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Agreement Between the United States and the Swiss Confederation--
Signed into Effect August 19, 2009

By Michael B. Nelson, Esq. - Email Editor

Date : August 25, 2009

Dear Valued Reader,

The United States and the Swiss Government have reached an Agreement in the matter of UBS and allegation of U.S. citizens avoiding U.S. taxation on American taxable income on their UBS accounts.

Attached to this article is a copy of the official Agreement wherein Switzerland agrees to provide the names of 4,450 wealthy Americans holding offshore accounts at UBS, Switzerland’s largest banking institution. What does this mean to the average American with bank accounts offshore, generally, or with UBS, specifically, will be discussed in this first of a series of special in-depth articles.

December 12, 2007

Igor Olenicoff, president and owner of Olen Properties Corporation, pleaded guilty to filing a false tax return for tax year 2002 related to foreign bank accounts he failed to disclose to the IRS; including several accounts he caused to be opened at UBS (formerly known as Union Bank of Switzerland), in Switzerland, in which Olenicoff had signatory authority and listed himself as Vice President and Director of accounts under the name of Guardian Guarantee Company Ltd. and New Guardian Bancorp APS.

May 13, 2008

R. Alexander Acosta, United States Attorney for the Southern District of Florida, the Department of Justice Tax Division, and the Internal Revenue Service, Criminal Investigation Division, announced the unsealing of a one-count indictment, copy of the official Indictment attached to this article, charging two foreign bankers with assisting an American billionaire real estate developer to evade United States income taxes on approximately $200 million of assets hidden offshore in Swiss and Liechtenstein bank accounts. The Indictment unsealed on May 13, 2008 at the Fort Lauderdale Federal Courthouse before U.S. Magistrate Judge Barry S. Seltzer, charged defendants Bradley Birkenfeld, 43, a United States citizen, who resides in Switzerland, and Mario Staggl, 43, a Liechtenstein citizen and resident, with conspiring to defraud the United States by assisting a United States citizen, who is a real estate developer, in creating nominee entities, fictitious trust, and bogus corporations to conceal the real estate developer's ownership and control of the offshore hidden assets. Birkenfeld made his initial appearance in court earlier today; as of May 13, 2008 Staggl remained at large.

June 30, 2008

The Justice Department filed papers seeking an order from a federal court in Miami, Fla., authorizing the Internal Revenue Service (IRS) to use a John Doe summons, official copy attached, to request information from Zurich, Switzerland-based UBS AG about U.S. taxpayers who may be using Swiss bank accounts to evade federal income taxes.

November 12, 2008

Raoul Weil, a senior executive of a large Swiss bank with offices worldwide, including the United States, was charged with conspiring with other executives, managers, private bankers and clients of the banking firm to defraud the United States. According to the criminal indictment, between 2002 and 2007, Weil oversaw the Swiss bank’s cross-border private banking business that provided services to some 20,000 U.S. clients who reportedly concealed approximately $20 billion in assets from the IRS. Weil, who allegedly referred to this business as "toxic waste," mandated that Swiss bankers grow the cross-border business, despite knowing that this would cause bankers to violate U.S. law. According to the indictment, when given a choice to wind down, sell or spin off the cross-border business, Weil chose to continue the business because of its profitability. Between 2002 and 2007, the United States cross-border business generated between $200 million a year in revenue for the Swiss bank. The indictment alleges that through the use of nominee entities, encrypted laptops, numbered accounts and other counter surveillance techniques, Weil and others at the bank assisted U.S. clients conceal their identities and offshore assets from the IRS. Swiss bankers routinely traveled to the United States to market Swiss bank secrecy to U.S. clients interested in attempting to evade federal income taxes. In 2004 alone, Swiss bankers, who ultimately reported to Weil, traveled to the United States approximately 3,800 times to discuss their clients’ Swiss bank accounts. Clients of the cross-border business filed false tax returns which omitted the interest income on their Swiss bank accounts and failed to disclose the existence of those bank accounts to the IRS.

