Cracking Down On Tax Shelters, Swiss Bank Pays $74M In Fines

By @MMichaelsMPN |
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    The Central Bank Wegelin & Co in St. Gallen, Switzerland is shown on Jan. 27, 2012. (Photo Ennio Leanza / Keystone / File)

    The Central Bank Wegelin & Co in St. Gallen, Switzerland is shown on Jan. 27, 2012. (Photo Ennio Leanza / Keystone / File)

    (MintPress) – Wegelin & Company, the oldest bank in Switzerland, admitted Thursday to helping wealthy Americans shelter more than $1.2 billion in one of the largest known cases of tax fraud in U.S. history. As part of the plea deal, representatives from the Swiss bank agreed to pay $74 million in fines — significant but largely a symbolic sum for the large financial institution.

    The money recovered is a small fraction of the estimated $5 trillion that Americans and corporations are thought to be hiding in offshore accounts, according to a 2008 Senate report. The settlement, while important, is a means for Swiss banks to placate critics and save face in what should be a much larger crackdown on tax shelters abroad.


    Admitting fault

    Representatives from Wegelin & Company, a Swiss bank founded in 1741, appeared in a Manhattan Federal Court this week, acknowledging that from 2002-2010, bank employees helped wealthy American account holders hide some $1.2 billion at the Swiss bank.

    Switzerland, Luxembourg and the Cayman Islands have historically been tax shelters for the wealthy elite to stash their fortunes, outside the purview of the Internal Revenue Service (IRS).

    Otto Bruderer, a Wegelin partner, commented on the widespread misconduct in court, saying, “From about 2002 through 2010, Wegelin agreed with certain U.S. taxpayers to evade the tax obligations of these U.S. taxpayer clients, who filed false tax returns with the IRS. Wegelin was aware the conduct was wrong.”

    It would be naive to believe that account holders or banks will voluntarily come forward with information regarding financial misconduct. With few resources to police transactions in the U.S. or abroad, the IRS has turned to a reward system for whistleblowers in an effort to incentivize the sharing of information by those working on the inside, with knowledge of tax sheltering.


    Catching tax evaders

    Although the program has been in place for years, the IRS has relied increasingly upon their whistleblower program in an effort to catch tax evaders by rewarding those who turn them in. Individuals presenting information leading to the recovery of offshore money or fraudulent tax schemes are eligible to receive a fraction of the fines paid by financial institutions and individuals found guilty of tax crimes.

    One of the more prominent cases occurred in September when Bradley C. Birkenfeld, a former employee at UBS AG bank, was awarded a $104 million “whistleblower award” for reporting widespread tax fraud committed by his former employer.

    During his career at the financial services firm, Birkenfeld helped thousands of wealthy Americans move their money to Swiss banks in order to avoid taxation by the IRS. After serving a 40-month sentence for his involvement in the UBS crimes, Birkenfeld was rewarded after his release from prison.

    Birkenfeld’s testimony was part of a larger 2009 case in which UBS was found to have helped 19,000 clients move more than $20 billion to Swiss bank accounts. After closing the division responsible for the mass tax evasion, the bank paid $780 million in fines and agreed to hand over account information for 4,500 individuals.

    Following the crackdown, an additional 33,000 tax evaders chose to report offshore accounts when faced with prosecution, generating an additional $5 billion in tax revenues.

    While the whistleblower program and occasional investigations have been somewhat successful in bringing in lost tax revenue, these are stopgap measures in place of broader systemic reform to a broken tax code.

    “It’s clearly a part of the piece of the puzzle. We know that because of this whistleblower program, citizens acting as attorney generals has been somewhat effective. We need to do more in terms of revising our tax code. We vastly under-fund the IRS in terms of collecting taxes,” said Professor David Schultz, an expert on government, nonprofit and business ethics, in a recent MintPress News statement.


    Extending long arm tax jurisdiction

    “Among the different ways we think about a tax system, it should be relatively simple in terms of enforcement. One of the problems that we have had in the international banking system is the fact that for many years Switzerland along with a few countries have created shelters where money can’t be detected,” added Schultz.

