On Feb. 2, 2012, a grand jury in the Southern District of New York indicted Weigelin & Co, a Swiss bank founded in 1741 that provided various asset management and private banking services to U.S. residents without having any branch offices in the US, for helping US taxpayers hide more than a billion in secret offshore accounts. See United States v. Wegelin, SDNY No.81-12 Cr.02(JSR) (2/2/12) (Download Wegelin indictment). The Department of Justice has also seized more than $16 million from Wegelin's U.S. accounts under civil forfeiture laws.
The indictment claims that more than 100 US taxpayers availed themselves of Weigelin's services to hide their assets, starting around 2002 and continuing through 2011. In particular, it charges that the bank and its officers opened "dozens" of new undeclared accounts in 2008-09 after the investigation of UBS had brought attention to the issue. The company's executive committee "affirmatively decided" to go after UBS's US clients, telling U.S. taxpayers that the bank's lack of U.S. branch offices would help prevent discovery. In announcing this new policy of capturing UBS's illegal business, a bank executive noted that Weigelin was smaller and that it would be able to charge high fees for this business since taxpayers were now frightened about the prospect of criminal prosecution in the US if their accounts were discovered.
The bank used a variety of techniques to assist in the tax evasion objectives of its US taxpayer clients. It helped them repatriate funds by drawing checks on a Stanford account held by the bank, and even extended this to assist clients of other offshore banks in repatriating their funds. This was often done by conmingling the US taxpayers' funds with other funds, so that the IRS would have more trouble connecting the dots. It set up their Swiss accounts in names of sham foundations and corporations--using Lichtenstein, Hong Kong and other jurisdictions' facilitative entities for this purpose. It used code names for taxpayers and numbered accounts rather than names whenever possible. The bankers never mailed information to their clients' US addresses, but they did email and telephone them about their accounts (sometimes using personal email accounts rather than office accounts to further deter discovery). After the bank started taking on clients that were fleeing UBS, it also changed its contact policies to require travel to the Swiss bank rather than email or phone contacts with US taxpayer clients. The indictment notes that "various" of the bank's clients filed false 1040s and failed to file the required FBARs related to the accounts. (We can probably expect to see more of these taxpayers facing criminal tax evasion charges as the months roll by.)
According to the indictment, the bank also solicited new US taxpayers for its asset management business, through Fed Ex and email and through a website (run by another firm, but paid for by the bank) advertising Swiss bank accounts that would not disclose information on tax evasion. At least 70 US taxpayers moved their accounts from UBS to Weigelin in response to these solicitations. As it became clear that voluntary disclosures by some US taxpayers was revealing information about other Swiss banks, Weigelin took measures to protect identities of advisers assisting US tax evasion, for example by removing client advisor names from records and listing merely "team international" on those records.
The indictment includes stories of US taxpayers who used the Weigelin bank to hide their assets. One, a woman who inherited a UBS account in 1987, made a trip with her husband to Switzerland when the UBS investigation became public and was advised to move her account to Weigelin, which she did. When the couple wanted funds out of the account, they would call and notify the bank that they were going to Aruba. In Aruba, they would fax information to the bank. The bank would arrange for checks (in amounts less than $10,000 each) on its Stamford account. The couple became alarmed, however, when it learned that its account at UBS might be one of the 4500 or so disclosed under the agreement with the IRS. Weigelin advised them not to worry, and not to voluntarily disclose the account, which held almost $2.5 million.
Another accountholder mentioned had a larger account of about $30 million.
Of course, it would have been to the taxpayers' benefit to disclose, and the bank was acting to protect itself in persuading them not to disclose. Surely accountholders should be able to recognize that there would be a conflict? None of the taxpayers specifically mentioned disclosed voluntarily and, one assumes, all are likely to be under criminal indictment (ought to be at any rate).