Seven former wealthy U.S. clients of UBS AG
They are the latest in a slew of cases the government has brought against former clients of the Swiss banking giant, after the bank last year admitted it actively helped U.S. citizens evade taxes overseas.
As the midnight April 15 deadline for filing tax returns loomed, officials used the prosecutions to call attention to requirements for taxpayers to report offshore assets.
The rich are not different, Manhattan U.S. Attorney Preet Bharara said in a statement. Multimillionaires with secret Swiss bank accounts have to pay their taxes just like everyone else. It is that simple.
Two of the seven accused pleaded guilty on Thursday in Manhattan federal court.
For the years 2003 to 2007, I filed a false income tax return knowing that it did not mention a UBS account I controlled or any income I earned in that account, one of the defendants, Jules Robbins, told U.S. Magistrate Judge Ronald Ellis.
Robbins, a resident of New York who owned and operated companies that distributed watches, was believed to have had as much as $40 million in the account. Robbins agreed to pay a civil penalty of $20.8 million and faces a possible prison sentence of between six months and 12 months following his guilty plea.
Another of those charged, New York investment portfolio manager Federico Hernandez, pleaded guilty to similar charges before U.S. District Judge Denny Chin. He faces a possible prison sentence of between 18 months and 24 months and a civil penalty of $4.4 million.
A U.S. grand jury returned indictments against four other former bank clients, businessmen Ernest Vogliano, Shmuel Sternfeld, Richard Werdiger and a New York woman identified as Sybil Nancy Upham. U.S. prosecutors also charged a disbarred lawyer, Kenneth Heller, who was arrested in Hoboken, New Jersey on Thursday.
U.S. prosecutors said in a statement that collectively, the seven hid more than $100 million from the Internal Revenue Service by using sham companies to conceal ownership of secret Swiss bank accounts at UBS.
Upham pleaded not guilty at her initial court appearance. Her attorney, Elkan Abramowitz, declined to comment.
Heller's attorney Jeffrey Harris said: They didn't indict him and the only reason they brought this criminal complaint is that every year on April 15 they want to make a big publicity splash.
Lawyers for the other defendants could not immediately be reached to comment.
Although keeping money offshore is not illegal, U.S. taxpayers must report assets held there. For assets over $10,000 there is an additional reporting requirement with the U.S. Treasury.
Several defendants used transfers of small bits of money to evade taxes, including a meeting where Vogliano asked his UBS financial advisor to prepare $100,000 in American Express Travelers checks in $500 denominations.
Upham, Heller, Vogliano and Sternfeld removed their money from UBS soon after media reported in May 2008 that the criminal investigation of UBS might disclose unreported accounts, according to court papers. UBS employees in Switzerland helped U.S. taxpayers conceal accounts, prosecutors said.
UBS last year paid $780 million to settle a United States government lawsuit against it. As part of that deal, the bank handed over details on more than 250 accounts. These cases are now being prosecuted by U.S. government lawyers.
There are separate cases in U.S. District Court for the Southern District of New York, No. 10-325, No. 10-326, No. 10-327, No. 10-328, No. 10-00333, No. 10-00334 and No. 10-mag-742.
(Reporting by Grant McCool in New York and Kim Dixon in Washington; Editing by Maureen Bavdek and Tim Dobbyn)