Igor Drabkin, Esq.

Tax time - hiding money in a Swiss bank account to avoid paying taxes?

Just as the April 15th deadline for filing income tax returns approached, the US government announced a bunch of new cases against the taxpayers who were hiding their assets in Swiss bank accounts. The parade of cases involved at least $145 million hidden in foreign bank accounts, according to the officials.

Seven former clients of UBS AG were charged with filing false tax returns, collectively hiding more than $100 million held offshore in Swiss accounts. Two of the seven pleaded guilty on April 15, 2010, in Manhattan federal court. One of the defendants, Jules Robbins, admitted to filing false income tax returns, knowingly failing to mention a UBS account and any income earned on that account, for the tax years 2003 to 2007.

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. He faces a possible prison sentence of between 18 months and 24 months and a civil penalty of $4.4 million. In addition, 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.

On April 12, 2010, another U.S. client of UBS AG pleaded guilty to filing false tax forms on income diverted to offshore Swiss accounts. Harry Abrahamsen pleaded guilty in federal court in New Jersey to failing to file a Report of Foreign Bank and Financial Accounts (FBAR) with respect to accounts valued at $1.3 million. Abrahamsen admitted he failed to report his account and a second one in his daughter’s name. He had transferred funds through a shell Panamanian company to hide funds from the Internal Revenue Service, according to the government.

Also on April 15, 2010, authorities arrested New York real estate developers Mauricio and Leon Cohen, father and son. In documents filed in the Southern District of Florida, the government alleges the two evaded taxes and failed to account for $45 million. They are also alleged to have failed to pay taxes on the sale of a New York hotel by using shell companies in tax havens. The government said the Cohens used a large international bank to hide the money. A source with knowledge of the case identified the bank as HSBC, Europe’s biggest bank. Interestingly, the name of HSBC was mentioned in the recent news with respect to the stolen data containing names of foreign account holders. This data was offered to, and apparently accepted by, the tax authorities of Germany and France. It will be interesting to see whether this case is the first of the string of HSBC cases that the US government may pursue, just as they pursued the UBS account holders.

This post is for educational and information purposes only. It is not legal advice on any particular case, and merely a general opinion of one California lawyer. You should not rely on it without consulting a competent attorney in your area about your specific case and facts. It is not intended to, and shall not, create an attorney-client relationship.

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