Fuerst Ittleman at 305-350-5690 or contact@fidjlaw.com

Former Jenkens & Gilchrist Attorneys, Former BDO Seidman CEO, and Deutsche Bank Broker Found Guilty of Multi-Billion Dollar Tax Fraud Scheme

Four tax and banking professionals were convicted on May 24, 2011 in Manhattan federal court for their roles in a tax shelter scheme, sending a clear message that dishonest tax professionals will be held accountable for their crimes. The verdict found former Jenkens & Gilchrist attorneys Paul M. Daugerdas and Donna M. Guerin, former BDO Seidman CEO Denis M. Field, and Deutsche Bank broker David Parse guilty of designing, marketing, and implementing fraudulent tax shelters used by the wealthy to avoid paying taxes to the IRS. According to the Justice Department, Daugerdas, Guerin, and Field collectively made $130 million in profits from the 10-year scheme.

According to the evidence, the defendants”who are all certified public accountants”undertook to prevent the IRS from detecting their clients use of the tax shelters. The defendants also created and assisted in creating transactional documents that fraudulently described their clients motivations for entering into the tax shelters. The entire scheme lasted from 1994 through 2004 and made the defendants millions of dollars in fees, commissions, and bonuses. Daugerdas, Field, and Parse also utilized the tax shelters for themselves to evade tax liabilities for their illicit income. For example, Daugerdas used the shelters to cut his tax liability on his $95 million income from over $32 million to less than $8,000.

Chief of IRS-Criminal Investigation Victor S.O. Song stated,

Promoting and marketing tax shelter transactions intended to conceal the true facts from the IRS isnt tax planning; its criminal activity. People trust their attorneys and Certified Public Accountants to hold the highest standards when dealing in financial transactions. Todays conviction reinforces or commitment to every American taxpayer to identify and to prosecute those who devise illegal tax shelters.

The Justice Department reported that Daugerdas, Guerin, and Field were all convicted of “conspiring to defraud the IRS to evade taxes, and of corruptly endeavoring to obstruct and impede the internal revenue laws,” in addition to mail fraud and multiple counts of tax evasion. Parse was convicted of mail fraud and obstructing internal revenue laws. The defendants face prison time and, for all counts except mail fraud, fines of the greater of $250,000 or twice the gross gain to the defendant or twice the gross loss to the IRS. Sentencing is scheduled for October 14, 2011.

Several other defendants implicated in the case have already pleaded guilty. At least four additional defendants are former BDO partners or executives. In December 2010, Deutsche Bank agreed to pay $553,633,153 to the United States in connection with the transactions engineered by the defendants.

The attorneys at Fuerst Ittleman, PL are committed to providing ethically and legally sound tax advisory and litigation services. For a private consultation regarding your companys tax planning or tax issues, email us at contact@fidjlaw.com.

U.S. Cracks Down on UBS Clients in California

Our continuing coverage of the U.S. governments attack on hidden offshore assets brings us the two latest cases against UBS clients, both surfacing in California district courts. Robert Greeley of San Francisco and Sean and Nadia Roberts of Tehachapi were charged with filing false 2008 income tax returns that failed to disclose their foreign accounts. Since 2007, the government has accused more than two dozen former UBS clients of tax crimes.

On June 14, Greeley was charged with filing a 2008 tax return that failed to report two UBS accounts and the interest income earned on the accounts. Greeley allegedly held both accounts in the name of Cayman Islands entities that he controlled”one from 2002 through at least 2008, and the other from 2004 through at least 2008.

On June 20, the Justice Department announced that Sean and Nadia Roberts pleaded guilty to filing a false tax return that failed to disclose, among other foreign accounts, a secret UBS bank account. The charges culminate a string of transactions by the Robertses which effected a sham aircraft loan and filtered cash from their domestic business through various foreign accounts and entities. The Robertses admitted to the following:

  • Filing returns for tax years 2004 through 2008 that concealed their interest in the foreign accounts
  • Failing to report income on the accounts,
  • Falsely deducting transfers from their business to the accounts, and
  • Failing to file Reports of Foreign Bank and Financial Accounts (“FBARs”) disclosing their interests in same.

