Legal News

In UBS Tax Case, U.S. Continues To Wage War, While Talking Peace

By Ashby Jones

The UBS tax-shelter matter may be inching ever-closer to a global resolution. But that doesn’t mean U.S. authorities aren’t continuing to bring down individuals alleged of having used Switzerland and UBS as an illegal safe-haven from IRS inspectors.

Both sides of the U.S.’s strategy are in full view in today’s newspapers. On the one hand lie the settlement discussions. UBS and the Swiss and U.S. governments are continuing settlement talks and now are expected to seek a postponement of a major tax-evasion federal court hearing scheduled for Monday in Miami. Click here for the WSJ story; here for the NYT story.

The delay would be the second sought as UBS tries to fight off U.S. government efforts to gain access to 52,000 accounts held by U.S. citizens at UBS. The IRS wants access to those accounts as it investigates whether U.S. clients, with the help of UBS, evaded U.S. taxes. The first hearing was scheduled for July 13. The Aug. 3 hearing could be held if talks break down.

UBS and the Swiss government have claimed in court filings and public statements that UBS can’t provide the information because that act would violate Swiss law. The Swiss government has even gone as far as to say it would seize UBS data to protect its country’s privacy laws.

But even as the parties move toward resolution, the U.S. is continuing to go after individuals. On Tuesday, Jeffrey Chernick of New York pleaded guilty to filing a false tax return and admitted he concealed more than $8 million in Swiss bank accounts. Chernick’s lawyers didn’t immediately return calls for comment.

The Justice Department said Tuesday that Chernick, who owns a corporation that represents toy manufacturers in China and Hong Kong, failed to report on his 2007 tax return he had an interest in or a signature authority over an account at UBS while also not reporting income from the account. According to court documents, beginning in the mid-1970s, the Stanfordville, N.Y., man set up a Hong Kong corporation and opened offshore bank accounts in order to conceal from the IRS commissions paid to him for toy sales.

The NYT article details the lengths to which Chernick and his charges would go to evade officials:

Mr. Chernick's private banker and a Swiss lawyer would dress as tourists when meeting Mr. Chernick at New York hotels, with the executive lying to customs officials by saying he was there to visit his brother. They mailed, rather than hand-carried, Mr. Chernick's bank statements, for fear that customs officials would seize hard copies. They also cut out Mr. Chernick's name and address from printed statements. Mr. Chernick gained access to his money in part through a credit card linked to his UBS and other Swiss accounts.

Full post as published by Law Blog - WSJ.com on July 29, 2009 (boomark / email).