60 Minutes Exposé on Money Laundering Into the U.S. (1/31/16)

60 Minutes had an exposé on money laundering into the U.S., a process enabled by the ease to create U.S. corporations whose owners are anonymous.  I recently posted on some U.S. initiatives to curb the practice for real estate cash deals in the names of corporations whose owners are anonymous.  More on Transparency for Entities Acquiring Valuable Real Estate in Some U.S. Markets (Federal Tax Crimes Blog 1/23/16), here; and One Step in Attacking Lack of Transparency in U.S. (Federal Tax Crimes Blog 1/13/16), here.  Both article  have links to other sources.

The 60 Minutes program involved undercover investigations by Global Witness, a London-based nonprofit organization that exposes international corruption, here. The 60 minutes programs are entitled Anonymous, Inc., parts I and II.  The programs with transcripts and some extra materials and key excerpts are available here.  (Note:  Ad blockers must off in order to access the content.)

Here is the opening from the transcript:

If you like crime dramas and movies with international intrigue, then you probably have a basic understanding of money laundering. It's how dictators, drug dealers, corrupt politicians, and other crooks avoid getting caught by transforming their ill-gotten gains into assets that appear to be legitimate. 

They do it by moving the dirty money through a maze of dummy corporations and offshore bank accounts that conceal their identity and the source of the funds. 

And most of it would never happen without the help -- witting or unwitting -- of lawyers, accountants and incorporators; the people who actually create these anonymous shell companies and help move the money. In fact, the U.S. has become one of the most popular places in the world to do it. 

Tonight, with the help of hidden camera footage, we're going to show you how easy it seems to have become to conceal questionable funds from law enforcement and the public. 

You need look no further for evidence than the changing skyline of New York City, where much of the priciest residential real estate is being snapped up not by individuals, but by anonymous shell companies with secret owners. 

There's nothing illegal about it as long as the money's legitimate, but there's no way to tell, if you don't know who the real buyers are. It is one of the reasons Global Witness, a London-based nonprofit organization that exposes international corruption, came to New York City 19 months ago. It wanted to see how helpful U.S. lawyers would be in concealing questionable funds. 

This hidden camera footage was shot in law firms across Manhattan without the lawyers' knowledge by the man in the gray coat with the German accent.

The hidden videos recorded some pretty disturbing behavior by lawyers.  Some of it is perhaps ethically equivocal, but one lawyer did show the "client" the door.  Here are two of the excerpts:

• The lawyer who said no, here.
• The lawyer who claimed that lawyers are immune because they run the country, here.

The New York Times has this article on the program:  Louise Story, Report Describes Lawyers’ Advice on Moving Suspect Funds Into U.S. (NYT 1/31/16), here.  Excerpts:

“It wasn’t hard to find lawyers to suggest ways to move suspect funds into the United States,” said Stefanie Ostfeld, a spokeswoman for Global Witness. “We went undercover because it is the only way we could show what really happens behind closed doors. The findings speak for themselves — something urgently needs to change.” 

* * * * 

In recent weeks, federal law enforcement officials have said they are beginning to focus investigations on lawyers and other professionals who facilitate money laundering. The Treasury Department announced a program to require real estate firms to help it uncover and track people who use shell companies to purchase high-end properties. 

This week, a bipartisan group of lawmakers is planning to introduce a bill in the House of Representatives to require more transparency into shell companies nationwide. And later this week, activists in London will hold what they are calling a Kleptocracy Tour, a bus ride past properties that they said had been associated with illicit money. They plan to hold a similar tour in New York in April.

My List of Category 2 Banks Obtaining NPAs (1/28/16; 1/30/16; 2/7/16)

In developing my statistics on the Category 2 Financial Institutions (Banks) in DOJ's Swiss Bank Program, here, I populated my Excel spreadsheet with the names of banks that indicated they would join or some other source indicated they would join.  I have included the number indicating or indicated that they would join in my statistics.  As of my most recent posting, Final Swiss Bank Achieves NPA Under Swiss Bank Program (1/25/16), here, the number of banks I had was 98.  DOJ Tax said that the original number of banks indicating they would join was around 106.  Since the program started, some of the banks upon further consideration, determined not to participate as Category 2 banks.  The final number indicated in DOJ's press release is 80.  My stats show 81 actually joining (but I think one that I include is participating through a related bank); I have not attempted to to reconcile the banks.  I thought I would list in this blog the banks which joined to obtain NPAs according to my spreadsheet and the banks that I show indicated interest but, finally, did not join.

Category 2 Participating Banks (in Alpabetical Order):

Aargauische Kantonalbank
ARVEST Privatbank AG
Banca Credinvest SA
Banca dello Stato del Cantone Ticino (Banca Stato)
Banca Intermobiliare di Investimenti e Gestioni (Suisse) SA
Bank BSI SA
Bank CIC
Bank Coop AG
Bank EKI Genossenschaft (Bank EKI)
Bank J. Safra Sarasin AG
Bank La Roche & Co AG
Bank Linth LLB AG
Bank Lombard Odier & Co Ltd
Bank Sparhafen Zurich AG (BSZ)
bank zweiplus ag (Bank Zweiplus)
Banque Bonhôte & Cie SA
Banque cantonale du Jura SA
Banque Cantonale du Valais
Banque Cantonale Neuchâteloise (BCN)
Banque Cantonale Vaudoise
Banque Heritage SA
Banque Internationale à Luxembourg (Suisse) SA
Banque Pasche SA
Baumann & Cie, Banquiers
BBVA Suiza S.A.
Berner Kantonalbank AG (BEKB)
BHF-Bank (Schweiz) AG (BHF)
BNP Paribas (Suisse) SA (BNPP)
Bordier & Cie Switzerland
Cornèr Banca SA
Coutts & Co Ltd
Crédit Agricole (Suisse) SA
Credito Privato Commerciale in liquidazione SA (CPC)
Deutsche Bank (Suisse) SA
Dreyfus Sons & Co Ltd, Banquiers
DZ Privatbank (Schweiz) AG
E. Gutzwiller & Cie. Banquiers
Edmond de Rothschild (Lugano) SA
Edmond de Rothschild (Suisse) SA
EFG Bank AG (SEE EFG BANK EUROPEAN - JOINT CAT 2 RESOLUTION)
EFG Bank European Financial Group SA, Geneva
Ersparniskasse Schaffhausen AG (EKS)
Falcon Private Bank AG
Finter Bank Zurich AG
Gonet & Cie
Graubündner Kantonalbank
Habib Bank AG Zurich (HBZ)
HSZH Verwaltungs AG
Hyposwiss Private Bank Genève S.A. (Hyposwiss Geneva)
Hypothekarbank Lenzburg AG (HBL)
IHAG Zürich AG (IHAG)
KBL (Switzerland) Ltd.
LBBW (Schweiz) AG
Leodan Privatbank AG
Luzerner Kantonalbank
Maerki Baumann & Co. AG
MediBank AG
Mercantil Bank (Schweiz) AG
Migros Bank AG (Migros)
Nidwaldner Kantonalbank (NKB)
PBZ Verwaltungs AG
Piquet Galland & Cie SA
PKB Privatbank AG
PostFinance AG
Privatbank Bellerive AG
Privatbank Reichmuth & Co.
Privatbank Von Graffenried AG
Rothschild Bank AG, Zurich
SB Saanen Bank AG
Schaffhauser Kantonalbank (SHKB)
Schroder & Co. Bank AG
Scobag Privatbank AG
Société Générale Private Banking (Lugano-Svizzera)
Société Générale Private Banking (Suisse) SA (SGPB-Suisse)
St. Galler Kantonalbank AG (SGKB)
Standard Chartered Bank (Switzerland) SA, en liquidation
Union Bancaire Privée, UBP SA
Vadian Bank
Valiant Bank AG
Zuger Kantonalbank

The foregoing banks (and related banks) are or will be included on the IRS financial institution list requiring 50% OVDP Miscellaneous Offshore Penalties for U.S. depositors joining OVDP after any bank they used in the 8 year period.