    • The couple agreed to pay $709,675 of restitution to the IRS, and a 50 percent penalty for the one year with the highest offshore balance to resolve their failure to file FBARs.

    The IRS implemented an Offshore Voluntary Disclosure Initiative in 2009”and again this year”whereby taxpayers avoid prosecution by disclosing their offshore accounts. Read our coverage of the Second Offshore Voluntary Disclosure Initiative here.

    The attorneys at Fuerst Ittleman, PL are adept in the complex regulatory requirements of the Bank Secrecy Act, foreign bank accounts, and the Internal Revenue Code. You can contact an attorney by emailing us at contact@fidjlaw.com.

    Two Dietary Supplement Companies Found Guilty of Criminal Contempt for Violating Consent Decree

    A New Jersey jury found two dietary supplement companies guilty of several counts of criminal contempt for violating a consent decree, see Department of Justice announcement. A consent decree is an agreement wherein the defendant agrees to take voluntary action to remedy nonconformance and, in turn, settles a pending civil suit with the government. Criminal contempt generally refers to conduct that defies or disrespects the court and impedes the administration of justice.

    Dr. Mohamed Desoky is the owner of two dietary supplement companies, Quality Formulation Laboratories, Inc. and American Sports Nutrition, Inc. These companies manufactured and distributed food products and supplements, including protein powder mixes and other dietary supplements, under the American Sports Nutrition brand and other private labels across the United States.

    In December 2008 and January 2009, the U.S. Food and Drug Administration (FDA) launched an investigation of Desoky and his companies in Paterson, New Jersey. During the course of that investigation, the FDA observed several instances of noncompliance with good manufacturing principles (GMPs), see FDA Inspection Form here.

    Based on the results of the FDAs investigation, the Justice Department filed suit against Desoky and his companies. In the complaint, the Justice Department claimed that Desokys companies produced adulterated food because its operations failed to meet the FDAs regulations for GMPs and that its insanitary conditions may have resulted in products contaminated with filth. The complaint also alleged that Desokys companies caused misbranding of food because their product labels failed to indicate the presence of a major allergen, milk.

    The complaint alleged that upon observation of the production area, the FDAs investigator found raw ingredient bags with rodent urine stains and numerous holes where rodents had gnawed completely through the packaging. Furthermore, the investigator allegedly surveyed that at least two dead rodents”one of which was apparently cut in half”were found in production or product storage areas. The complaint went on to allege observation of multiple instances of live, active rodents and the existence of rodent excrement throughout the factory. The companys alleged “failure to have adequate control over their manufacturing process, sanitizing and cleaning operations, and employee training” may have resulted in a product containing a major allergen due to “cross-contamination” or “cross-contact” during the manufacturing process.

    In March 2010, Desoky signed and entered into a consent decree of permanent injunction that required the defendants to immediately cease all manufacturing operations, including directly or indirectly receiving, manufacturing, preparing, packing, labeling, and distributing any article of food, including dietary supplements, see FDAs announcement of consent decree here. Pursuant to this consent decree, Desoky and his companies were prohibited from reopening their operations in New Jersey or elsewhere without first correcting their violations and obtaining FDA approval.

    Soon thereafter, the FDA conducted another investigation of the Quality Formulations facility and found evidence that some manufacturing and distribution had occurred after the consent decree came into effect. Additionally, the FDA determined that Desoky transported some employees and equipment to a new facility to continue manufacturing and shipping products. As a result of this violation, the government filed criminal contempt charges against Desoky, his companies and Desokys two sons, who, even with the knowledge of the consent decrees terms, allegedly helped Desoky set up the new manufacturing facility in Congers, New York. Criminal charges were filed in the U.S. District Court for the District of New Jersey and the jury returned a guilty verdict. Sentencing has been scheduled by the court for September 7, 2011.

    The jurys guilty verdict may be a strong indication to food and dietary supplement manufacturers of the importance of compliance with food safety laws. This case raises interesting questions about the role of consent decrees in future litigation with the FDA, as well as the FDAs future regulation of dietary supplement companies and GMPs. Fuerst Ittleman will continue to monitor the progress of these issues. For more information, contact us at contact@fidjlaw.com.

