It took a federal jury only 90 minutes to reach a not-guilty verdict on Monday in the case of former UBS executive Raoul Weil. The former global wealth-management chief was being tried on conspiracy charges relating to the efforts by UBS and their employees to assist U.S. taxpayers avoid declaring or paying taxes on, their accounts held outside of the U.S. If you have accounts overseas, the time to file an FBAR is now.
The Department of Justice alleged that Weil knew about the actions of lower-level UBS bankers and their efforts to help UBS clients avoid U.S. tax. At the conclusion of the trial, U.S. District Judge James Cohn told jurors that they must return a verdict of not guilty if Weil “scerely believed himself to be in compliance with the law.” And the jury did just that. Though it is possible that the way the Department of Justice has handled the investigation and prosecutions (or non-prosecutions) of other Swiss bankers may have played a role in the acquittal.
It seems that the Justice Department’s strategy for prosecuting UBS and other Swiss banking executives has been to grant immunity from prosecution or very lucrative plea-deals to mid-level bankers in exchange for their cooperation and testimony against defendants (including U.S. taxpayers). Though this plan has worked for the DOJ for many years in other legal battles (outside of foreign account reporting), perhaps the jurors weren’t comfortable with convicting a foreign citizen based on testimony from someone who worked with the DOJ to provide insight into UBS in exchange for his guaranteed freedom. The prosecution’s primary witness was Martin Liechti, a former UBS head of banking in the Americas. He testified that Weil had knowledge that a large amount of UBS accounts were out of compliance with internal policies and in violation of U.S. law. Though, Liechti’s testimony was tainted with the fact that he received immunity in exchange for his testimony.
Weil’s attorneys were adamant that their client had done nothing wrong. “He is an innocent man, and the jury was emphatic in recognizing that” said Aaron Marcu, one of the attorneys on Weil’s legal team.
Federal law requires that U.S. taxpayers report the existence of any foreign account that reaches a high-balance of $10,000. Taxpayers declare the account (and any interest or investment type income) on their individual tax returns as well as on a Foreign Bank Account Reporting form (FinCen 114). The government taxes United States citizens based on their worldwide income, thus, keeping track of where citizens are storing their money is a top priority (money laundering and anti-terrorism concerns also prevail).
Though the omission of a few lines on a tax return or other government forms may seem like a simple mistake, the government is not taking the issue lightly. Penalties for failing to file an FBAR form or including information about your foreign account on your taxes can result in an IRS criminal investigation, years in a federal prison, and fines that can theoretically exceed 250% of the high-balance of your foreign account.
Though the story of Mr. Weil may bring a feeling of relief to taxpayers that have undeclared accounts overseas, such a sense may be premature or even misguided. It is important to keep in mind that Mr. Weil was an executive at UBS and didn’t oversee lower-level bankers on a day-to-day basis. This may have been his saving grace. In fact, it should be noted that the jury did not find that there was not any illegal activity. The panel simply determined that Raoul Weil did not partake in a conspiracy. In fact, UBS previously admitted to assisting U.S. taxpayers in their endeavors to avoid domestic taxation.
Where the Department of Justice has been much more successful is in the prosecution of low-level bankers and clients of UBS and other Swiss banks. The main reason for this is that they are easy targets. U.S. clients of Swiss (and other overseas) banks are domestic and generally do not require extradition prior to prosecution. Further, there are plenty of mid-level banking employees that are more than happy to provide evidence and testimony against U.S. taxpayers to save themselves.
It certainly seems that though Mr. Weil was successful in his defense this week, U.S. taxpayers are still the most likely to be prosecuted and convicted for violations of federal law relating to reporting of foreign bank accounts.
If you or someone that you know has an account in a foreign bank, it would be very wise to speak with an Irvine tax attorney that has years of experience representing taxpayers that are looking to avoid the negative consequences of being caught and prosecuted by the Department of Justice. At the Tax Law Offices of David W. Klasing, our team of tax professionals will ensure that you are in the best position possible to either repel a government audit or prosecution. Further, if you aren’t being investigated, we can help you determine if you are eligible for the Offshore Voluntary Disclosure Program, a program that allows you to come clean with the government and avoid the potential life-altering effects of a prison sentence or huge fines and penalties. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation at (800) 681-1295.