DOJ May Have Sights Set on HSBC

[jcolvin2]

http://www.nytimes.com/2010/04/16/business/16tax.html

2 Charged in International Tax Evasion Scheme Said to Involve HSBC
By LYNNLEY BROWNING
Published: April 15, 2010
Federal authorities arrested two property developers, a father and son, on Thursday and charged them with participating in a multimillion-dollar tax evasion scheme through a large international bank.

The property developers — Mauricio Cohen Assor and his son, Leon Cohen-Levy — were taken into custody in New York, a day after they were jointly charged in a criminal complaint filed in Federal District Court in Fort Lauderdale, Fla., court papers show.

The bank was identified as HSBC by a person who was briefed on the matter but spoke on condition of not being identified because the investigation is continuing.

The arrests underscore how federal authorities are broadening their investigation into offshore tax fraud to include private banks other than the Swiss giant UBS, the focal point of the Justice Department’s crackdown on financial firms that sell tax evasion services.

In addition to UBS, prosecutors have been scrutinizing HSBC, one of the world’s largest private banks, which is based in London but has large Swiss operations, and other Swiss institutions.

The two developers have been embroiled in a long-running legal dispute over their involvement with the Flatotel, a luxury apartment-style hotel in Midtown Manhattan. They sold the hotel around 2000 for $33 million but routed the proceeds through accounts concealed by sham entities established in Panama, the British Virgin Islands, Liechtenstein, Switzerland and the Bahamas, court papers show. They did not pay taxes on the sale.

From 1987 through at least 2001, the men opened various accounts in the names of the foreign entities and shell companies and used unidentified Swiss lawyers as signatories for some of the accounts.

The bank knew that the two men were the true owners of the accounts and entities, court papers said, but it allowed them to pretend otherwise for tax purposes. “The bankers who handled the accounts knew and documented” that Mauricio Cohen Assor in particular was the real owner behind the entities and accounts, the complaint said.

The complaint against the developers describes how federal agents used wiretaps — an unusual move in tax cases — in 2007 to record their phone conversations with an unidentified banker.

Both men are Spanish natives; Leon Cohen-Levy, who lives part of the year on Fisher Island, Fla., became a United States citizen in 2003, and Mauricio Cohen Assor, of Miami Beach, won permanent residency status in 2005. Their lawyers could not be reached for comment.

Court papers said that a large international bank knowingly allowed the men to engage in tax fraud through the bank while acquiring their citizenship and residency papers because the bank did not require them to fill out the necessary disclosure forms with the Internal Revenue Service.

The men appear to have routed at least $65 million in cash and bonds through their offshore accounts, court papers show. They used their accounts “to fund a luxury lifestyle for themselves and for their family members,” including purchases of a $188,000 Bentley and $67,000 Dodge Viper, the complaint shows.

HSBC declined to comment.

Leon Cohen-Levy sought in recent years to build a 93-story apartment-hotel skyscraper called Empire World Towers in downtown Miami, a project that would have been one of the tallest residential high-rises in the world.

But the deal stalled in 2008 when a New York State Supreme Court judge ruled against him and his father over separate fraud accusations brought by a French lender regarding the Flatotel. The judge rendered a $266 million default judgment against the men.

Separately Thursday, the authorities charged five former American clients of UBS with evading taxes in offshore accounts at UBS’s private bank. Two other former clients waived indictment and pleaded guilty. The group of seven collectively evaded taxes on $100 million in assets, court papers show.

UBS paid a $780 million fine last year and admitted criminal wrongdoing in connection with offshore tax evasion services sold to wealthy Americans through its private bank.

The UBS clients indicted on Thursday in the Southern District of New York were Shmuel Sternfeld, of Tel Aviv; Sybil Nancy Upham, of New York; Ernest Vogliano, of New York; Richard Werdiger, a jewel merchant from Purchase, N.Y.; and Kenneth Heller, a disbarred maritime lawyer in New York.

The two other former UBS clients who pleaded guilty are Federico Hernandez, a former money manager in New York; and Jules Robbins, a watch distributor from Jericho, N.Y.

The actions bring to 16 the number of American former UBS clients charged in the Justice Department’s investigation.

The UBS clients were variously accused of using sham offshore entities in Hong Kong, Panama and elsewhere, including one known as Real Cool Investments Ltd., to further disguise their ownership of the UBS accounts.

Prosecutors also accused some of them of shifting assets out of UBS to smaller banks in Switzerland and Liechtenstein when UBS came under scrutiny in 2008, and of carrying cash by hand into the United States from Switzerland without declaring it.

[Number Six]

http://www.nytimes.com/2010/07/10/busin ... f=business

I would stay tuned to this investigation. If more people have incentives in the way of finder's fees, the illegal type of offshore banking scam could quickly reach an endgame.

Our friends at the "Sovereign Society" keep trumpeting their message of the legal vs. illegal form of offshore accounts.

http://sovereignsociety.com/

[Judge Roy Bean]

It's not just here in the US:

Mass Leak of Client Data Rattles Swiss Banking

http://online.wsj.com/article/SB1000142 ... 64360.html

NICE, France—The anonymous emails carried a tantalizing subject line: "Tax evasion: client list available."

The messages, sent two years ago to tax authorities across Europe, made an audacious claim: The sender could provide a large client list of a Swiss-based private bank, plus access to its computer systems. The emails were sent to Germany's secret police, the French police and the U.K.'s tax authorities and foreign ministry.

The emails came from the computers of Hervé Falciani and Georgina Mikhael, two employees of HSBC Holdings PLC, people familiar with the matter say. The caper has landed the two at the center of a controversy over whether governments should use data obtained by dubious means to bring tax evaders to justice.

[jcolvin2]

Canada acquired the names of 1,800 Canadians who were involved with HSBC in Switzerland a couple of weeks ago. No word on whether US may obtain similar information on American account holders.

http://www.theglobeandmail.com/news/nat ... le1733792/