Addendum to Swiss Bank List of Banks Obtaining NPAs (1/30/16):

A reader advised me by email that an entity on the list as originally posted, Finacor SA, is an asset manager rather than a bank qualified under the terms of the DOJ Swiss Bank Program.  That is correct and thus makes my number of banks in the program 1 too many.  So the corrected number is 80 banks achieving NPAs.  In an address yesterday at an ABA Tax Section meeting in Los Angeles, Carline Ciraolo, the Acting Assistant Attorney General, said:

For those who are counting, in the last 10 months, the department executed 78 agreements with 80 banks and imposed more than $1.3 billion in Swiss Bank Program penalties. 

The department also signed a non-prosecution agreement with Finacor, a Swiss asset management firm, reflecting the department's willingness to reach fair and appropriate resolutions with entities that come forward in a timely manner, disclose all relevant information regarding their illegal activities and cooperate fully and completely, including naming the individuals engaged in criminal conduct.

As to Finacor, I included it in ithe original listing because, as I noted in my blog entry, Swiss Asset Manager Settles Up with DOJ Tax (Federal Tax Crimes Blog 10/6/15), here, and the related DOJ press release, here, Finacor had attempted to join under Category 2 but was determined not to be a bank and thus technically disqualified.  Still, the agreement reached with Finacor seems to have paralleled the Category 2 agreements.  Thus the press release says:

[T]he firm is required under today’s agreement to fully comply with the obligations imposed under the terms of that program [Swiss Bank Program].

Hence, in my spreadsheet, I put it under category 2 even though not technically Category 2 and listed it as an asset manager rather than a bank.  However, in aggregating the number of Swiss banks, I only filtered for NPAs and Category 2, thus including Finacor in the aggregate Category 2 number and, in producing the list above, I only filtered by the same criteria, thus including Finacor in the list as originally posted.  I have now revised the filter to also only include banks in the Category 2 aggregate numbers and lists (thus excluding Finacor, an asset manager).  Future postings of the results therefore should be accurate, but I have gone back to only the last blog entry for the final Category 2 resolution to change the aggregate number to 80.  I apologize for wrongly listing Finacor.

Swiss Banks indicating or indicated that they would join as Category 2 but who did not join:

AKB Privatbank Zurich AG
Bank Morgan Stanley AG
Banque Hottinger et Cie. SA
Goldman Sachs Bank AG
Verwaltungs AG, the final Category 2 Bank)
Linth Bank
Lloyds Banking Group Plc
Saanen Bank
Schaffhauser Kantonalbank
Ticino Cantonal Bank
Valiant Holding AG
Walliser Kantonalbank

Note 2/7/16:  This list was modified to delete BSI, Rothschild, Hyposwiss, Saanen and Schaffhauser Kantonalbank (or variations) that did join as category 2 (either directly or through a related or successor corporation).

I would appreciate any corrections or additions either by comment to this blog entry or by email to me at jack@tjtaxlaw.com.

I do note that some of these banks (such as Hyposwiss as inidicated) are probably included in Category 2 participations by related banks.

And, of course, I do not have the list of 106 that DOJ Tax originally used, there are a number of banks which indicated that the would join, did not join, and are unknown to me.

Final Swiss Bank Achieves NPA Under Swiss Bank Program (1/25/16)

DOJ Tax announced here the final Category 2 resolution in its Swiss Bank Program, here, as follows:

HSZH Verwaltungs AG

$49.757 million

The press release opens with DOJ Tax touting the results achieved under the program (emphasis supplied by JAT):

The Department of Justice announced today that it reached its final non-prosecution agreement under Category 2 of the Swiss Bank Program, with HSZH Verwaltungs AG (HSZH).  The department has executed agreements with 80 banks since March 30, 2015, when it announced the first Swiss Bank Program non-prosecution agreement with BSI SA.  The department has imposed a total of more than $1.36 billion in Swiss Bank penalties, including more than $49 million in penalties from HSZH.  Every bank in the program, including HSZH, is required to cooperate in any related criminal or civil proceedings, and that cooperation continues through 2016 and beyond.

* * * * 

“The department’s Swiss Bank Program has been a successful, innovative effort to get the financial institutions that facilitated fraud on the American tax system to come forward with information about their wrongdoing – and to ensure that they are held responsible for it,” said Acting Associate Attorney General Stuart F. Delery.  “As we have seen over the last year, Swiss banks are paying an appropriate penalty for their misconduct, and the information and continuing cooperation we have required the banks to provide in order to participate in the program is allowing us to systematically attack offshore tax avoidance schemes.” 

“The completion of the agreements under Category 2 of the Swiss Bank Program represents a substantial milestone in the department’s ongoing efforts to combat offshore tax evasion, and we remain committed to holding financial institutions, professionals and individual taxpayers accountable for their respective roles in concealing foreign accounts and assets, and evading U.S. tax obligations,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.  “Using the flood of information flowing from various sources, the department is investigating this criminal conduct, referring appropriate matters to the Internal Revenue Service for civil enforcement and pursuing leads in jurisdictions well beyond Switzerland.  Individuals and entities engaged in offshore tax evasion are well advised to come forward now, because the window to get to us before we get to you is rapidly closing.”

As to HSZH, the history is presented as follows:

HSZH, the final bank to reach a non-prosecution agreement under Category 2 of the Swiss Bank Program, was previously known as Hyposwiss Privatbank AG.  HSZH was founded in 1889 in Solothurn, Switzerland.  In 1988, Schweizerische Bankgesellschaft AG, which was later merged into UBS AG, acquired the bank and renamed it Hyposwiss Privatbank AG.  Hyposwiss Privatbank AG increasingly focused on private banking activities, servicing both domestic and international clients, and at all times, HSZH solely operated on Swiss territory.  In 2002, the bank was acquired from UBS by St. Galler Kantonalbank (SGKB), the state-owned cantonal bank of St. Gallen.  In 2014, HSZH unwound its residual banking operations under the supervision of FINMA, the Swiss banking regulator.  On Jan. 6, 2014, and in connection with the wind-down, the bank changed its name to HSZH Verwaltungs AG.  HSZH returned its banking license, and FINMA released HSZH from its supervision on Nov. 27, 2014. 

The bank will be added to the IRS's Foreign Financial Institutions or Facilitators, here.  As indicated in the last quoted paragraph, accountholders in the listed banks joining OVDP after one of their banks are listed will be subject to the 50% penalty in OVDP (provided that they do not opt out, in which case, who knows).