    The fundamental problem is one of international sovereignty, where the IRS can only investigate tax evasion insofar as foreign governments will cooperate. However, as Schultz notes, there is much that Washington lawmakers can do to simplify the tax code, empower the IRS and crackdown on fraud.

    “The other part of the problem is the tax code in the U.S makes it difficult to detect sources of income for wealthy individuals and doesn’t always require sources to report that income to the IRS,” continued Schultz.

    Indeed, talk of taxes has become a headache not just for the average American who dreads paying them, but also for legislators who have little knowledge of the overly complicated tax code in the U.S.

    As Schultz points out, “There are few members of Congress with a mastery of the tax code.” Although there are other, more pressing problems, the issue remains of paramount importance for collecting revenue and financing the repair of infrastructure and the maintenance of critical social programs, like Medicare, Medicaid and public education.

    Public support for a simpler, more progressive tax code is clear. A Pew Opinion poll conducted in August found that 58 percent of Americans believe that the rich pay too little in taxes. This reflects a growing public disdain for the radical supply side “trickle down” economic theory informing Reaganomics, the tax policy in America for the past 30 years.

    However, even those limited taxes paid by the highest income earners is reduced further as the wealthy can move their money, illegally, to tax shelters with little risk of a crackdown by the feeble IRS.

    The problem is one that extends to corporations as well, offshoring operations or cleverly skirting loopholes in the tax code as to avoid taxation. Currently, the IRS can tax any entity doing business, headquartered in or making income in the U.S.

    However, when it comes to taxing a U.S. company earning profit overseas, or its subsidiary companies, the legal reach of the IRS remains limited at best.

    The more comprehensive approach to closing tax loopholes and prosecuting violators, be they individuals or corporations, would require a legislative overhaul of the U.S. tax code and changing the methods of enforcement.

    “Tax Amnesties” a popular proposal by conservative lawmakers have been moderately successful in bringing in revenue from consistent tax violators by offering them the opportunity to pay outstanding taxes without fear of legal retribution.

    In 2009, Louisiana Gov. Bobby Jindal instituted a tax amnesty, bringing in $450 million in lost state taxes. While this is an impressive figure, an occasional amnesty doesn’t provide the long-term legislative teeth necessary to prevent future tax evasion.

    The long-term solution, promoted by Dr. Schultz and others, is to create a “long arm tax jurisdiction” capable of monitoring movement of capital and, if necessary, cracking down on violators who break tax laws.

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    • jack loach

      Sods —–

      .—- 2015.

      For almost two
      decades we have strived to get justice for the injustice we have
      suffered at the hands of a world renowned bank— PICTET & CIE.

      Two yorkshiremen
      both running their own small family businesses trying to resolve the
      problem by taking all the correct legal procedures to recover their

      The matter was
      raised in Parliament – twice– the FSA investigated the matter
      concluding that PICTET had rogues operating in their London Bank —
      but the rogues had left —saying no one left to prosecute.??? —–
      so there.

      We then
      approached the Financial Ombudsman Service. (FOS) — our case was
      dealt with by seven different people —- then our numerous E-Mails
      were ignored — nobody would speak to us ——-so there.

      We then asked the
      SFO ( Serious Fraud Office.) to investigate our case —- the
      criteria of our case ticked all their boxes. — we were instructed
      not to send them

      documents/evidence.—— in fact they wrote to us advising us to go
      to the Citizen’s Advice Bureau.(CAB.)

      Richard Alderman
      the SFO boss —- who responded to our letter was the same man who
      would not investigate the “ Madoff” scandal or the “Libor”

      The MP’s
      committee —- said he was sloppy— and the SFO was run like “
      Fred Karno’s Circus” —– it was an office of fraud.—– so

      Our M.P.
      approached our local Chief Constable to investigate—– he was
      called—- Sir Norman Bettison— Chief Constable of West Yorkshire
      Police —- a force that made “ Dad’s Army” look like the S.A.S.
      They were inept – corrupt —malicious — from top to bottom. We
      were criminally dealt with by the Forces Solicitor—- the Head of
      the Economic Crime Unit —-and the Chief Constable —– so there.