    Recent DOJ Letters May Signal Increased Federal Efforts To Prosecute Medicinal Marijuana Under the CSA

    Recent Department of Justice actions may signal an impending crackdown on the medical marijuana industry by federal authorities. The issue of medical marijuana is a textbook example of the interplay between State and Federal governments and highlights issues of federalism, preemption, and the Supremacy Clause of the U.S. Constitution.

    Though 15 states currently allow for the use of medical marijuana, marijuana remains prohibited under federal law. Under federal law, marijuana is classified as a Schedule 1 drug under the CSA. Drugs classified as Schedule 1 have been found by Congress to: 1) have a high potential for abuse; 2) have no currently accepted medical use in treatment in the US; and 3) lack accepted safety for use under medical supervision. Additionally, no prescriptions may be written for CSA Schedule 1 drugs. Therefore, though it may be legal under state law to possess, cultivate, and/or distribute marijuana for medicinal purposes, such actions violate federal law.

    The conflict between the rights of citizens under state medical marijuana laws and the federal CSA has played out in several landmark decisions in the U.S. Supreme Court over the past decade. In United States v. Oakland Cannabis Buyers Cooperative, 582 U.S. 483 (2001), the Court was faced with a battle between the rights of citizens under California law and the CSA. Under the California Compassionate Use Act, a patient or his primary caregiver could cultivate or possess marijuana on the advice of a physician. Oakland Cannabis Buyers Cooperative was organized to distribute marijuana to qualified patients for medical purposes. The United States sued to enjoin the Cooperative under the CSA arguing that the Cooperatives activities violated the CSAs prohibitions on distributing, manufacturing, and possessing with the intent to distribute or manufacture a controlled substance. In response, the Cooperative argued that a common law medical necessity defense should be written into the CSA and that because California law allowed for medicinal use, the medical necessity defense should apply.

    In siding with the government, the Supreme Court held that there is no medical necessity exception to the CSAs prohibitions on manufacturing and distributing marijuana. The Court went on to explain that Congress made a value judgment in placing marijuana in Schedule 1 under the CSA. As such, because the CSA defines Schedule 1 drugs as having no currently accepted medical use, medical necessity could not be used to avoid prosecution.

    In Gonzales v. Raich, 545 U.S. 1 (2005), the Supreme Court directly addressed the issue of whether Congress, pursuant to its Commerce Clause authority, could regulate and prohibit the local cultivation of marijuana which complied with California state law. In Raich, the Respondents were California residents who qualified for medicinal marijuana under the states Compassionate Use Act. After federal agents seized and destroyed all six of Monsons cannabis plants, the respondents filed suit seeking injunctive and declaratory relief prohibiting the enforcement of the federal CSA to the extent it prevented them from possessing, obtaining, or manufacturing cannabis for their personal medical use. The respondents claimed that enforcing the CSA would violate the Commerce Clause and other constitutional provisions. In response, the government argued that the Commerce Clause permitted regulation of even entirely intrastate activities so long as those activities are part of an economic “class of activities” that have a substantial effect on interstate commerce.

    In holding that the CSAs prohibition of locally grown and used marijuana was permissible, the Court found that Congress had a rational basis for concluding that local marijuana substantially affects interstate commerce. The Court found that Congress can regulate purely intrastate activity that is not itself “commercial,” i.e., not produced for sale, if it concludes that failure to regulate that class of activity would undercut the regulation of the interstate market in that commodity. The Court went on to find that due to the inability to distinguish or prevent locally cultivated marijuana from entering the interstate market, the failure to regulate it would undermine the purposes of the CSA as a whole.

    Post-Raich, the position of the DOJ throughout the remainder of the Bush administration was that any use of medicinal marijuana, though legal under state law, could and would be prosecuted under the CSA. However, this position appeared to change under the Obama administration with the publication of the Ogden Memorandum in 2009. On October 19, 2009, the DOJ announced that, while it was committed to the enforcement of the CSA, it was also committed to efficient and rational use of its limited resources. Therefore, the DOJ advised that prosecutors “should not focus federal resources in [their] States on individuals whose actions are in clear and unambiguous compliance with existing state laws providing for the medical use of marijuana.” A copy of the Ogden Memorandum can be read here.

