Wegelin & Co., Switzerland’s oldest bank, has agreed to pay $74 million to the United States to settle charges that it aided U.S. taxpayers in evading taxes. This is the first time a foreign bank has plead guilty to U.S. tax law violations.
In pleading guilty, Wegelin acknowledged the government’s claims that it hid more than $1.2 billion in secret accounts for U.S. clients. According to the Justice Department, Wegelin conspired with U.S. taxpayers, to hide assets held in offshore bank accounts from 2002 – 2011.
On March 5, 2013, U.S. District Judge Jed S. Rakoff in New York ordered Wegelin to pay the fine, which the parties had been agreed upon earlier. The total $74 million fine includes approximately $20 million in restitution to the IRS and a $22.05 million fine, plus civil forfeiture of an additional $15.8 million, representing the gross fees earned by the bank on the undeclared accounts of U.S. taxpayers, and the April 2012 forfeiture of over $16.2 million from Wegelin’s correspondent bank account.
“There is no excuse for wealthy Americans flouting their responsibilities as citizens of this great country to pay their taxes, and there is no excuse for foreign financial institutions helping them to do so,” Manhattan U.S. Attorney Preet Bharara said in a statement. “Wegelin became a haven for U.S. taxpayers seeking to circumvent the tax code by hiding their money in secret off-shore accounts, and the bank willfully and aggressively jumped in to fill a void that was left when other Swiss banks abandoned the practice due to pressure from U.S. law enforcement. Today’s guilty plea is a watershed moment in our efforts to hold to account both the individuals and the banks—wherever they may be in the world—who are engaging in unlawful conduct that deprives the U.S. Treasury of billions of dollars of tax revenue. We will continue our efforts until this practice is eliminated in its entirety.”
More Pending Tax Evasion Cases
As Bharara indicates, this is probably not the last big settlement we will see. The United States continues to aggressively pursue tax evasion and has ongoing investigations into 10 more Swiss banks, including Credit Suisse and the Zurich and Basel cantonal banks. The case against Wegelin client advisers Michael Berlinka, Urs Frei, and Roger Keller is also still ongoing. Berlinka, Frei and Keller were indicted in January 2012 of helping more than 100 U.S. taxpayers hide more than $1.2 billion in income and assets from the IRS by “opening and servicing “undeclared accounts.”