      We were then
      advised to pass our complaint against West Yorkshire Police to the
      I.P.C.C. – which we did — they advised us to make our complaint
      to —- the West Yorkshire Police — we did with reluctance — all
      we got was abuse and obfuscation. —– so there.

      Sir Norman
      Bettison —- The Forces solicitor— and the Head of the Economic
      Crime —- have all been removed from their posts and facing criminal

      —— so there.

      We even sought
      justice through the Courts — culminating in a visit to the Court of
      Appeal-London.— On leaving the Courts of Appeal that day our
      barrister a “rising star” informed us — that if that was
      British Justice then you can keep it. He quit the law and moved to
      Canada —– so there.

      A few years later
      we learned that one of the judges ( Lord Justice.) in our case at the
      Court of Appeal was related to a senior executive of the Pictet Bank
      —–so there.

      The Ministry of
      Justice passed our case to Lord Myners to investigate — we would
      rather have had Mickey Mouse or Donald Duck do it. — to this day we
      don’t know

      —whether he did
      anything or not —- probably not — seeing that his wife was on the
      Pictet Prix Board.

      Pictet & Cie
      .Bank — voted private bank of the year 2013.

      Ivan Pictet —-
      Voted banker of the year 2012. —- the senior partner — lied on
      numerous occasions and had documents destroyed — also said genuine
      documents were forgeries. —– so there.

      Ivan Pictet in
      Oct. 2013 —- Given the Legion of Honour — but saying that —-
      honours were given to Hitler — Eichmann — Mussolini —Franco
      — he’s in fitting company. —-so there.

      RAPHAEL.Q.C. — Peters & Peters.London. They were the banks

      Raphael.Q.C. along with Ivan Pictet withheld crucial documents
      requested by the High Court —- the FSA —- and the police Fraud
      Squad. —-so there.

      Raphael.Q.C. became an Honorary Queens Counsellor in March. 2012.

      Raphael.Q.C. became a Master of the Bench in Nov.2012.

      An expert in
      Fraud —the Doyen of Fraud Lawyers. —– so there.

      This says a lot
      about Banks — and their lawyers –the consensus of opinion is that
      they are highly paid “crooks” —- no wonder they voted Ivan
      Pictet banker of the year. — and Monty Raphael a Queens Counsellor
      – “crime does pay”?

      It appears that
      crimes in the “establishment.” are honoured by their peers.


      Full Story.—-
      “google ”

      Insert.—– The
      Crimes of —– Pictet & Cie Bank.


      Ivan Pictet/
      Monty Raphael Q.C.

    • jack loach

      Swiss Bank
      Accounts. Jan.. 2015.

      Is your monies safe
      in these accounts —- definitely NOT.

      Would you get your
      money back if every body decided to withdraw all their accounts –
      NO WAY.

      Economic Experts
      say that there would only enough money to repay 50% of their clients.

      Are you going to be
      in the 50% — that loose your money.– Get it out NOW.

      2012 — – June.
      — Published in Anglo INFO .Geneva.— USA Trust Fund Investors were
      sent false and fraudulent documents by Pictet Bank.Switzerland. in
      order to collect large fees. ( Like MADOFF) —Even after the SEC in
      the USA uncovered the fraud Pictet continued to charge fees and drain
      whatever was left in these accounts. Estimated that $90,000,000
      million lost in this Pictet Ponzi scheme.

      2012 – – – July.
      — De – Spiegel. — states – Pictet Bank uses a letterbox
      company in

      and a tax loophole involving investments in London to gain

      millionaires as clients.

      – – – August —- German Opposition Leader accuses Swiss Banks of
      “organised crime.”

      the fines that crooked Swiss banks have incurred in the last few
      years exceeds £75.Billion.

      is also calculated that the secrecy ” agreements” with
      regards to tax evation by their clients will cost the banks another
      £450 Billion.( paid out of your monies.)

      banks are panicking — the are quickly restructuring their banks
      —- from partnerships —

      ” LIMITED COMPANIES.” —– this will probably mean that
      in the future — they could

      you only 10% of your monies ” if you are one of the lucky ones”
      —- and it be legal.

      —- The Crimes of —- Pictet & Cie Bank.