    However, news organizations such as NPR have reported that over the course of the past several months, the U.S. Attorneys Office has issued letters to 8 of the 15 state governments which authorize the use of medicinal marijuana emphasizing DOJs commitment to enforcing the Controlled Substances Act (“CSA”) vigorously against individuals and organizations that participate in unlawful manufacturing and distribution activity involving marijuana under federal law, even if such activities are permitted under state law. A copy of NPRs report can be read here.

    In the wake of these letters, DOJ spokespersons have emphasized that the Ogden Memorandum neither legalized marijuana possession nor provided a defense to prosecution under federal law and that distribution continues to be a federal offense. As a result, dispensaries, which are legal under some State medical marijuana laws, may face a renewed risk of prosecution.

    The attorneys at Fuerst Ittleman, PL have extensive experience dealing with administrative law, regulatory compliance, and white collar criminal defense. You can reach an attorney by emailing us at contact@fidjlaw.com.

    Proposed rulemaking by DEA will bring its regulations governing forfeitures in line with the Civil Asset Forfeiture Reform Act

    The Drug Enforcement Administration (DEA) recently published a notice of proposed rulemaking regarding the consolidation of seizure and forfeiture regulations in the Department of Justice which will harmonize the regulations of the DEA, Bureau of Alcohol, Tobacco & Firearms (ATF) and Federal Bureau of Investigation (FBI) pertaining to the seizure and forfeiture of assets and bring those procedures for seizure and forfeiture under one regulation. That notice of proposed rulemaking can be found here. Generally, assets may be seized and forfeited to the government if they were used in violation of a law providing for forfeiture, are contraband, violate a regulatory statute, or are connected in some way to the laundering of monetary proceeds of a specified unlawful activity.

    In 2000, Congress passed the Civil Asset Forfeiture Reform Act (CAFRA) which amended the forfeiture laws regarding seizures and forfeitures involving federal agencies, except for violations of the Customs laws, certain laws involving embargos, IRS laws or seizures for violations of the Food, Drug & Cosmetic Act. CAFRA was passed in response to stories of abuse regarding the seizures and forfeitures of assets without adequate due process protections for individuals who could not afford counsel or the bond often required to challenge government forfeitures.

    For example, prior to CAFRA, there were no fixed time limits regarding when notice letters had to be sent by the agency informing an owner that his or her goods had been seized for forfeiture and no remedies to the owner for goods being held an inordinate amount of time. Likewise, there was no fixed deadline governing when a forfeiture proceeding had to be commenced after notice had been sent to the owner. Additionally, persons claiming seized goods had to post a bond, sometimes in the thousands of dollars, just for the right to contest the forfeiture. In cases where the owner of seized property could not afford a lawyer, he or she had to represent his or her self. In all cases, the agency only had to show probable cause that the goods were forfeitable, the owner had the burden of proof to show why the goods should not go to the agency. Innocence or lack of knowledge of a violation of the law was not necessarily a defense.

    Now, under CAFRA, forfeiture notices must generally be sent within 60 days of seizure;, and if the notice is not sent the agency must return the property. If an owner files a claim for the property, a complaint for forfeiture in court must be filed within 90 days, the owner no longer needs to post a bond, and if the forfeiture is of a primary residence, and the owner does not have the funds for a lawyer, the court must appoint a lawyer. Furthermore, the government now has the burden to prove by the greater weight of the evidence that the goods are forfeitable under the law, and an owner now can assert innocence or lack of knowledge of the violation claimed by the agency as a defense to forfeiture, and an owner can obtain an attorneys fees award against the agency if he or she prevails in a forfeiture action in court.

    The proposed rulemaking by the DEA seeks to harmonize its regulations with these CAFRA requirements and consolidate its rules and procedures with those of other Department of Justice agencies. These proposed, consolidated regulations will apply to all seizures and forfeitures commenced by any agency of the Department of Justice except those specifically excluded by CAFRA. The proposed regulations will make express in the rules of the Department of Justice the enhanced due process protections provided by CAFRA to owners and others with interests in property.

