Whistleblower Lawyer Blog

The IRS emphasis on international and offshore tax violations continues. Today, the government made clear that U.S. prosecutions for cross-border tax evasion did not end with the 2009 landmark UBS settlement, which followed a tax whistleblower's approaching U.S officials.

The Justice Department announced today that three more former Credit Suisse bankers have been indicted for helping U.S. taxpayers evade U.S. taxes.

Credit Suisse has been under U.S. scrutiny for at least the past year. Today's indictments of three former officials bring to seven the number of Credit Suisse bankers charged thus far.

Indicted today were Markus Walder, the former head of North America Offshore Banking and a former senior Credit Suisse official; Susanne D. Rüegg Meier, a former manager; Andreas Bachmann, a former banker at a subsidiary of Credit Suisse; and Josef Dorig, the founder of a Swiss trust company that worked with Credit Suisse.

According to DOJ's announcement, the 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."

The government also alleged that the defendants provided "unlicensed and unregistered banking services to U.S. customers with undeclared accounts." They allegedly concealed their wrongdoing by making false statements and providing misleading information to the Federal Reserve Bank of New York and the IRS.

The indictments are part of a broader U.S. investigation into various Swiss and other foreign banks. They reportedly include HSBC; Julius Baer; and Basler Kantonalbank. Significantly, the Credit Suisse investigation has resulted in more indictments than the UBS investigation.

Tax evasion using international and offshore accounts will continue to be a focus of the IRS's efforts, especially now that the IRS Whistleblower Program is bringing in more and more information about these violations.

Too often missing in today's discussions of Dodd-Frank's one-year anniversary is appreciation of efforts by CFTC and SEC leadership to build from scratch the effective new whistleblower programs mandated by Dodd-Frank.

With scant resources, each agency is creating an essential mechanism to protect today's investors from the next fraudulent scheme.

Let's start with the CFTC. When I met with Chairman Gary Gensler and his CFTC staff in March to discuss the CFTC's proposed whistleblower rules, I was struck by Chairman Gensler's focus on what improvements could be made to its "draft" commodities whistleblower rules.

The only non-lawyer in the room, Gensler seemed to grasp more quickly than anyone potential abuses that its draft rules would not correct.

CFTC Commissioner Bart Chilton has also recognized how essential an effective whistleblower program is to protect investors.

More importantly, even the CFTC's initial cut at its rules showed that it would not simply copy the SEC whistleblower rules' approach, but would independently design a meaningful program to protect the public by attracting significant whistleblower information to ferret out frauds.

Likewise, the SEC--whose whistleblower rules have been finalized--has shown a welcome commitment to making SEC whistleblowers welcome. Chair Mary Schapiro, Director of Enforcement Robert Khuzami, and other staff such as Steve Cohen, Jordan Thomas, and Sarit Klein put more than considerable thought and effort in refining the SEC whistleblower rules announced in May 2011.

Some in Congress seek to keep the SEC and CFTC so underfunded that they cannot protect the public effectively. As former SEC counsel Professor Don Langevoort observed, "Congress maintains increasingly tight control over SEC policy largely through the budgetary process, and having the Commission be habitually needy and under-resourced fits well within this strategy. The campaign contributions from various sources with an interest in securities regulation are large, and influential members of Congress hardly maximize their own political advantage by stepping aside and leaving the SEC free to do its work as it sees fit."

Continue reading "Progress with Dodd-Frank's Whistleblower Programs: CFTC and SEC Working to Deter the Next Big Schemes to Harm Investing Public" »

The SEC Whistleblower Program encompasses not only classic securities violations, but also violations of the Foreign Corrupt Practices Act ("FCPA"), a topic we have followed closely.

This past week, the SEC filed and settled an FCPA case against Armor Holdings, Inc., and collected more than $5.6 million, while the Department of Justice added almost $10.3 million in criminal fines.

The SEC charged that Armor Holdings, Inc. engaged in a bribery scheme to sell body armor to U.N. peacekeeping missions. The Commission also alleged that Armor Holdings violated the federal securities laws' books and records and internal controls provisions by failing to account properly for commissions in 2001-2007.

Demonstrating the SEC's increased emphasis on FCPA enforcement, this case is one of 32 FCPA cases the Commission has filed since 2010. Bribery of foreign government officials for business is having increased repercussions.

According to the SEC's Complaint, through a U.K. subsidiary Armor Holdings paid more than $200,000 through an intermediary to a United Nations official who could send it business, and used a sham consulting agreement to disguise its actions. The result was more than $7 million in additional revenues, and more than $1.5 million in additional profits, according to the SEC.

Continue reading "SEC Charges FCPA Bribery Scheme--Feds Collect $15 Million" »