Former UBS Banker Charged with Helping U.S. Taxpayers Use Secret Swiss Bank Accounts to Evade U.S. Taxes

Investment Advisor Encouraged U.S. Taxpayers Not to Disclose Accounts to Internal Revenue Service

WASHINGTON – Martin Lack, a former UBS AG banker who is currently an independent asset manager, has been charged with conspiracy to defraud the United States, the Justice Department and the Internal Revenue Service (IRS) announced today.

According to the indictment, Lack, a citizen and resident of Switzerland, founded his own investment management firm, Lack & Partner Asset Management AG in Zurich in 2002.  According to the indictment, Lack assisted U.S. customers to open and maintain secret bank accounts at a Swiss cantonal bank headquartered in Basel, Switzerland, with the assistance of a private banker at the bank.  The indictment alleges that Lack traveled to the U.S. to conduct banking for U.S. customers with undeclared accounts and conducted currency transactions in the U.S. in violation of federal banking and currency reporting laws. 

According to the indictment, Lack encouraged his customers not to participate in the IRS voluntary disclosure program and he offered to provide his customers with falsified bank documents to conceal the source of the funds in their undeclared bank accounts.  The indictment further alleges that Lack gave a U.S. customer with an undeclared bank account a cell phone and instructed the customer to only contact him using the cell phone and not to use a U.S. land line.

The indictment further alleges that Lack feared that he would be arrested by U.S. law enforcement following the investigation of UBS AG, so, in November 2010, he sent his associate, Renzo Gadola, to meet with a client at a Miami hotel to persuade that client not to disclose to the U.S. that the client owned and controlled a bank account at a regional bank headquartered in Basel.  The undeclared bank account allegedly was funded when the client provided Lack with approximately $445,000 in cash during two meetings in New Orleans in 2007.   According to the indictment, at the Nov. 6, 2010, meeting in Miami, Gadola encouraged the customer not to disclose the undeclared cantonal bank account to U.S. authorities, telling the customer that there was a “99.9 percent chance the client had nothing to worry about because the “likelihood . . .that they will somehow. . . find out about the account is practically zero percent.” Lack also allegedly encouraged this client not to disclose the undeclared bank account at the cantonal bank to the U.S. authorities and offered to provide the client with falsified bank documents to make the funds in the account appear as though they were the proceeds of a loan.  On Dec. 22, 2010, Gadola pleaded guilty to conspiring to defraud the United States. He is scheduled to be sentenced before District Judge James King of the Southern District of Florida on Nov. 18, 2011.

Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida; John DiCicco, Principal Deputy Assistant Attorney General for the Justice Department’s Tax Division; and Jose A. Gonzalez, Special Agent in Charge   of the Internal Revenue Service - Criminal Investigation (IRS-CI) Miami Field Office, commended the investigative efforts of the IRS agents involved in this case, as well as Senior Litigation Counsel Kevin M. Downing, Trial Attorney Mark F. Daly, Trial Attorney Michelle M. Petersen of the Tax Division, and Assistant U.S. Attorney Bertha Mitrani, who are prosecuting the case.

A criminal indictment is only an accusation and a defendant is presumed innocent until proven guilty. If convicted, the defendant faces a maximum of five years in prison and a maximum fine of $250,000.

More information about the Justice Department’s Tax Division and its enforcement efforts is available at usdoj.gov/tax/.

Swiss International Bank's Former Head of North America Offshore Banking, Others Charged with Conspiracy

Superseding Indictment Alleges Defendants Helped U.S. Taxpayers Hide Assets in Secret Accounts

WASHINGTON – Markus Walder, former head of North America Offshore Banking at an international bank headquartered in Zurich; Susanne D. Rüegg Meier, a former manager with the international bank; Andreas Bachmann, a former banker at a subsidiary of the international bank; and Josef Dörig, the founder of a Swiss trust company, have been charged with conspiring with other Swiss bankers to defraud the United States, the Justice Department and Internal Revenue Service (IRS) announced today.   The four are charged in a superseding indictment together with four other defendants (Marco Parenti Adami, Emanuel Agustino, Michele Bergantino and Roger Schaerer) who were charged in an indictment returned on Feb. 23, 2011.

According to the superseding indictment, the international bank’s managers and bankers engaged in illegal cross-border banking that was designed to assist U.S. customers evade their income taxes by opening and maintaining secret bank accounts at the bank and other Swiss banks.   As of the fall of 2008, the international bank maintained thousands of secret accounts for U.S. customers with as much as $3 billion in total assets under management in those accounts.   The conspiracy dates back to 1953 and involved two generations of U.S. tax evaders including U.S. customers who inherited secret accounts at the international bank.

Moreover, according to the superseding indictment, the conspirators utilized a representative office in New York City to provide unlicensed and unregistered banking services to U.S. customers with undeclared accounts.   Walder, Schaerer, their co-conspirators and others allegedly made false statements and provided misleading information to the Federal Reserve Bank of New York and to the IRS in order to conceal the international bank’s U.S. cross-border banking business and the role of the New York representative office in that business.