The updated statistics are:

US DOJ Swiss Bank Program	Number	Number Resolved	Total Costs
U.S. / Swiss Bank Initiative Category 1 (Criminal Inv.) *	16	4	$3,470,550,000
U.S. / Swiss Bank Initiative Category 2 **	98	80*	$1,363,683,990
U.S. / Swiss Bank Initiative Category 3	14		$0
U.S. / Swiss Bank Initiative Category 4	8		$0
Swiss Bank Program Results	136		$4,834,233,990
* Includes subsidiary or related entities counted as separate entities, so the numbers may exceed the numbers the IRS and DOJ posted numbers which combine some of the entities.
** DOJ says original total was 106 but that it expects about 80 to complete the process.

* As revised on 1/30/16 to exclude Finacor S.A., an asset manager, which attempted to join the program under Category 2 but, since not a bank, was determined to be ineligible but achieved an NPA under the Category 2 terms.

More on the U.S. as the World's Tax Haven (1/27/16; 1/29/16)

On the theme of U.S. laws offering tax haven opportunities for foreign persons, Jesse Drucker reports on one instance of an offshore bank, Rothschild & Co., setting up shop in the U.S. to promote the business.  Jesse Drucker, The World’s Favorite New Tax Haven Is the United States (BloombergBusiness 1/17/16), here.  [Please see note at end of this blog entry for a correction I made on 1/29/16 to this opening statement.]

Excerpts from the opening:

Last September, at a law firm overlooking San Francisco Bay, Andrew Penney, a managing director at Rothschild & Co., gave a talk on how the world’s wealthy elite can avoid paying taxes. 

His message was clear: You can help your clients move their fortunes to the United States, free of taxes and hidden from their governments. 

Some are calling it the new Switzerland. 

After years of lambasting other countries for helping rich Americans hide their money offshore, the U.S. is emerging as a leading tax and secrecy haven for rich foreigners. By resisting new global disclosure standards, the U.S. is creating a hot new market, becoming the go-to place to stash foreign wealth. Everyone from London lawyers to Swiss trust companies is getting in on the act, helping the world’s rich move accounts from places like the Bahamas and the British Virgin Islands to Nevada, Wyoming, and South Dakota.

Other key tidbits:

Rokahr and other advisers said there is a legitimate need for secrecy. Confidential accounts that hide wealth, whether in the U.S., Switzerland, or elsewhere, protect against kidnappings or extortion in their owners’ home countries. The rich also often feel safer parking their money in the U.S. rather than some other location perceived as less-sure.
“I do not hear anybody saying, ‘I want to avoid taxes,’ ” Rokahr said. “These are people who are legitimately concerned with their own health and welfare.” 

No one expects offshore havens to disappear anytime soon. Swiss banks still hold about $1.9 trillion in assets not reported by account holders in their home countries, according to Gabriel Zucman, an economics professor at the University of California at Berkeley. Nor is it clear how many of the almost 100 countries and other jurisdictions that have signed on will actually enforce the new disclosure standards, issued by the Organisation for Economic Co-operation and Development, a government-funded international policy group. 

There’s nothing illegal about banks luring foreigners to put money in the U.S. with promises of confidentiality as long as they are not intentionally helping to evade taxes abroad. Still, the U.S. is one of the few places left where advisers are actively promoting accounts that will remain secret from overseas authorities.

* * * * 

Firms aren’t wasting time to make the most of the current environment. Bolton Global Capital, a Boston-area financial advisory firm, recently circulated this hypothetical example in an e-mail: A wealthy Mexican opens a U.S. bank account using a company in the British Virgin Islands. As a result, only the company’s name would be sent to the BVI government, while the identity of the person owning the account would not be shared with Mexican authorities. 

The U.S. failure to sign onto the OECD information-sharing standard is “proving to be a strong driver of growth for our business,” wrote Bolton’s chief executive officer, Ray Grenier, in a marketing e-mail to bankers. His firm is seeing a spike in accounts moved out of European banks—“Switzerland in particular”—and into the U.S. The new OECD standard “was the beginning of the exodus,” he said in an interview. 

The U.S. Treasury is proposing standards similar to the OECD’s for foreign-held accounts in the U.S. But similar proposals in the past have stalled in the face of opposition from the Republican-controlled Congress and the banking industry. 

At issue is not just non-U.S. citizens skirting their home countries’ taxes. Treasury also is concerned that massive inflows of capital into secret accounts could become a new channel for criminal money laundering. At least $1.6 trillion in illicit funds are laundered through the global financial system each year, according to a United Nations estimate.
Offering secrecy to clients is not against the law, but U.S. firms are not permitted to knowingly help overseas customers evade foreign taxes, said Scott Michel, a criminal tax defense attorney at Washington, D.C.-based Caplin & Drysdale who has represented Swiss banks and foreign account holders. 

“To the extent non-U.S. persons are encouraged to come to the U.S. for what may be our own ‘tax haven’ characteristics, the U.S. government would likely take a dim view of any marketing suggesting that evading home country tax is a legal objective,” he said.

There are other tidbits in the article as well.  A strongly recommended read for persons interested in federal tax crimes.  Consider this from Saltzman & Book, IRS Practice and Procedure (Thomson Reuters/Tax & Accounting, Rev. 2nd ed. 2002 & Supp. 2015-3).

¶ 12.03[3][c][vi] Other countries' taxes; revenue rule. 

As noted, some component of many crimes will use mail, wire, or commercial delivery services. This is true of cross-border crimes intended to include conduct in the United States that violates laws of other countries. Those laws of other countries may include tax laws. Can the mail and wire fraud statutes be deployed if the object of the crime was the violation of foreign tax law? Under the common-law revenue rule, one country will generally decline to enforce another country's tax law. The notion is that taxes are so intertwined with the sovereignty of the country that another country should not be involved in the enforcement of the other country's tax laws. In Pasquantino v. United States, n349 the Court held in a rather summary majority opinion (J. Thomas) that use of U.S. mail or wire communications to evade Canada's taxes was within the literal terms of the wire fraud statute. For present purposes, Justice Thomas's summary application of the wire fraud statute in Pasquantino should illustrate how pervasive the statute can be in its potential application. As the world increasingly becomes a global village in which nations cooperate regarding tax matters, one can expect such cases to continue.
   n 349 Pasquantino v. United States, 544 US 349 (2004), reh'g denied, 544 US 1012 (2005) [Casetext version here].

 For those wanting a bit more detail on the holding in Saltzman, the link is provided in the footnote.  But, here is the Supreme Court's syllabus of its opnion (from Casetext):

Petitioners carried out a scheme to smuggle large quantities of liquor into Canada from the United States to evade Canada's heavy alcohol import taxes. They were convicted of violating the federal wire fraud statute, 18 U. S. C. § 1343, for doing so. That statute prohibits the use of inter-state wires to effect "any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses." The Fourth Circuit affirmed their convictions, rejecting petitioners' argument that their prosecution contravened the common-law revenue rule, which bars courts from enforcing foreign sovereigns' tax laws. The Fourth Circuit also held that Canada's right to receive tax revenue was "money or property" within § 1343's meaning. 

Held: A plot to defraud a foreign government of tax revenue violates the federal wire fraud statute. Pp. 355-372. 