    When faced with the deprivation of property by a federal agency, it is important to obtain counsel in order to ensure that the government complies with the enhanced due process protections of CAFRA. At Fuerst Ittleman, we will monitor the proposed rulemaking and will blog when the final rules are promulgated.

    Department of Justice Prosecutes US Taxpayer For Failing to Report HSBC Bank Account in Bermuda

    On May 19, 2011, a criminal information was filed in the U.S. District Court for the District of Massachusetts charging Michael F. Schiavo with one count of willfully violating the Foreign Bank Account Reporting Requirements of 31 U.S.C. sections 5314 and 5322(a).

    Of particular interest is the following paragraphs of the information:

    11. A “silent disclosure” occurs when a U.S. taxpayer with an undeclared account files FBARs and amended returns and pays any related tax and interest for previously unreported offshore income without notifying the IRS of the undeclared account through the Voluntary Disclosure Program. A silent disclosure does not constitute a voluntary disclosure. On its website, the IRS strongly encourages taxpayers to come forward under the Voluntary Disclosure Program and warns them that taxpayers who instead make silent disclosures risk being criminally prosecuted for all applicable years.

    18. On or about October 6, 2009, following widespread media coverage of UBS’s disclosure to the IRS of account records for undeclared accounts held by U.S. taxpayers and the IRS’s Voluntary Disclosure Program, Schiavo made a “silent disclosure” by preparing and filing FBARs and amended Forms 1040 for tax years 2003 to 2008, in which he reported the existence of his previously undeclared account at HSBC Bank Bermuda. He made such filings notwithstanding the availability of the Voluntary Disclosure Program. Schaivo reported on the amended individual income tax returns the interest income that he earned from the previously undeclared account he held at HSBC Bank Bermuda but did not report on the 2006 return the income earned that he earned from Headway Partners.

    19. On or about October 27, 2009, a Special Agent from the IRS attempted to interview Schiavo at his home.

    20. On or about October 29,2009, Schiavo prepared and executed a second amended individual income tax return for tax year 2006 on which he reported the income earned that he earned from Headway Partners and that had been deposited into his previously undeclared account at HSBC Bank Bermuda.

    A full copy of the information is available here.

    What is interesting is that the criminal charges do not contain any violations of the Internal Revenue Code (Title 26), but instead only contain violations of the Bank Secrecy Act. The Bank Secrecy Act requires individuals to file Form TD 90.22-1. A copy of the form is available here.

    Further, the U.S. Department of Justice has issued a press release on the matter available here.

    The attorneys at Fuerst Ittleman, PL have extensive experience in addressing undeclared foreign bank accounts, undeclared income and voluntary disclosures. You can contact an attorney by emailing us at contact@fidjlaw.com.

    Senate passes Food Safety Crime Bill with greatly enhanced penalties

    The United States Senate recently passed a food safety crime bill sponsored by Senator Patrick Leahy that will significantly strengthen criminal penalties for companies and persons that knowingly violate food safety standards and place tainted products on the market. The legislation, known as the Food Safety Accountability Act, will create a new criminal offense in Title 18 of the United States Code, and will have significant criminal penalties of up to 10 years imprisonment for committing certain food offenses “knowingly and intentionally to defraud or misleadand with conscious or reckless disregard or a risk of death or serious bodily injury.” The Senates version will now go to the House of Representatives for consideration. This bill evidences the Governments increased focus on food safety and adds teeth into the new Food Safety Modernization Act, passed last year to increase the regulatory powers and oversight of the Food & Drug Administration.

    The FDA is ramping up criminal enforcement of the nations food and drug laws. We have previously blogged about the unsuccessful prosecution of the general counsel of GlaxoSmithKline, a large pharmaceutical company for obstruction of justice, here. We have also recently blogged here on the new emphasis by the FDA on bringing Park doctrine prosecutions, where corporate executives can be convicted of crimes even if they have no knowledge of or intent to commit a crime. Our lawyers are monitoring the progress of this bill and are ready to advise clients on how to navigate the FDAs regulatory minefield.