American taxpayers who opted to disclose their offshore accounts to avoid prosecution paraded into a New York courtroom this week.
They came to testify against their former Swiss banker who is on trial for helping customers conceal millions of dollars from the Internal Revenue Service as the U.S. began cracking down on tax evasion. The taxpayers told jurors how Stefan Buck, 37, former head of private banking for Bank Frey & Co., advised them to open accounts at the Zurich-based financial institution after UBS Group AG admitted in 2009 that it fostered tax cheats and paid a $780 million penalty.
Prosecutors allege Buck conspired with a Swiss lawyer to open and maintain undeclared accounts on behalf of U.S. taxpayers who were forced to close accounts at other banks.
Buck is one of the few foreign bankers, lawyers and advisers charged in the U.S. effort to tackle Swiss-aided offshore tax evasion who is defending himself in court. A handful of the defendants, including the Swiss lawyer, have pleaded guilty and agreed to cooperate, while at least two have been convicted and two others were acquitted.
Client Testimony
Christine Warsaw, a 67-year-old from Carefree, Arizona, testified that Buck convinced her and her late husband, Steve, to move about $1 million to Bank Frey from Credit Agricole SA, where employees told them it was “kicking out the American accounts” because of concern about U.S. scrutiny.
“We didn’t want the IRS to be notified,” Warsaw said. “It would open us up to investigation.”
Warsaw said Buck told them he didn’t have to report their holdings to the IRS if they allowed Bank Frey to have discretionary management of the account, and that it couldn’t hold U.S.-based securities or investments. They opened two accounts at Bank Frey, which Warsaw said they closed after getting a subpoena in 2011.
The couple entered a voluntary offshore disclosure program and paid more than $1 million in taxes, interest and penalties on the accounts, she said in federal court in Manhattan
The 2009 UBS settlement led to more than 50,000 voluntary disclosures to the IRS and the repatriation of billions of dollars. It also led 80 other Swiss banks to reach non-prosecution agreements with the Justice Department to resolve potential liability in the U.S. for tax-related criminal activity.
Buck’s attorney, Marc Agnifilo, tried to shift the blame onto the taxpayers during his opening statements, saying that many of them have been evading taxes since the 1970s, while his client was only born in 1980. Buck was a low-level employee at Bank Frey who was simply following orders from his superiors, Agnifilo said.
“This case involves a massive and unwarranted shift in personal responsibility,” Agnifilo said. “All but one of them got a pass, a complete pass from criminal prosecution. The rest of them broke the laws of this country with total impunity. All they had to do was point at Switzerland.”