(a) Section 1343's plain terms criminalize a scheme such as petitioners'. Their smuggling operation satisfies both of the § 1343 elements that are in dispute here. First, Canada's right to uncollected excise taxes on the liquor petitioners imported into Canada is "property" within the statute's meaning. That right is an entitlement to collect money from petitioners, the possession of which is "something of value" to the Canadian Government. McNally v. United States, 483 U. S. 350, 358. Such valuable entitlements are "property" as that term ordinarily is employed. Second, petitioners' plot was a "scheme or artifice to defraud" Canada of its valuable entitlement to tax revenue, because petitioners routinely concealed imported liquor from Canadian officials and failed to declare those goods on customs forms. See Durland v. United States, 161 U. S. 306, 313. Pp. 355-359. 

(b) The foregoing construction of § 1343 does not derogate from the common-law revenue rule. Pp. 359-372. 

(1) Relying on the canon of construction that "`[s]tatutes which invade the common law . . . are to be read with a presumption favoring the retention of long-established and familiar principles, except when a statutory purpose to the contrary is evident,'" United States v. Texas, 507 U. S. 529, 534, petitioners argue that, to avoid reading § 1343 to derogate from the revenue rule, the Court should construe the otherwise-applicable statutory language to except frauds directed at *350 evading foreign taxes. Whether § 1343 derogates from the revenue rule depends on whether reading the statute to reach this prosecution conflicts with a well-established revenue rule principle. See United States v. Craft, 535 U. S. 274, 276. Thus, before concluding that Congress intended to exempt the present prosecution from § 1343's broad reach, the Court must find that the revenue rule clearly barred such a prosecution as of 1952, the year Congress enacted the wire fraud statute. See Neder v. United States, 527 U. S. 1, 22-23. Pp. 359-360. 

(2) No common-law case decided as of 1952 clearly established that the revenue rule barred the United States from prosecuting a fraudulent scheme to evade foreign taxes. Pp. 360-368. 

(i) The revenue rule has long been treated as a corollary of the rule that "[t]he Courts of no country execute the penal laws of another." The Antelope, 10 Wheat. 66, 123. It was first treated as such in cases prohibiting the enforcement of tax liabilities of one sovereign in the courts of another sovereign, such as suits to enforce tax judgments. The revenue rule's grounding in these cases shows that, at its core, it prohibited the collection of tax obligations of foreign nations. The present prosecution is unlike these classic examples of actions traditionally barred by the revenue rule. It is not a suit that recovers a foreign tax liability, but is a criminal prosecution brought by the United States to punish domestic criminal conduct. Pp. 360-362. 

(ii) Cases applying the revenue rule to bar indirect enforcement of foreign revenue laws, in contrast to the direct collection of a tax obligation, cannot bear the weight petitioners place on them. Many of them were decided after Congress passed the wire fraud statute. Others come from foreign courts. And, significantly, none involved a domestic sovereign acting pursuant to authority conferred by a criminal statute to enforce the sovereign's own penal law. Moreover, none of petitioners' cases barred an action that had as its primary object the deterrence and punishment of fraudulent conduct — a substantial domestic regulatory interest entirely independent of foreign tax enforcement. The main object of the action in each of them was the collection of money that would pay foreign tax claims. The absence of such an object here means that the link between this prosecution and foreign tax collection is incidental and attenuated at best. Thus, it cannot be said whether Congress in 1952 would have considered this prosecution within the revenue rule. Petitioners answer unpersuasively that the recovery of taxes is indeed the object of this suit because restitution of Canada's lost tax revenue is required under the federal Mandatory Victims Restitution Act of 1996. Whether restitution is mandatory is irrelevant here because § 1343 advances the Government's independent interest in punishing fraudulent domestic criminal conduct. In any *351 event, if awarding restitution to foreign sovereigns were contrary to the revenue rule, the proper resolution would be to construe the later enacted restitution statute not to allow such awards, rather than to assume that it impliedly repealed § 1343 as applied to this prosecution. Pp. 362-365. 

(iii) Also unavailing is petitioners' argument that early English common-law cases holding unenforceable contracts executed to evade other nations' revenue laws demonstrate that "indirect" enforcement of such laws is at the very core of the revenue rule, rather than at its margins. Those early cases were driven by an interest in lessening the commercial disruption caused by high tariffs. By the mid-20th century, however, that rationale was supplanted, and courts began to apply the revenue rule to tax obligations on the strength of the analogy between a country's revenue laws and its penal ones. Because the early English cases rested on a far different foundation from that on which the revenue rule came to rest, they say little about whether the wire fraud statute derogated from the revenue rule in its mid-20th-century form. Pp. 365-366. 

(iv) Petitioners' criminal prosecution "enforces" Canadian revenue law in an attenuated sense, but not in a sense that clearly would contravene the revenue rule. That rule never proscribed all enforcement of foreign revenue law. For example, at the same time they were enforcing domestic contracts that had the purpose of violating foreign revenue law, English courts also considered void foreign contracts that lacked tax stamps required under foreign revenue law. The line the revenue rule draws between impermissible and permissible "enforcement" of foreign revenue law has therefore always been unclear. The uncertainty persisted in American cases, which demonstrate that the extent to which the revenue rule barred indirect recognition of foreign revenue laws was unsettled as of 1952. Pp. 366-368. 

(3) The traditional rationales for the revenue rule do not plainly suggest that it barred this prosecution. First, this prosecution poses little risk of causing the principal evil against which the revenue rule was traditionally thought to guard: judicial evaluation of the revenue policies of foreign sovereigns. This action was brought by the Executive, "the sole organ of the federal government in the field of international relations," United States v. Curtiss-Wright Export Corp., 299 U. S. 304, 320. Although a prosecution like this one requires a court to recognize foreign law to determine whether the defendant violated U. S. law, it may be assumed that by electing to prosecute, the Executive has assessed this prosecution's impact on this Nation's relationship with Canada, and concluded that it poses little danger of causing international friction. Petitioners' broader argument that the revenue rule avoids *352 giving domestic effect to politically sensitive and controversial policy decisions embodied in foreign revenue laws worries the Court little. The present prosecution, if authorized by the wire fraud statute, embodies the policy choice of the two political branches of Government — Congress and the Executive — to free the interstate wires from fraudulent use, irrespective of the object of the fraud. Such a reading of § 1343 gives effect to that considered policy choice and therefore poses no risk of advancing Canadian policies illegitimately. Finally, petitioners' assertion that courts lack the competence to examine the validity of unfamiliar foreign tax schemes is not persuasive here. Foreign law posed no unmanageable complexity in this case, and Federal Rule of Criminal Procedure 26.1 gives federal courts sufficient means to resolve any incidental foreign law issues that may arise in wire fraud prosecutions. Pp. 368-370. 

(4) The Court's interpretation does not give § 1343 extraterritorial effect. Petitioners' offense was complete the moment they executed their scheme intending to defraud Canada of tax revenue inside the United States. See Durland, 161 U. S., at 313. Therefore, only domestic conduct is at issue here. In any event, because § 1343 punishes frauds executed "in interstate or foreign commerce," it is not a statute that involves only domestic concerns. Pp. 371-372. 