February 18, 2009

UBS AG, Switzerland’s largest bank, entered into a Deferred Prosecution Agreement, copy of the official agreement attached, on charges of conspiring to defraud the United States by impeding the Internal Revenue Service. As part of the deferred prosecution agreement and in an unprecedented move, UBS, based on an order by the Swiss Financial Markets Supervisory Authority (FINMA), agreed to immediately provide the United States government with the identities of, and account information for, certain United States customers of UBS’s cross-border business. Under the deferred prosecution agreement, UBS also agreed to expeditiously exit the business of providing banking services to United States clients with undeclared accounts. As part of the Deferred Prosecution Agreement, UBS agreed to pay $780 million in fines, penalties, interest and restitution.

April 14, 2009

Robert Moran, of Lighthouse Point, Fla., pleaded guilty to a criminal charge of filing a false income tax return. Moran accepted responsibility for concealing more than $3 million in assets in a secret bank account at UBS in Switzerland. According to court records, on or about Oct. 14, 2008, Moran, a Ft. Lauderdale yacht broker, filed a U.S. Individual Income Tax Return Form 1040 for tax year 2007, which he signed under the penalties of perjury. The tax return failed to report that Moran had an interest in, or signature authority over, a financial account at UBS in Switzerland. Additionally, Moran failed to report the interest income on any of his UBS Swiss bank accounts.

June 25, 2009

UBS client, Steven Michael Rubinstein of Boca Raton, Fla., pleaded guilty to filing a false tax return for tax year 2004. On April 1, 2009, Rubinstein was charged with filing a false tax return that intentionally failed to disclose the existence of a Swiss bank account maintained by UBS of which he was the beneficial owner and failed to report any interest income on that account.

August 14, 2009

John McCarthy was charged with failing to inform the government of a Swiss bank account as part of a scheme to move at least $1 million from the United States into Swiss bank accounts with the goal of avoiding the payment of federal income taxes. UBS AG, turned over records showing that McCarthy was the beneficial owner and, therefore, had a direct financial interest in a UBS bank account opened in Switzerland in 2003 in the name of COGS Enterprises, Ltd., a Hong Kong entity. McCarthy admitted skimming money from his domestic business and, after funneling the money through a U.S. account, wire transferring the skimmed funds into his COGS Enterprises account in Switzerland. McCarthy admitted that, with the assistance of UBS representatives and his Swiss lawyer, he directed the investment activities and transfers of funds into and out of the COGS UBS Swiss bank account, as well as from other UBS Swiss accounts he controlled. UBS representatives worked closely with his Swiss lawyer to keep McCarthy's funds from leaving Switzerland and helped McCarthy move additional monies out of the United States undetected by the federal government. As a result of the money transfers, McCarthy admitted that he failed to pay at least $200,000 in federal income taxes. McCarthy is expected to make his initial appearance in federal court on September 14, 2009, after pleading guilty, and face a statutory maximum penalty of five years in federal prison and fines totaling $250,000.

August 20, 2009

Hansruedi Schumacher and Matthias Rickenbach were indicted for conspiring to assist wealthy American clients conceal their assets by establishing sham offshore entities. Schumacher was an executive manager at Neue Zuercher Bank (NZB), a private Swiss bank. Rickenbach is a Swiss attorney who had advised U.S. clients. According to the indictment, Schumacher and Rickenbach helped wealthy American clients conceal their assets by establishing sham and nominee offshore entities to hide their U.S. clients' assets and income while allowing these clients to still control the assets and make investment decisions. Schumacher and Rickenbach regularly traveled to the United States to conduct banking and investment activities with their U.S. clients and that when they traveled they concealed their business activities in the United States by falsely representing to American authorities that they were traveling to the U.S. for personal reasons. While in the United States, the defendants would sometimes bring cash for their clients. Schumacher and Rickenbach aided their wealthy American clients repatriate money back to the United States using several deceptive means: helping their clients obtain offshore credit cards, creating sham loan documents, falsifying bank documents to generate the appearance that assets of their U.S. clients belonged to Swiss citizens, and they falsified documents to disguise their United States clients’ repatriation of offshore funds as inheritances from foreign citizens.

