CREDIT SUISSE PLEADS GUILTY TO CONSPIRACY TO AID U.S. CITIZENS WITH FILING FALSE TAX RETURNS

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, May 19, 2014

Credit Suisse Pleads Guilty to Conspiracy to Aid and Assist U.S. Taxpayers in Filing False Returns

Bank Admits to Helping U.S. Taxpayers Hide Offshore Accounts from IRS; Agrees to Pay $2.6 Billion, Highest Ever Payment in a Criminal Tax Case Investigation Has Also Led to Indictment of Eight Credit Suisse Employees since 2011.

Credit Suisse AG pleaded guilty today to conspiracy to aid and assist U.S. taxpayers in filing false income tax returns and other documents with the Internal Revenue Service (IRS).  The guilty plea by the Swiss corporation is the result of a years-long investigation by U.S. law enforcement authorities that has also produced indictments of eight Credit Suisse executives since 2011; two of those individuals have pleaded guilty so far.

The plea agreement, along with agreements made with state and federal partners, provides that Credit Suisse will pay a total of $2.6 billion - $1.8 billion to the Department of Justice for the U.S. Treasury, $100 million to the Federal Reserve, and $715 million to the New York State Department of Financial Services.  The plea agreement was filed in the Eastern District of Virginia today.  Earlier this year, Credit Suisse paid approximately $196 million in disgorgement, interest and penalties to the Securities and Exchange Commission (SEC) for violating the federal securities laws by providing cross-border brokerage and investment advisory services to U.S. clients without first registering with the SEC.  That settlement with the SEC is also reflected in today’s plea agreement.  Together, these actions by U.S. law enforcement and state and federal partners appropriately punish Credit Suisse for its past behavior in these matters.

The announcement was made by Attorney General Eric H. Holder, Deputy Attorney General James M. Cole, Assistant Attorney General Kathryn Keneally for the Justice Department’s Tax Division, U.S. Attorney Dana J. Boente for the Eastern District of Virginia, and Commissioner John Koskinen of the IRS.

“This case shows that no financial institution, no matter its size or global reach, is above the law,” said Attorney General Holder.  “Credit Suisse conspired to help U.S. citizens hide assets in offshore accounts in order to evade paying taxes.  When a bank engages in misconduct this brazen, it should expect that the Justice Department will pursue criminal prosecution to the fullest extent possible, as has happened here.”

As part of the plea agreement, Credit Suisse acknowledged that, for decades prior to and through 2009, it operated an illegal cross-border banking business that knowingly and willfully aided and assisted thousands of U.S. clients in opening and maintaining undeclared accounts and concealing their offshore assets and income from the IRS.

“Credit Suisse’s guilty plea is just the latest effort by the department to slam the door shut on undeclared bank accounts, phony trusts and other foreign schemes used by U.S. taxpayers to evade taxes,” said Deputy Attorney General Cole.  “We will continue to hold to account the bankers, the brokers and other professionals in Switzerland and around the world as well as the institutions that trained and directed them to use bank secrecy laws to protect U.S. tax cheats.”

According to the statement of facts filed with the plea agreement, Credit Suisse employed a variety of means to assist U.S. clients in concealing their undeclared accounts, including by:

•          assisting clients in using sham entities to hide undeclared accounts;
•          soliciting IRS forms that falsely stated, under penalties of perjury, that the sham entities were the beneficial owners of the assets in the accounts;
•          failing to maintain in the United States records related to the accounts;
•          destroying account records sent to the United States for client review;
•          using Credit Suisse managers and employees as unregistered investment advisors on undeclared accounts;
•          facilitating withdrawals of funds from the undeclared accounts by either providing hand-delivered cash in the United States or using Credit Suisse’s correspondent bank accounts in the United States;
•          structuring transfers of funds to evade currency transaction reporting requirements; and
•          providing offshore credit and debit cards to repatriate funds in the undeclared accounts.