336 F. 3d 321, affirmed.

I had originally identified the Rothschild AG as a Category 2 Bank.  A reader, LarryK, commented (see comment to this blog entry) as follows:

This is incorrect. It is not the Swiss branch of Rothschild AG that set-up shop in the US. Rothschild & Co. Ltd is based in the UK and the Swiss have nothing to do with this venture.

 I have corrected the blog entry and apologize to readers for my error.  (As a side, I encourage readers to comment or email me about any errors they see, whether in substance or style.)

One More Swiss Bank Achieves NPA Under Swiss Bank Program (1/25/16)

On January 25, 2015, DOJ announced, here, that 1 more bank has entered an NPA under the DOJ program for Swiss banks, here.

Leodan Privatbank AG

$500,000

The banks will be added to the IRS's Foreign Financial Institutions or Facilitators, here.  As indicated in the last quoted paragraph, accountholders in the listed banks joining OVDP after one of their banks are listed will be subject to the 50% penalty in OVDP (provided that they do not opt out, in which case, who knows).

Here are the updated statistics for the Swiss Bank Program:

US DOJ Swiss Bank Program	Number|	Number Resolved	Total Costs
U.S. / Swiss Bank Initiative Category 1 (Criminal Inv.) *	16	4	$3,470,550,000
U.S. / Swiss Bank Initiative Category 2 **	97	80	$1,313,926,990
U.S. / Swiss Bank Initiative Category 3	14		$0
U.S. / Swiss Bank Initiative Category 4	8		$0
Swiss Bank Program Results	135		$4,784,476,990
* Includes subsidiary or related entities counted as separate entities, so the numbers may exceed the numbers the IRS and DOJ posted numbers which combine some of the entities.
** DOJ says original total was 106 but that it expects about 80 to complete the process.

More on Transparency for Entities Acquiring Valuable Real Estate in Some U.S. Markets (1/23/16)

I recently reported on a common complaint against the U.S. which insists on more transparency from foreign countries but has some gaps in its transparency for foreign countries with respect to hiding ownership of real estate.  One Step in Attacking Lack of Transparency in U.S. (1/13/16), here.  Foreigners have been able to use entities to hide the true ownership of valuable real estate, particularly in such attractive destinations as New York.  In that blog, I noted that the U.S. is now attempting to require information about the true owners and, of course, the next step is making the information available to foreign countries.

Tax Notes Today, has a very good article on the issue in considerable more depth.  William Hoke, Reporting Rule Might Deflect Some Criticism of U.S. as Tax Haven, 2016 TNT 15-3 (1/25/16), no link available.  I recommend that those with a subscription to TNT or the sister publications in which it is printed read the article.  Some key points from the article that I thought interesting are:

1. There is criticism of the U.S. failure to join CRS, which was inspired by FATCA, but may operate to require more transparency in some cases.  Two quotes from the article:

J. Richard Harvey of Villanova University said that by implementing FATCA, the United States paved the way for more international reporting of financial assets, such as through the CRS. "Thus, it is somewhat ironic and disappointing that the U.S. has failed to fully participate in CRS," Harvey said. "Such failure could make it more difficult for the U.S. to successfully implement FATCA to the extent [that] other countries decide to not provide certain information with the U.S." 

* * * *  

Andres Knobel of the Tax Justice Network said that while more than 70 jurisdictions have signed the multilateral competent authority agreement on the automatic exchange of financial account information under the CRS, a number of requirements regarding underlying treaties, national legislation, and confidentiality must also be met before the transfer of information can begin. Knobel likened the process to the Tinder online dating service. Automatic exchange of information "will take place only among jurisdictions that meet all the requirements . . . and that choose each other," he said.

That reminds me of the illusory contract illustration used by Hardy Dillard, former dean of UVA Law School, way back when I went there.  He illustrated the illusory contract of the boyfriend trying to bend the girlfriend to his intentions by promising that "I'll marry you if I choose to."  That, of course, was from a different era, with such illusory promises probably not necessary any more.

2.  Regarding the new initiative reported above to require ownership information for entities acquiring real estate:

Thierry Boitelle of Bonnard Lawson in Geneva said "this rather limited reporting" will be available to foreign governments by way of the information exchange provisions of tax and judicial assistance agreements. "Most likely it will be upon request, although there are good arguments for saying that contracting states have a fiduciary duty toward each other to exchange information spontaneously in case of suspicion of money laundering or tax evasion," Boitelle said. "I would hope this is actually a best practice being applied, but maybe I am dreaming or being naive about it."

3.  The article presents anecdotal indications that some foreign banks may be touting U.S. entities as avoidance mechanisms for CRS reporting.  The new initiative itself and particularly if expanded to other U.S. areas attracting foreign investment may limit this perceived opportunity.

Notice to Readers: Irrelevant and Political or Anti-IRS Comments Will Not Be Approved (1/22/16; 1/28/16)

I have in the past routinely approved most irrelevant and political and anti-IRS comments to blog entries.  Today, I received another and my tolerance for such comments has worn thin.  I post below the comment that has provoked my reaction. 

I remind readers that this is a federal tax crimes blog.  It is not a political blog or tax policy blog or any other kind of blog except federal tax crimes.  Hence, I will no longer approve comments that are not relevant to the blog entry and that present more political argument or anti-IRS argument than analysis of the law relevant to federal tax crimes issues.

For those of you who want to make political comments or anti-IRS, I recommend that you find another blog which welcomes those comments.  For example, you might try the Tax Prof Blog, here, where Professor Paul Caron posts each day one entry labeled The IRS Scandal, Day xxx (the entry today is The IRS Scandal, Day 988).  Each day you will find a posting and, so long as you want to make political or anti IRS comments, he seems more than willing to post such comments on his blog.

Thus, for readers who may be inclined to want to make these comments, please note that henceforth they will not be approved for publication on the Federal Tax Crimes Blog.

Here is the comment provoking this response.

Breaking News: The IRS rabbit hole of corruption goes even deeper. 

http://www.forbes.com/sites/robertwood/2016/01/20/irs-wipes-another-hard-drive-defying-court-order-but-you-must-keep-tax-records/#128fd9ac726b 

There are several very annoying things about the IRS in this article but this quote I find very revealing: 

Despite a court order to preserve documents, the IRS wiped the hard drive of an important IRS official, Mr. Samuel Maruca. Controversially, Mr. Maruca helped the IRS hire Quinn Emanuel, an outside law firm tasked with pursuing Microsoft. Hiring outsiders at over $1,000 an hour (!) angered Senate Finance Committee Chairman Orrin Hatch, who wrote a letter to the IRS complaining about strange deal and the $2.2 million fee. 

So once again we have an internal IRS cover up of their own wilful criminality.  Any honest person working at the IRS must realize that this it has turned into a political crime racket, and that's probably why so many rats are jumping ship.   

Compare this to how the IRS hounds  law abiding Swiss wealth advisers who were merely following Swiss law and the QI agreements in the course of doing their jobs.  Even worse for these honest Swiss citizens, the IRS is going to pay $1000/hr lawyers from crony political law firms to extract the IRS's pound of flesh.... for following the laws of the country they are citizens of and live in. 

For US tax payers this is even worse news on the heals of the latest bill that allows the IRS to outsource its tax collection.  We know these firms will be crony political K-street tax collectors providing campaign kickbacks to the Democratic party.  And we know that these extra costs will be paid for by the US tax donkeys through higher fees and penalties.   

