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September 4, 2013

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Offshore Adviser Pleas Guilty to Conspiracy

The United States campaign against secret offshore accounts was greatly aided by a high-level Swiss adviser’s guilty plea to a single count of conspiracy. On August 16, Edgar Paltzer, a Swiss lawyer formerly with the Zurich firm of Niederer, Kraft & Frey, pleaded guilty in a New York federal court. Paltzer faces up to five years plus fines. However, he is expected to receive a shorter prison sentence due to his cooperation.

“Now it’s clear that the U.S. will make deals with advisers who come clean, not just with individual taxpayers and banks,” said Jeffrey Neiman, a former government prosecutor now in private practice in Ft. Lauderdale, Florida.

Paltzer is one of the most prominent Swiss advisers and the first to plead guilty. Many U.S. taxpayers holding secret offshore accounts are feeling the pressure as the number of advisers turning in their clients in order to protect themselves continues to rise.

“If I were one of [Mr. Paltzer’s] clients, I’d be having a heart attack,” said Edward Robbins, a criminal tax lawyer with Hochman, Salkin, Rettig, Toscher & Perez in Los Angeles.

The IRS may have gained a whole new method of pursuit with this case. The court ordered that five UBS AG vaults in Zurich controlled by Paltzer be sealed. These vaults can be used to store assets that don’t have to be declared to the IRS. However, the vaults themselves are usually tied to bank accounts that should be. Some of these physical assets may have been purchased with funds from an undeclared account that has since been closed, and there is no statute of limitations for civil tax fraud penalties.

The U.S. is expected to increase its efforts to prosecute taxpayers with undeclared offshore accounts and has been doing so after UBS admitted in 2009 that it helped taxpayers hide money abroad. UBS paid $780 million to settle criminal charges. Since that time, more than 38,000 taxpayers have entered an IRS limited amnesty program for people who concealed offshore accounts.

Offshore Accounts/International Tax Disputes