New York CEO Pleads Guilty to Hiding Millions in Swiss Accounts

The Chairman and CEO of an international pulp mill company pled guilty to concealing more than $8.4 million in secret Swiss bank accounts. The 77 year old faces a maximum of five years in prison, and he has already agreed to pay a civil FBAR penalty of $4.2 million, which represents 50% of the highest value in the foreign accounts.

In addition to serving as Chairman and CEO of Parsons & Whittemore Enterprises Corporation, George Landegger serves as Chairman for various other businesses and entities, including Georgetown University’s Foreign Service School and the Alabama Commission on Higher Education. He has also supported various philanthropic causes.

Landegger utilized the services of an attorney in Zurich to form a sham Liechtenstein trust, which held his undeclared accounts at a Swiss bank. Individuals with undeclared offshore accounts often use foreign trusts to conceal their ownership of the accounts. He named the trust “Onicuppac,” which is the word “Cappucino” spelled in reverse. He never disclosed the accounts on an FBAR or reported the related income on his tax returns.

In 2009, Landegger met with a representative of the Swiss bank to discuss his options, after UBS AG, another Swiss bank, was investigated by the United States government for helping American clients maintain undeclared accounts. The representative told Landegger that he may want to disclose his accounts under the 2009 Offshore Voluntary Disclosure Initiative, but Landegger rejected this option. Rather, he chose to slowly move the funds from Switzerland to accounts in Canada and Hong Kong.

As part of his plea agreement, Landegger has agreed to pay a civil FBAR penalty of $4.2 million, in addition to back taxes of $71,000. Had he come forward under the terms of the 2009 Offshore Voluntary Disclosure Initiative, as was suggested to him, Landegger would have paid a penalty of approximately $1.68 million. He also would have avoided being criminally prosecuted and facing up to five years in prison.

In 2012, the IRS opened the current Offshore Voluntary Disclosure Program (OVDP) on an indefinite basis. However, taxpayers are only eligible for this program if the government is not already in possession of information about their undeclared accounts. With the implementation of the Foreign Account Tax Compliance Act (FATCA), foreign financial institutions are beginning to provide information about their American clients to the IRS.

In 2014, the IRS announced new Streamlined Procedures for taxpayers whose failure to declare foreign accounts was non-willful. These procedures make it much easier for innocent taxpayers to come into compliance without having to go through the entire OVDP process, and the penalty has been reduced to only 5% of the highest year-end balance in the accounts during the last six years. Taxpayers who come forward under these new procedures are not guaranteed immunity from criminal prosecution, so it is important to discuss the risks with an experienced tax attorney.