But even worse, we know that this 2-way street of corruption will be used by the Clinton machine to guarantee that anyone running against Hillary will be fighting the IRS too.  That is certainly is one formidable wall of corruption.

Addendum 1/28/16 6:15pm:

Other blogs have posted on this blog and offered their readers opportunities to comment..

• Maple Sandbox, here.
• Isaac Brock Society, here.

Should Proof of No Tax Evaded Be Admissible as Defense in Crime Not Requiring Tax Evaded as an Element (1/20/16)

Tax evasion, § 7201, here, requires proof of a tax evaded as an element of the crime.  Other prominent tax crimes do not require proof of tax evaded as an element of the crime. E.g., tax perjury, § 7206(1), here, and tax obstruction, § 7212(a), here.  But, a tax evaded is at the heart of most tax crimes, even when not an element of the crime, because of the Sentencing Guidelines which key the principal punishments -- incarceration and fines -- to the tax evaded.  See e.g., John A. Townsend, Tax Evaded in the Federal Tax Crimes Sentencing Process and Beyond, 59 Vill. L. Rev. 599 (2014), here.

The question sometimes presented is whether the presence or absence of tax evaded is an issue that can be presented to the jury in a trial for a crime not requiring a tax evaded as an element of the crime.  Obviously, from the Government's perspective informing the jury that taxes were evaded is important to supply the motive for the conduct that requires willfulness as an element or, as with tax obstruction, corrupt action as an element.  I suspect that most courts would routinely admit the Government's evidence of tax evaded.  But the defendant might try to admit evidence that no taxes were evaded in the case in chief in order to make conviction less palatable to the jury and as mitigating or disproving other elements of the crime -- e.g., the ubiquitous willfulness requirement for tax crimes and corruptly element of § 7212(a)?

In United States v. Giambalvo, ___ F.3d ___, 2016 U.S. App. LEXIS 478 (8th Cir. 2016), here, the defendant was convicted of one count of tax obstruction, § 7212(a), and eight counts of tax perjury, § 7206(1).  As previously noted, tax evaded is not an element of either crime.  In the case in chief, the defendant called as an expert an H&R Block accountant to testify that, based on her review, the defendant owed no tax.  (That evidence would clearly be appropriate at the sentencing phase where tax loss is the primary driver for the Sentencing Guidelines calculations.)  The district court excluded the proffered testimony.  On appeal, defendant raised the issue.  The Court of Appeals resolved the issue as follows:

Prior to trial, Giambalvo notified the government of his intent to call H&R Block accountant Claudia Bradshaw as an expert witness. Bradshaw would testify that, based on her preparation of Giambalvo's tax returns dated May 31, 2014, for the tax years at issue in the case, Giambalvo did not owe any taxes on January 26, 2011. According to Bradshaw's proposed testimony, Giambalvo would have been due a substantial tax refund had he filed proper and timely federal income tax returns. The government moved in limine to exclude evidence of Giambalvo's tax returns and tax-loss data prepared and filed post indictment. 

The district court granted the government's motion in limine during a pretrial motion hearing, concluding that "the suddenly filed tax returns under the established law clearly doesn't come in" because these tax returns were filed "[m]ore than ten years later, more than three and a half years after the indictment [was] issued." As a result, the court found the probative value of such returns "minimal," but the prejudice to be "great." According to the court, under § 7206(1), "the amount of tax loss isn't probative" to whether Giambalvo's misstatements could have hindered the IRS in carrying out its "functions as to verification or the accuracy of the return or unrelated tax return." The court concluded that the parties would not "get into tax loss" because "[a]ll we are looking at is whether [Giambalvo] made misstatements on his tax returns at the time he made the returns, because it is a perjury related statute. It is irrelevant whether or not there was a tax deficiency." 

The court later reiterated that "[w]e are not getting into tax loss, or subsequently filed tax returns," even though the court did suggest that it "would keep the door slightly ajar for conversation." Giambalvo's counsel then asked whether the court's ruling was that the evidence was "also not relevant for corruptly" under 26 U.S.C. § 7212(a). The court responded, "As to the entry of the zero, yes, I'm keeping it out. I'm overruling all of the arguments that you made." 

During trial, Giambalvo counsel's asked the court to reconsider this ruling after Officer Laramie testified that his job description included collecting taxes, arguing that the government had opened the door to Bradshaw's testimony by "cross-examining [Officer Laramie] on the fact that Mr. Giambalvo, objectively speaking, did not actually owe the taxes the revenue officer was seeking to collect is proper both impeachment and substantive evidence that was injected into this trial by the prosecution." He also argued that the government opened the door to introduction of the lack of a tax deficiency through Officer Laramie's testimony "that Mr. Giambalvo called and asked about paying taxes," which "suggest[ed] that Mr. Giambalvo actually owed taxes." The court rejected this argument, explaining that "this case is about—in its most simple, stay-focused terms—whether or not the number [that Giambalvo] wrote on that tax return at zero was correct or if [his] defense that he honestly believed it to be correct, and that's it." The court noted that Officer Laramie never discussed collections even though that is included in his job description. According to the court, Officer Laramie "simply went through what was on the documents that [Giambalvo] submitted" without "express[ing] his thoughts about those numbers or his interpretation of those numbers." The court characterized Officer Laramie's testimony as "lay[ing] the foundation for the records coming into evidence" without expressing any "efforts to collect anything." The court advised Giambalvo's counsel that he could "cross-examine [Officer Laramie] on what he received but not . . . to his efforts to collect taxes" because "[h]e never talked about that." 

On appeal, Giambalvo argues that the district court's exclusion of evidence that he did not actually owe any income taxes for the tax years at issue violated his right to due process by prohibiting him from establishing a complete defense. Giambalvo intended to prove his lack of tax liability through tax returns prepared and filed after he was indicted for impeding administration of the tax laws and filing false returns. 

The Constitution affords "criminal defendants a meaningful opportunity to present a complete defense." United States v. Petters, 663 F.3d 375, 381 (8th Cir. 2011) (quotations and citations omitted). But a criminal defendant's "right to present relevant testimony is not without limitation. The right may, in appropriate cases, bow to accommodate other legitimate interests in the criminal trial process." Id. (quotation and citations omitted). "For instance, '[t]he accused does not have an unfettered right to offer testimony that is incompetent, privileged, or otherwise inadmissible under standard rules of evidence.'" Id. (alteration in original) (quoting Taylor v. Illinois, 484 U.S. 400, 410 (1988)). As a result, "the 'Constitution leaves to the judges who must make these decisions wide latitude to exclude evidence that is repetitive . . . , only marginally relevant or poses an undue risk of harassment, prejudice, [or] confusion of the issues.'" Id. (alterations in original) (quoting Crane v. Kentucky, 476 U.S. 683, 689-90 (1986)). 

As discussed supra, Count 1 charged Giambalvo with obstructing or impeding the administration of the internal revenue laws, in violation of 26 U.S.C. § 7212(a). Counts 2-9 charged Giambalvo with making and subscribing a false income tax return, in violation of 26 U.S.C. § 7206(1), which provides that an individual will be guilty of a felony if he or she "[w]illfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter." 

