Charges have been filed against seven individuals who collectively hid more than $100 million from the IRS by using sham companies to conceal their ownership of secret Swiss bank accounts held at UBS AG (UBS).
Among those charges is Richard Werdiger, who owned, operated, and controlled, among other companies, Michael Werdiger, Inc. (MWI). Among other things, MWI engaged in the business of selling diamond and other jewelry, says Werdiger’s indictment. The Michael Werdiger Inc company is a DTC sightholder according to the DTC sightholder directory.
Two of those seven defendants, Jules Robbins and Federico Hernandez, pleaded guilty to separate criminal informations filed in Manhattan federal court and agreed to pay civil penalties of $20.8 million and $4.4 million, respectively.
Charges also were unsealed against five additional defendants: Kenneth Heller, Sybil Nancy Upham, Richard Werdiger, Ernest Vogliano and Shmuel Sternfeld. According to the charging instruments unsealed, statements made in connection with the guilty plea proceedings involving Robbins and Hernandez, and other court documents:
For many years, UBS provided private banking services to U.S. taxpayers as part of its “U.S. cross-border banking business,” which employed approximately 60 UBS employees based in Switzerland. From at least 2000 to 2008, UBS, through these employees, helped U.S. taxpayers conceal their Swiss-based assets, and the income earned on those assets, from the IRS. UBS and the U.S. taxpayers, assisted by independent Swiss attorneys and financial advisors, hid these assets from the IRS by listing sham offshore companies as the account holders of UBS accounts, when in fact the U.S. taxpayers actually owned and controlled the accounts, explains the Dept of Justice.
Four of the defendants – Upham, Heller, Vogliano and Sternfeld – removed their assets from UBS shortly after the publication of media reports in May 2008 that the Government’s criminal investigation of UBS might result in the disclosure of their unreported accounts to the United States Department of Justice. Specifically to avoid this result, these defendants moved tens of millions of dollar collectively from UBS to smaller, lower-profile Swiss and Liechtenstein banks, hand-picked because they, unlike UBS, did not have offices in the United States.
Two of the defendants – Upham and Vogliano – repatriated funds from their UBS bank accounts to the United States by traveling or having a close family member travel from New York to UBS’s offices in Zurich, Switzerland, to pick up hundreds of thousands of dollars in cash or travelers checks and then return to the United States.
Under federal law, when filing Individual Income Tax Returns, Form 1040, U.S. taxpayers are obligated to report their worldwide income. Additionally, taxpayers who have a financial interest in, or signature or other authority over, a financial account in a foreign country with an aggregate value of more than $10,000 at any time during a particular year are required to file with the IRS a Report of Foreign Bank and Financial Accounts (FBAR), as indicated on Schedule B of Form 1040.
The defendants are variously charged with conspiracy crimes, criminal tax offenses, and/or willful failure to file FBARs.
According to the charging documents:
From 1986 to 2000, Richard Werdiger opened three separate UBS accounts under the name of sham foundations and corporations formed in Liechtenstein and Panama. To further conceal his ownership of these accounts, Werdiger instructed UBS to permit him to communicate with the bank using the code name “Trygon,” rather than his real name. As of Dec. 31, 2003, Werdiger’s UBS accounts collectively contained over $7 million.
Werdiger failed to report the income earned in these accounts on his tax returns, and concealed his ownership of the accounts on his federal income tax filings. In addition, although Werdiger filed FBARs for bank accounts that he held in 2004 in 2005, he falsely omitted from those FBARs his interest in the UBS accounts.
Werdiger, of Purchase, N.Y., is charged with one count of conspiring to defraud the IRS, which carries a maximum penalty of five years in prison; five counts of subscribing to false federal income tax returns, each of which carries a maximum penalty of three years in prison; two counts of willful failure to file an FBAR, each of which carries a maximum penalty of five years in prison; and two counts of filing a false FBAR, each of which carries a maximum penalty of five years in prison.
In addition to the criminal penalties specified above, those defendants charged with willful failure to file FBARs may be subject to a civil penalty of up to 50 percent of the value of the accounts for each year the accounts were not disclosed.
In February 2009, UBS entered into a deferred prosecution agreement with the United States, pursuant to which the bank admitted to helping U.S. taxpayers hide accounts from the IRS. As part of this agreement, UBS provided the U.S. Government with the identities of, and account information for, certain U.S. customers of UBS’s U.S. cross-border banking business.
For decades, the IRS has had a voluntary disclosure program (the VDP) in which individual taxpayers with previously undisclosed income can contact the IRS, resolve their tax matters, and significantly reduce their risk of criminal tax prosecution. In March 2009, IRS Commissioner Douglas Shulman announced, as part of the VDP, a reduced 20 percent FBAR penalty (as compared to the usual 50 percent penalty described above) for U.S. taxpayers who reported undisclosed offshore bank accounts to the IRS. In September 2009, the opportunity for the reduced FBAR penalty was extended through Oct. 15, 2009. Under long-established IRS practice, U.S. taxpayers were not eligible for any form of voluntary disclosure (with or without the reduced FBAR penalty) if, at the time they applied for the VDP, they were already under criminal or civil investigation or the IRS already had information from a third party (such as UBS) alerting the IRS to the taxpayer’s possible tax violations. The reduced penalty phase has expired, but the VDP remains in effect.
Mr. Bharara thanked the IRS for its outstanding work in the investigation of the cases announced today. Mr. Bharara also thanked the New York County District Attorney’s Office, which is conducting a parallel investigation of New York State tax evasion by UBS customers, and the U.S. Department of Justice’s Tax Division for their significant assistance. He added that the investigation is continuing.
“The rich are not different,” said U.S. Attorney Preet Bharara. “Multimillionaires with secret Swiss bank accounts have to pay their taxes just like everyone else. It is that simple. On a day when millions of Americans fulfill their obligation to file truthful returns, we make clear that serious tax cheats will suffer serious consequences.”
“These legal actions signal a victory for America’s taxpayers who play by the rules,” said IRS Criminal Investigation Chief Victor S. O. Song. “Today is the deadline to file a U.S. tax return, and those Americans who file accurate, honest and timely returns can be assured that the Government will hold accountable those who don’t. For those still hiding in this shadowy world of secret offshore accounts, it is time to come in and get right with your government or face stiff criminal and financial penalties.”
The charges contained in the various charging instruments discussed above are merely accusations, and the defendants are presumed innocent unless and until proven guilty.
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