U.S. Data from Swiss Banks May Mean More Prosecutions

Jul 27, 2015   
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By Joel Schectman
July 22, 2015

More Swiss banks are coming clean with U.S. authorities and experts say that could mean trouble for U.S. tax cheats and their investment managers.

The U.S. Justice Department said it reached its 20th deal under the Swiss Bank Program last week. The program, which began two years ago, offered leniency to Swiss banks that were hiding Americans’ assets from the Internal Revenue Service if the firms agreed to give up information on account holders. Authorities are ”mining this trove of information,” Acting Assistant Attorney General Caroline D. Ciraolo said in an emailed statement, and have “identified and are investigating individual accountholders who willfully concealed their foreign accounts, as well as domestic and foreign facilitators who helped U.S. taxpayers dodge their obligations.”

The program started in 2013 and authorities began announcing resolutions last spring, with Swiss banks agreeing to penalties ranging from as little as $9,090 to $211 million.

The banks are seeking leniency at a time when U.S. authorities have taken an increasingly tough line against Swiss institutions that help wealthy Americans dodge taxes. Last year, U.S. prosecutors extracted a guilty plea and $2.6 billion in penalties from Credit Suisse Group AG after the bank admitted to aiding tax evasion.

But legal experts say the cases against individuals utilizing the banks may still be yet to come, as authorities piece together the trove of incriminating information the Swiss firms handed over. “There is so much information now in possession of DoJ. They are taking their time and putting together cases on individuals,” said Jared Dwyer, a former federal tax prosecutor, who predicts a spike in cases against individuals over the next year and a half.

The data dump will also allow authorities to follow the money trail to other offshore banks that hide American assets in the Caribbean and Latin America, said Mr. Dwyer, now an attorney at Greenberg Traurig LLP.

Joseph DiRuzzo, a tax litigation specialist at Fuerst Ittleman David & Joseph PL, said he expects the data mining to help the IRS make civil tax evasion cases, which have no statute of limitations. But time might run out for criminal charges, Mr. DiRuzzo said. Tax crimes have a maximum of a six-year statute of limitation, Mr. DiRuzzo said. “The clock is ticking,” he said.

And many U.S. account holders pulled out of Swiss banks back in 2010, when U.S. authorities first signaled that they would crack down. “If you didn’t see the writing on the wall in 2010, it was hubris–that’s all I can call it,” Mr. DiRuzzo said.