Neither §§ 7212(a) nor 7206(1) require proof of a tax deficiency. See, e.g., United States v. Floyd, 740 F.3d 22, 32 (1st Cir. 2014) ("A conviction for violation of section 7212(a) does not require proof of . . . a tax deficiency . . . ." (citation omitted)); United States v. Young, 804 F.2d 116, 119 (8th Cir. 1996) ("In a section 7206(1) prosecution, however, the government need not establish an actual tax deficiency." (citation omitted)). 

Because the government need not establish an actual tax deficiency to prove a violation of §§ 7212(a) or 7206(1), the question arises whether a defendant may put on evidence that he did not owe any taxes as a defense to such charges. Like our sister circuits, we conclude that the answer is no. This is because "the amount of taxes owed is irrelevant to a prosecution for tax fraud." United States v. Minneman, 143 F.3d 274, 279 (7th Cir. 1998) (emphasis added) (citing United States v. Marashi, 913 F.2d 724, 736 (9th Cir. 1990) ("Section 7206(1) is a perjury statute; it is irrelevant whether there was an actual tax deficiency." (citation omitted)). 

Here, the district court excluded Bradshaw's expert testimony that Giambalvo did not owe any taxes and was due a substantial refund on the date that he mailed 11 "zero" income tax returns to the IRS. The court held that evidence of subsequently prepared and filed tax returns is inadmissible in a criminal tax prosecution unrelated to tax deficiency collection. The district court found that the probative value of such evidence is much less than the associated unfair prejudice. 

The district court's ruling is in accord with our precedent. "We have previously said that 'there is no doubt that self-serving exculpatory acts performed substantially after a defendant's wrongdoing is discovered are of minimal probative value as to his state of mind at the time of the alleged crime.'" United States v. Ellesfen, 655 F.3d 769, 778 (8th Cir. 2011) (quoting United States v. Radtke, 415 F.3d 826, 840-41 (8th Cir. 2005) (holding that the district court did not abuse its discretion in excluding evidence that the defendant filed an amended tax return after he had been indicted for willfully subscribing to a known false tax return)). 

Giambalvo additionally argues that evidence of the non-existence of tax loss should have been admitted to enable him to contest the element of materiality in the § 7206(1) counts. (Citing United States v. Clifton, 127 F.3d 969, 971 (10th Cir. 1997) ("For instance, if a taxpayer's allowable deductions exceed taxable income in a taxable year, no income tax will be due for that year. Therefore, taxpayer's failure to report all taxable income will not affect the computation of tax, which in turn might very well affect the jury's deliberations on the element of materiality. For these reasons, we hold that materiality in a § 7206(1) prosecution is an element of the crime which the district court must submit to the jury, unless of course defendant waives the right."); United States v. Uchimura, 125 F.3d 1282, 1285 n.5 (9th Cir. 1997) ("That no additional tax is owed of course has a bearing on materiality, but the question is ultimately one for the jury to decide.").) According to Giambalvo, Clifton and Uchimura are "the only legal authority on point." 

We disagree. Subsequent to Clifton and Uchimura, the Supreme Court explained that 

[t]o obtain a conviction on the [§ 7206(1)] tax offense at issue, the Government must prove that the defendant filed a tax return "which he does not believe to be true and correct as to every material matter." 26 U.S.C. § 7206(1). In general, a false statement is material if it has "a natural tendency to influence, or [is] capable of influencing, the decision of the decisionmaking body to which it was addressed." United States v. Gaudin, 515 U.S., at 509, 115 S. Ct. 2310 (quoting Kungys v. United States, 485 U.S. 759, 770, 108 S. Ct. 1537, 99 L. Ed. 2d 839 (1988) (internal quotation marks omitted)).
Neder v. United States, 527 U.S. 1, 16 (1999) (third alteration in original) (emphasis added). 

We have recognized that "the government need not establish an actual tax deficiency to demonstrate that [a defendant's] false statements in [his tax] returns were material." United States v. Peiker, 2 F. App'x 685, 687 (8th Cir. 2001) (per curiam) (citing Young, 804 F.2d at 119). Similarly, the Seventh Circuit has held "that proof of a tax deficiency was not essential to prove materiality." United States v. Bouzanis, 2003 WL 920717, at *2 (N.D. Ill. Mar. 7, 2003) (citing United States v. Peters, 153 F.3d 445, at 461-62 (7th Cir. 1998)). 

Giambalvo also argues that evidence of the lack of a tax deficiency was relevant to showing that he did not act "corruptly" under § 7212(a). 26 U.S.C. § 7212(a) ("Whoever corruptly . . . endeavors to intimate or impede any officer or employee of the United States acting in an official capacity under this title, or in any other way corruptly . . . obstructs or impedes, or endeavors to obstruct or impede, the due administration of this title . . . ."). We have previously indicated our inclination to reject the argument "that the term corruptly is limited to situations in which the defendant wrongfully sought or gained a financial advantage." United States v. Yagow, 953 F.2d 423, 427 (8th Cir. 1992) (citing United States v. Reeves, 782 F.2d 1323, 1325 (5th Cir. 1986)). 

More recently, the Fifth Circuit has held that, § 7212(a) does not require that the defendant obtain benefits or advantages "under the tax laws." United States v. Saldana, 427 F.3d 298, 305 (5th Cir. 2005). The Fifth Circuit observed that "the language of the statute itself does not require that an individual intend to procure a benefit for himself under the tax laws to have formed the requisite mens rea." Id. Similarly, "the Sixth Circuit [has] affirmed a defendant's conviction for violation of § 7212(a) when the defendant had filed false 1099 and 1096 forms for the sole purpose of intimidating and harassing his creditors." Id. (citing United States v. Bowman, 173 F.3d 595, 596-97 (6th Cir. 1999)). The Sixth Circuit "held that the defendant's conduct fell within the [27]  ambit of § 7212(a)'s proscribed conduct even though he sought no financial advantage or benefit for himself under the tax laws." Id. (citing Bowman, 173 F.3d at 600). 

In line with the Fifth Circuit's and Sixth Circuit's more recent conclusions, we now hold—as we were inclined to do in Yagow—that "corruptly" is not limited to situations where the defendant wrongfully sought or gained a financial advantage under the tax laws. If the government was not required to prove that the benefit that Giambalvo sought by his "corrupt" actions to obstruct or impede the IRS was financial in nature, then evidence of the non-existence of a tax loss was not relevant to refute the "corruptly" element of § 7212(a). 

Additionally, Giambalvo argues that evidence of the lack of a tax deficiency was relevant to showing that he did not act "willfully" under § 7206(1). See 26 U.S.C. § 7206(1) ("Any person who . . . [w]illfully makes and subscribes any return, statement, or other document . . . ."). According to Giambalvo, he is permitted to present circumstantial evidence tending to show his good faith as a defense. Giambalvo asserts that, for approximately eight years, he "subscribed to a belief that was so against his financial interest that it literally cost him more than $30,000—i.e. [28] , had he filed proper tax returns, he would have been entitled to receive more than $30,000 back in tax refunds." He maintains that such evidence was admissible evidence of his good-faith belief because his actions were against his financial interest. 

