February 8, 2016

Tax Enforcement Spotlight – Bank Julius Baer

By the C|C Whistleblower Lawyer Team

This Tax Enforcement Spotlight features Bank Julius Baer & Co. Ltd. On Thursday, the Switzerland based financial institution agreed to pay a total of $547 million as part of a deferred prosecution agreement to settle criminal charges that the bank conspired to help many of its U.S. taxpayer-clients hide from the IRS billions of dollars in offshore accounts and evade U.S. taxes on the income earned in those accounts.  See DOJ Press Release.

According to the government, from at least the 1990s through 2009, Julius Baer helped many of its U.S. taxpayer-clients evade their U.S. tax obligations, file false federal tax returns with the IRS and otherwise hide accounts held at Julius Baer from the IRS.  The bank did so by opening and maintaining undeclared accounts for U.S. taxpayers and by allowing third-party asset managers to open undeclared accounts for U.S. taxpayers at Julius Baer.

In furtherance of the scheme, the bank entered into “code word agreements” with clients under which it agreed not to identify the clients by name to reduce the risk that U.S. tax authorities would learn their identities.  The bank also maintained many U.S. client accounts in the name of non-U.S. corporations, foundations, trusts, or other legal entities to help conceal the beneficial ownership of the accounts.  The bank also advised its bankers to take certain steps to avoid scrutiny from U.S. authorities when travelling to the United States, as well as steps to avoid U.S. law enforcement identifying Julius Baer clients.  This included scripting what to say to immigration officers to disguise the business nature of their trips, and using mobile phones registered in and operating from Switzerland and calling cards to avoid being traced.

Under the deferred prosecution agreement with Julius Baer (the agreement), the company admits that it knowingly assisted many of its U.S. taxpayer-clients in evading their tax obligations under U.S. law.  The admissions are contained in a detailed Statement of Facts attached to the agreement.  The agreement requires Julius Baer to pay a total of $547 million by no later than Feb. 9, 2016. If the bank abides by all of the terms of the agreement, the government will defer prosecution on the Information for three years and then seek to dismiss the charges.

“Bank Julius Baer not only turned a blind eye to tax avoiders, but actually conspired with them to break the law,” said U.S. Attorney Bharara. “Together with our partners at the IRS, we will continue to prosecute financial institutions and individuals who facilitate tax evasion.”

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