The superseding indictment alleges that Walder supervised the U.S. cross-border banking business, including the New York representative office headed by Schaerer, a Geneva-based team of bankers led by manager Marco Parenti Adami and a Zurich-based team of bankers led by manager Rüegg Meier.   Rüegg Meier was a member of senior management at the international bank and also served as a private banker, providing unlicensed and unregistered banking services to U.S. customers with undeclared accounts at the bank.   The superseding indictment further alleges that Bachmann was a private banker for a wholly-owned subsidiary of the international bank who traveled to the United States to assist U.S. taxpayers in evading their U.S. taxes through the use of secret bank accounts.   It is further alleged that Dörig, founder of a Swiss trust company, was a preferred provider of the international bank who assisted U.S. customers in forming and maintaining nominee tax haven entities and opening secret accounts at the international bank and its subsidiaries in the names of the entities.

According to the superseding indictment, the defendants and their co-conspirators solicited U.S. customers to open secret accounts because Swiss bank secrecy would permit them to conceal from the IRS their ownership of accounts at the international bank and other Swiss banks.   It is further alleged that they provided unlicensed and unregistered banking services and investment advice to customers in the United States in person while on travel to the United States, including at the international bank’s representative office in New York City and by mailings, email and telephone calls to and from the United States.   It is further alleged that the international bank’s employees destroyed statements and other account records that were sent via email or facsimile to the representative office in New York so that records regarding the undeclared accounts would not be maintained in the United States.

The superseding indictment alleges that the defendants and their co-conspirators caused U.S. customers to travel outside the United States to conduct banking related to their secret accounts; opened secret accounts in the names of nominee tax haven entities for U.S. customers; accepted IRS forms that falsely stated under penalties of perjury that the owners of the secret accounts were not subject to U.S. taxation; advised and caused United States customers to structure withdrawals from their secret accounts in amounts less than $10,000 in an attempt to conceal the secret accounts and the transactions from American authorities; mailed bank checks in amounts less than $10,000 to customers in the United States; and advised U.S. customers to utilize offshore charge, credit and debit cards linked to their secret accounts and provided the customers with such cards, including cards issued by American Express, Visa and Maestro.

According to the superseding indictment, after the bank decided to close the secret accounts maintained by U.S. customers, the defendants encouraged and assisted U.S. customers to transfer their secret accounts to other foreign banks as a means of continuing to hide their assets from the IRS and discouraged the customers from disclosing their secret accounts to the IRS through the IRS’s Voluntary Disclosure Program.

Neil H. MacBride, U.S. Attorney for the Eastern District of Virginia; John A. DiCicco, Principal Deputy Assistant Attorney General for the Justice Department’s Tax Division; and Douglas H. Shulman, Commissioner of the IRS, made the announcement.

A criminal indictment is only an accusation and a defendant is presumed innocent until proven guilty. If convicted, the defendants each face a maximum of five years in prison and a maximum fine of $250,000.

U.S. Attorney MacBride and Principal Deputy Assistant Attorney General DiCicco commended the investigative efforts of the IRS agents involved in this case, as well as Senior Litigation Counsels Kevin M. Downing and John E. Sullivan and Trial Attorneys Mark F. Daly, Tino M. Lisella, Michelle M. Petersen and Melissa Siskind of the Tax Division, and Assistant U.S. Attorney Mark Lytle, who are prosecuting the case.

Minneapolis Man Pleads Guilty to Making False Statements in Trevor Cook Ponzi Scheme

MINNEAPOLIS—Earlier today in federal court in Minneapolis, a 40-year-old Minneapolis man pleaded guilty to making false statements to federal investigators in a multi-million-dollar Ponzi scheme orchestrated by Trevor Cook. Jon Jason Greco pleaded guilty to one count of making a false and material statement in connection to the crime. Greco, who was indicted on March 22, 2011, entered his plea before United States District Court Chief Judge Michael J. Davis.

In his plea agreement, Greco admitted that on July 27, 2010, he lied to investigators about foreign currency and coins he had placed in a locker at the Mall of America. The currency and coins were assets the government wanted to seize. Cook pleaded guilty on April 13, 2010, to federal criminal charges regarding the operation of a foreign currency trading scam that defrauded more than 900 investors. Pursuant to the terms of his plea agreement, Cook committed to turning over the proceeds of the fraud. On June 24, 2010, Greco was interviewed by investigators regarding the location of those assets.

On July 27, Greco admitted that he told investigators the items belonged to him, a gift from a deceased uncle, and did not belong to Cook. However, Greco knew the items belonged to Cook. Because of Greco’s false statements, the U.S. failed to recover approximately $6,000 of the assets. Seized assets were used to repay victims of Cook’s fraud.

For his crime, Greco faces a potential maximum penalty of five years in prison. Judge Davis will determine his sentence at a future hearing, yet to be scheduled. In August of 2010, Cook was sentenced to 300 months in federal prison for orchestrating the scam itself.