Giambalvo does not have "'an unfettered right to offer testimony that is . . . otherwise inadmissible under the standard rules of evidence.'" Petters, 663 F.3d at 381 (quoting Taylor, 484 U.S. at 410). As explained supra, because the issue of tax deficiency is not an element that the government must prove—or attempted to prove—then the existence of such deficiency is irrelevant in such prosecutions. While the district could have admitted Giambalvo's evidence of no tax deficiency, it was not an abuse of discretion to exclude it. 

Finally, Giambalvo argues that the government opened the door to the admission of tax-loss evidence by IRS Revenue Officer Laramie's testimony that his "[p]rimary duties are to collect taxes and returns." Officer Laramie testified, "[W]e try to determine if returns are due, if there are balances that may be owed on previously filed returns. We then try to collect on those or determine if the person has the ability to pay, you know." The trial record reveals that Officer Laramie did not describe his efforts to collect taxes from Giambalvo; instead, he was only giving his general job description. Therefore, we hold that the district court did not err in rejecting Giambalvo's argument that the government opened the door to admission of tax-loss evidence through Officer Laramie's testimony.

JAT Comment:  I am unconvinced that the judge properly excluded the evidence.  Still, I suppose, that in the discretion to manage the boundaries of a case, so long as the defendant is given a fair trial, these type of evidentiary rulings, even if technically incorrect, may not require reversal.  But, when they go to the heart of a defense in tax crimes -- usually the defense of nonwillfulness or, for tax obstruction, noncorruptness -- I think the defendant's right to a broad defense is appropriate.

Prosecuting Corporate Employees and Officers, with Focus on Swiss Banks (1/15/16)

I have previously blogged on Professor Brandon Garrett (UVA Law) who have carved out an academic niche on how the Government deals with corporate crime, particularly large corporate crime (the too big to jail group).  See e.g., Judge Jed Rakoff Reviews Brandon Garrett's Book on Too Big to Jail: How Prosecutors Compromise with Corporations (Federal Tax Crimes Blog 2/10/15), here.  At the risk of oversimplifying his arguments, I summarize them in part relevant to this blog entry:  When the Government goes after corporate misconduct, it too often focuses only on the corporation in terms of criminal sanctions and not the individuals, particularly those higher up the chain, who committed the underlying conduct.  Corporations cannot go to jail; individuals can. Prosecuting and convicting individuals in addition to corporations could, he thinks, provide more front-end incentive for individuals to forego illegal conduct within the corporations.  However, as fans of tax crimes know at least anecdotally, it is hard to convict higher level corporate officers for conduct that their underlings actually commit.  The poster child example is the acquittal of Raoul Weil, a high-level UBS banker who "remoted" himself from the dirty work of actually servicing U.S. taxpayers seeking to evade U.S. tax.  See e.g., Raoul Weil Found Not Guilty (Federal Tax Crimes 11/3/14; 11/6/14), here.

One might turn a common phrase and say that lifeless, breathless, unthinking, unfeeling corporations do not commit crimes; people do.  Still in our jurisprudence, corporations can commit crimes.  They just can't be jailed.  To the extent that actual incarceration incentivizes people to avoid misconduct, people should be jailed.  In September of 2015, DOJ announced a new policy of more aggressively pursuing people for misconduct in corporations.  See the DAG memo here and my blog entry, New DOJ Policy on Prosecuting Individuals Beyond Corporate Crime (Federal Tax Crimes Blog 9/10/15), here.

Professor Garrett has a new article that updates in summary fashion his research.  The Year Banks Finally Paid (Slate 1/13/16), here.  The following are excerpts:

Nevertheless, we need to keep asking whether this strategy of chasing dollars rather than changing practices and prosecuting executives makes any sense. In the past decade, data I have collected show that federal prosecutors have set new records each year in corporate fines. For all their success and zeal, however, it’s not clear that fines alone are stopping bad actors on Wall Street. 

* * * * 

A remarkable number of banks, 80 of them, finalized cases with federal prosecutors. Most were Swiss banks that settled out of court as part of a DOJ Tax Division program designed to incentivize them to come clean or face the music. Next year we will see still more cases with less-cooperative Swiss banks that won’t get such lenient deals. More mammoth bank cases lumber along in the courts; last spring, several major banks, including Wall Street giants JPMorgan Chase and Citicorp, agreed to plead guilty in cases relating to foreign-exchange currency manipulation. Those cases have not resulted in sentencing yet, but when they do, prosecutors will rake in $5 billion more in fines. 

* * * * 

Banks pay the fines, but bankers don’t usually do any time. I have found that among the 66 cases of financial institutions that received deferred or nonprosecution agreements from federal prosecutors from 2001 to 2014, only 23 of them—33 percent—had any employees prosecuted. 

Now, I don't have Professor Garrett's expertise and have not spent enough time on his marvelous web site at UVA Law, here, but I thought I would add some thoughts from my even narrower niche of the universe in which he teaches -- the offshore account and enabler activities.

As all of the readers of this blog know, offshore banks and other financial institutions -- poster children being Swiss Banks -- have for years enabled U.S. taxpayers to evade tax.  The U.S. taxpayers evading tax committed tax and tax-related (including FBAR) crimes; the Swiss Banks, their employees and related enablers committed crimes.  The Government has prosecuted and entered a number of DPAs and NPAs with Swiss Banks, and has prosecuted a number of Swiss bankers and other enablers.  My latest count of the Swisss bankers shows over 40 individual "enablers", many of whom are or were Swiss bankers.  Many of these remain fugitives (about which more later).

An important requirement of US DOJ Swiss Bank program is that the participating Category 2 Banks must rat on their employees committing misconduct.  So, since the Category 2 part of the program is now winding up in terms of reaching NPAs with the Banks, I expect that DOJ will be bringing more indictments of Swiss Bank employees.  Those employees may not be able to avoid indictment, but they can avoid the prosecution by not coming into the U.S.  But, as Mr. Weil found out, traveling outside Switzerland is risky.  So, as I have noted before, many Swiss bankers (and other enablers, such a lawyers) have constrained their travel or take risk when they travel.  I have said before that this risk and fear may make Switzerland (which will not extradite for tax crimes) a kind of Club Fed -- a great place to be but somewhat confining if you can't leave it.

One issue inspired by Professor Garrett's research is whether higher-ups with the banks can be prosecuted successfully.  I mentioned Mr. Weil, the high level UBS officer, who mounted a successful defense that he was too remote from the criminal conduct to be responsible for it.  DOJ had the full cooperation of UBS and still could not convict Weil.  In the Swiss banker context, I will refer to that defense as the Weil defense.  My suspicion -- based on no real hard information -- is that in serving up the gory details of its employees' misconduct to DOJ, the Swiss Banks liberally applied the Weil defense to the fullest possible in order to avoid incriminating the higher ups.  In other words, I suspect, they served up minions and deflected from the higher ups to the extent they could with the Weil defense.  If that happened, I suspect it happened by omitting key information on the notion that, under the Weil defense, the higher-up conduct was not criminal.

One final note. the statute of limitations for tax crimes is suspended while the person "is outside the United States or is a fugitive from justice within the meaning of section 3290 of Title 18 of the United States Code."  26 USC 6531 (flush language), here.  So the risk of prosecution for this group is likely to be indefinite.  And, if DOJ does start with the minion employees, it may deploy the usual prosecution tactic of working their way up toward the top on the back of the minion employees.