Most folks that remember their childhood will also likely remember the feeling of dread that rushed through your body when one or both of your parents summoned you from your bedroom to receive a harsh scolding for something that you had done. To avoid the unpleasantness of the forthcoming verbal lashing, we pretend not to hear them, lock ourselves in our rooms, or even attempt to bargain from afar. Today, we’ll talk about Stefan Buck, a Swiss banking executive and fugitive, who is locked in his proverbial room without any intention of leaving. Buck is facing charges related to tax evasion.
As the United States has marched toward the utopian idea of global tax compliance, the Swiss and their banks have surely suffered the brunt of the offensive against tax evasion. Their citizens, banks, and bankers have been prosecuted in the United States and have, for the most part, opted to pay hefty fines and penalties to avoid spending time in prison. And though the jury is still out as to whether the Department of Justice is overstepping their authority as a domestic law enforcement agency, most who find themselves in the crosshairs of federal criminal charges are quick to make a deal. But not Stefan Buck.
Buck, a member of the Board of Directors and head of Private Banking at Bank Frey in Switzerland, was indicted in 2013 by a federal grand jury on conspiracy charges related to the bank’s interactions with its American customers. Although Buck has been aware of the charges (and has been since the indictment), he has elected to stay put in Switzerland. This may be caused by the absence of any real motivation to travel to the United States to surrender to law enforcement. The Swiss government will not extradite those within its borders wanted for tax offenses.
This doesn’t mean that Buck has been silent on the matter, though. His attorney has filed a request in court to have his bail amount set in advance. Buck would then be able to surrender to U.S. Marshals and be released on bond. His attorney reasoned that if Buck is willing to leave his “safe haven”, the government should “be open to practical solutions to this laudable result”. Recently, a federal judge denied that request. So it appears as if Stefan Buck will remain a fugitive, at least for the time being.
Buck’s conspiracy charge stemmed from an investigation into Bank Frey and their relationship with their U.S. clients. The indictment asserts that Buck and his associates at Bank Frey assisted American customers hold their money in Bank Frey accounts while avoiding detection by U.S. taxing authorities. This was achieved by setting up “nominee” accounts for the sole benefit of the U.S. customer.
The idea of beneficial ownership became a main discussion point in the late ‘80’s and early 90’s in the international treaty context, but has recently been adopted by the IRS and DOJ as a way to explain how tax evasion is promulgated. Essentially, a taxpayer can set up a foreign entity that in turn, sets up an account at a foreign bank. On paper, it appears as if a foreign corporation owns the bank account (and therefore is not required to report to existence of said account to the IRS).
In reality, the U.S. asserts, the person actually benefiting from the account (the beneficial owner), is the American who set up the foreign corporation in the first place. Therefore, the government takes the position that those who assist Americans with the establishment of foreign entities with the intent to use it as a “nominee”, are conspiring with the taxpayer to create and maintain an undisclosed (and potentially untaxed) account.
Although Stefan Buck may seem like a big fish, the Department of Justice takes all instances of account nondisclosure seriously. Americans young and old have been prosecuted and sentenced to time in federal prison for failing to disclose their foreign bank accounts as prescribed by the Foreign Bank Account Reporting (FBAR) requirements. The willful failure to file documentation disclosing a foreign account with a value of $10,000 or more is a felony.
Unlike Stefan Buck, Americans do not have the luxury of a “safe haven” and no foreign government will prevent U.S. Marshals from entering your home to parade you away in handcuffs. But by the same token, Americans have something that Buck does not: the ability to participate in the Offshore Voluntary Disclosure Program. The OVDP allows taxpayers to remedy their past illegal behavior by fully disclosing their foreign account(s) and paying any associated back taxes and a reduced penalty. In exchange, the government will agree to not prosecute you criminally. Thus, participation in the OVDP forecloses on the chance that you will spend any time in a federal correctional facility. To most taxpayers, such an opportunity is golden.
But that opportunity is time-sensitive. The OVDP is a product of administrative generosity and can be cancelled by the IRS at any time. Furthermore, if the Department of Justice or IRS has already begun to look into your taxes (for any reason), you are likely ineligible for the Program. Although Stefan Buck may be safe from capture, it is only a matter of time until records from Bank Frey are procured by the U.S. and their American customers are prosecuted for willful failure to file an FBAR and potentially felony tax evasion.
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have years of experience assisting taxpayers reach desirable outcomes when dealing with the IRS. Whether you are subject to a tax audit, IRS criminal investigation, or you simply just want to come clean about your foreign accounts through the OVDP, we are committed to working tirelessly on your behalf, so secure the best possible outcome for you and your family. Do not try and fight this battle on your own. Contact the Tax Law Offices of David W. Klasing today at (800) 681-1295 for a reduced-rate consultation.