This case is the result of an investigation by the Internal Revenue Service-Criminal Investigation Division and the Federal Bureau of Investigation. It is being prosecuted by Assistant U.S. Attorney Tracy L. Perzel.

“Alpha One” Foreign Currency Trader Convicted of Securities Fraud

HOUSTON, TX—Robert David Watson, 50, of Spring, Texas, the “developer and owner” of “Alpha One”, a purportedly profitable foreign currency investment model, has been convicted of securities fraud after defrauding investors of millions of dollars, United States Attorney José Angel Moreno announced today.

Indicted in November 2010, Watson pleaded guilty this morning to securities fraud before U.S. District Judge Gray H. Miller. Watson faces up to 20 years in prison and $5 million fine at sentencing which Judge Miller has set for Sept. 23, 2011. The court has permitted Watson to remain on bond pending his sentencing hearing. The United States will seek restitution for the victims of Watson’s fraud at the sentencing.

At today’s hearing, Watson admitted that between 2003 and 2009, he used and employed manipulative and deceptive devices and contrivances in connection with the purchase and sale of investments in a sequence of trading enterprises he formed. He admitted raising tens of millions of dollars from scores of investors and to having exercised custody and control over those funds under the pretense that he used them to trade, including buying and selling foreign currencies.

To persuade people to invest or remain invested in his enterprises, he represented that he sought profits in the foreign currency markets using a model called Alpha One, which he maintained he developed and owned. Among other things, Watson claimed that Alpha One earned high historical returns since 2000, never had a losing month, and earned an annualized return of 23.04% between June 2006 and February 2009.

Watson, however, admitted that he failed to trade as he represented. Rather, he made a minimal number of trades and earned little if any profits. Nevertheless, he caused periodic, sham account statements to be sent to investors via U.S. Mail or wire communication, or to be made available to investors electronically, that purportedly tracked returns from trading profits, when in fact the statements did not reflect real trades or account values. To make those sham account statements appear legitimate, he prepared phony statements of trading activity and bank accounts, which he provided to the entities’ insiders and employees and showed to inquisitive investors. When investors withdrew supposed returns or their principal investments, he admitted he caused them to be paid with funds raised from other investors, not profits from foreign currency trades. Although he did minimal trading, Watson paid himself lucratively, receiving hundreds of thousands of dollars annually during the scheme.

In April 2009, Securities and Exchange Commission (SEC) Enforcement Division staff in Fort Worth, Texas began to investigate Watson and the purported profitability of his enterprises. Watson, however, impeded that investigation by fabricating bank statements and foreign currency trading records and producing them to the SEC in a final attempt to conceal his fraud.

Special agents from the FBI and the Internal Revenue Service Criminal Investigations as well as staff from the SEC in Fort Worth and the Commodity Futures Trading Commission (CFTC) conducted the investigation leading to the charges. Assistant U.S. Attorney Stephen L. Corso is prosecuting the case.

Federal Court Bars Firm with Offices in Pennsylvania and Virginia from Promoting Stock-Loan Tax Scheme

Court Finds “HedgeLoan” Transactions Were Taxable Stock Sales Disguised as Loans

WASHINGTON – A federal court has permanently barred HedgeLender LLC from promoting a stock-loan tax scheme, the Justice Department announced today.   According to court findings, HedgeLender, which maintained offices in Philadelphia and Reston, Va., promoted a scheme purportedly allowing owners of appreciated stock to obtain cash through purported loans without reporting or paying tax on capital gains.

In entering a permanent injunction order against the firm, Judge T.S. Ellis III of the U.S. District Court for the Eastern District of Virginia found that HedgeLender knowingly made false statements when it told potential customers that these “HedgeLoan” transactions were true loans secured by the customers’ stock.   In reality, the court found, the stock was sold immediately, and the funds provided to the customers were sales proceeds, not loan proceeds, and therefore subject to federal income tax on capital gains at the time of receipt.   According to the court, HedgeLender caused the sale of more than $268 million in securities through the HedgeLoan scheme, and it promoted the program even after the U.S. Securities and Exchange Commission sued two of its owners, who agreed to stop promoting a similar stock-loan product.

The order announced today is the latest in a series of federal court decisions finding that purported stock-loan transactions like the HedgeLoan scheme are actually sales and not loans.   In November 2009, a California federal court enjoined the developer of a similar scheme, the Derivium 90 percent loan program.   The government complaint against HedgeLender also named two alleged owners of HedgeLender, Daniel Stafford and Fred R. Wahler, Jr., as well as William Chapman and two companies he allegedly owned, Alexander Capital Markets LLC and Alexander Financial LLC.   All five of those defendants previously agreed to permanent injunctions without admitting the allegations in the complaint.

In the past decade, the Justice Department’s Tax Division has obtained hundreds of injunctions against tax return preparers and tax fraud promoters.   Information about these cases is available on the Justice Department website.