As part of the plea agreement, Credit Suisse further agreed to make a complete disclosure of its cross-border activities, cooperate in treaty requests for account information, provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed, and to close accounts of account holders who fail to come into compliance with U.S. reporting obligations.  Credit Suisse has also agreed to implement programs to ensure its compliance with U.S. laws, including its reporting obligations under the Foreign Account Tax Compliance Act and relevant tax treaties, in all its current and future dealings with U.S. customers.

“Today’s plea by Credit Suisse is a significant step in our global enforcement against those who would avoid their tax obligations by hiding their assets in foreign bank accounts, and those financial institutions, bankers, and other professionals who facilitate this conduct,” said Assistant Attorney General Keneally for the Tax Division. “Credit Suisse has also changed its business operations to ensure that U.S. taxpayers will no longer be able to hide their assets at Credit Suisse, and provided the government with valuable information that will further our investigations.”

“This prosecution and plea should serve notice that secret accounts and assisting the evasion of income taxes has a high cost,” said U.S. Attorney Boente.  “Concealing financial accounts from the U.S. government is not a legitimate part of wealth management or private banking services.”

“Pursuing international tax evasion is a priority area for IRS Criminal Investigation, and we will continue to follow the money here in the United States and around the world” said IRS Commissioner Koskinen.  “I want to commend the special agents in IRS-Criminal Investigation for all of their hard work in this area and the close cooperation with the Department of Justice.  Today's guilty plea is another important milestone in ongoing law enforcement efforts to investigate the use of offshore accounts to evade taxes.  People should no longer feel comfortable hiding their assets and income from the IRS.”

The Board of Governors of the Federal Reserve System is also announcing today that it has reached a resolution with Credit Suisse, by which Credit Suisse has agreed to a cease and desist order, certain remedial steps to ensure its compliance with U.S. law in its ongoing operations, and a civil monetary penalty of $100 million.  Additionally, the New York State Department of Financial Services is announcing a similar resolution by which Credit Suisse has agreed to a cease and desist order and a monetary penalty of $715 million.

* * *

On Feb. 23, 2011, a grand jury in the Eastern District of Virginia returned an indictment charging four Credit Suisse employees - Marco Parenti Adami, a former Credit Suisse manager; Emanuel Agustino, a former Credit Suisse banker; Michele Bergantino. a former Credit Suisse banker; and Roger Schaerer, Credit Suisse’s former Representative Officer in its Representative Office in New York - with conspiring with other Swiss bankers and U.S. taxpayers to defraud the United States.  On July 21, 2011, the grand jury returned a superseding indictment adding four additional defendants charged with the conspiracy to defraud the United States.  The four new defendants were: Markus Walder, the former head of North America Offshore Banking at Credit Suisse; Süsanne D. Rüegg Meier, a former Credit Suisse manager; Andreas Bachmann, a former banker at Credit Suisse Fides, a subsidiary of Credit Suisse; and Josef Dörig, a former Credit Suisse Fides employee and owner/operator of a trust company.  On March 12, 2014, Bachmann pleaded guilty to the superseding indictment in connection with his work as a banker at Credit Suisse Fides.  On April 30, 2014, Dörig pleaded guilty to conspiring to defraud the IRS in connection with his role managing offshore entities used by U.S. taxpayers to conceal their accounts at Credit Suisse.  Those pleas were accepted by U.S. District Judge Gerald Bruce Lee.  Bachmann and Dörig each face maximum penalties of five years in prison when they are sentenced on Aug. 8, 2014.

* * *

This case was prosecuted by Assistant U.S. Attorney Mark D. Lytle and Trial Attorneys Mark F. Daly and Nanette L. Davis of the Tax Division.  The case was investigated by IRS-Criminal Investigation.

The Department of Justice expressed gratitude to the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, the U.S. Securities and Exchange Commission, and the New York State Department of Financial Services for their significant and valuable assistance.