August 21, 2009

Former UBS banker, Bradley Birkenfeld of Weymouth, Mass., was sentenced to 40 months incarceration by Judge William J. Zloch in Fort Lauderdale, Fla. The sentencing was harsher than even the prosecution expected; the prosecution recommended Birkenfeld be sentenced to 30 months of incarceration. Birkenfeld worked as a private banker in Geneva, Switzerland, for UBS. While at UBS, Birkenfeld assisted an American billionaire real estate developer evade paying $7.2 million in taxes by assisting the developer conceal $200 million of assets hidden offshore in Switzerland and Liechtenstein. While at UBS, Birkenfeld routinely traveled to and had contacts within the United States in an effort to assist wealthy Americans conceal their ownership in assets held offshore and therefore evade the payment of taxes on the income generated on the money hidden offshore. In order to assist wealthy Americans who concealed assets at UBS in Switzerland, Birkenfeld admitted that he and others advised U.S. clients to place cash and valuables in Swiss safety deposit boxes; purchase jewels, artwork and luxury items using the funds in their Swiss bank account while overseas; misrepresent the receipt of funds from the Swiss bank account in the United States as loans from the Swiss bank; destroy all off-shore banking records existing in the United States; utilize Swiss bank credit cards that they claimed could not be discovered by United States authorities; and file false U.S. individual income tax returns that omitted income earned by their clients and fraudulently misrepresented that their clients did not have an interest in and signature authority over accounts held offshore.

Where We Are Now?

Declarations were made by the United States of America and the Swiss Confederation at the signing of the Agreement on the request for information from the Internal Revenue Service of the United States of America regarding UBS AG on August 19, 2009 in Washington, DC, the following declarations which form an integral part of the Agreement:

Declaration by the Swiss Confederation

The Swiss Confederation declares that it will be prepared to review and process additional requests for information by the IRS under Article 26 of the existing Tax Treaty if they are based on a pattern of facts and circumstances that are equivalent to those of the UBS AG case.

Declaration by United States of America

The United States of America declares that in determining what rebalancing measures in Paragraph 4 of Article 5 are proportionate, the United States of America will consider the totality of the circumstances and fully recognize the compliance and cooperation of UBS AG with the terms of this Agreement.

These Declarations were made at Washington, DC on the 19th day of August 2009, in duplicate, in English for the United States of America and one in Swiss for the Swiss Confederation by Barry B. Shott Guillaume Scheurer, United States Competent Authority and the Chargé d’Affaires a.i. of Switzerland Deputy Commissioner (International) Internal Revenue Service.

Bank Settlement Agreement

Executed on 19 August 2009 (copy of the Official Agreement attached with this Article)

Agreement Between The United States and The Swiss Confederation

Executed on 19 August 2009 (Copy of the Official Agreement attached with this Article)

SUMMARY:

Hours after the settlement of the agreement was unveiled, the Swiss government said it would sell the SFr6bn ($5.6bn) in convertible securities it bought when it bailed out UBS last October. The sale of the securities will be to institutional investors on or before August 25, 2009, giving the Swiss Government a rate of return of their investment of about 9% of UBS at 15%. As for the American account holders, Douglas Shulman, Commissioner of the Internal Revenue Service, did reinforce that the vast majority of the 52,000 bank account holders at UBS were legal with the beneficial interest holders reporting their foreign bank accounts under the FBAR requirements and declaring their bank account taxable income on their U.S. Tax Returns.

Individuals who are not within the definition of being compliant with the tax laws of the United States, as Commissioner Shulman itemized above, may still have viable options available. We will be looking at these options and acknowledging the quickly expiring dates for these options that are yet available.

If you have any questions about this subject, please email us at info@trustmakers.com.

Until next time,

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