CEO, MANAGING PARTNER OF WALL STREET BROKER-DEALER CHARGED IN CONSPIRACY TO BRIBE FOREIGN OFFICIALS

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, April 14, 2014

CEO and Managing Partner of Wall Street Broker-Dealer Charged with Massive International Bribery Scheme

The chief executive officer and a managing partner of a New York-based U.S. broker-dealer were arrested today on felony charges arising from a conspiracy to pay bribes to a senior official in Venezuela’s state economic development bank.

Acting Assistant Attorney General David A. O’Neil of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara of the Southern District of New York and Assistant Director in Charge George Venizelos of the New York Office of the FBI made the announcement.

According to the indictment unsealed today, Benito Chinea and Joseph DeMeneses, who were the Chief Executive Officer and a managing partner, respectively, of a New York-based broker-dealer (Broker-Dealer), are accused of conspiring with others to pay and launder bribes to Maria de los Angeles Gonzalez de Hernandez, a senior official in Venezuela’s state-owned economic development bank, Banco de Desarollo Económico y Social de Venezuela (BANDES), in exchange for her directing BANDES’s financial trading business to the Broker-Dealer. DeMeneses was also charged with conspiring to obstruct an examination of the Broker-Dealer by the U.S. Securities and Exchange Commission (SEC) to conceal the true facts of the Broker-Dealer’s relationship with BANDES.

Chinea, 47, was arrested today in Manalapan, N.J., where he resides, and DeMeneses, 44, was arrested today in Fairfield, Conn., where he resides.  In a separate action, the SEC announced civil charges against Chinea, DeMeneses and others involved in the bribery scheme.

“ These senior Wall Street executives are accused of paying six-figure bribes to an official in Venezuela to secure foreign business for their firm,” said Acting Assistant Attorney General O’Neil.  “Today’s charges show once again that we will aggressively pursue individual executives, all the way up the corporate ladder, when they try to bribe their way ahead of the competition. ”

“These two defendants, senior executives at a U.S. brokerage firm, are the fifth and sixth people to be charged in an alleged conspiracy to corrupt the trading business of a state-run economic development bank of Venezuela,” said U.S. Attorney Bharara.   “They are alleged to have bribed a willing officer at the bank to steer its overseas trading business to the defendants’ brokerage firm, reaping millions for these defendants and their partners in crime.  This Office will not tolerate the kind of outright bribery and concealment that characterized this scheme.”

“As alleged in the indictment, Chinea and Demeneses bribed Gonzalez to secure bank Bandes's financial trading business,” said FBI ADIC Venizelos.   “Demeneses compounded the Broker-Dealer’s illegal activities by conspiring to obstruct an investigation by regulators.  The arrests today of Chinea and Demeneses should be a reminder to all those in the business community that engaging in bribery schemes to secure business and make a profit is illegal. Together with our law enforcement partners, the FBI will continue to investigate bribery and fraud at all levels.”

According to the allegations in the indictment unsealed today, as well as other documents previously filed in Manhattan federal court, Chinea and DeMeneses worked at the headquarters of the Broker-Dealer in New York City.   In 2008, the Broker-Dealer established a group called the Global Markets Group (GMG), which offered fixed income trading services for institutional clients in the purchase and sale of foreign sovereign debt.   One of the Broker-Dealer’s GMG clients was BANDES, which operated under the direction of the Venezuelan Ministry of Finance.   Gonzalez was an official at BANDES and oversaw the development bank’s overseas trading activity.   At her direction, BANDES conducted substantial trading through the Broker-Dealer.   Most of the trades executed by the Broker-Dealer on behalf of BANDES involved fixed income investments for which the Broker-Dealer charged the bank a commission.

As alleged in court documents, from late 2008 through 2012, Chinea and DeMeneses, together with three Miami-based Broker-Dealer employees, Ernesto Lujan, Tomas Alberto Clarke Bethancourt and Jose Alejandro Hurtado, participated in a bribery scheme in which Gonzalez directed trading business she controlled at BANDES to the Broker-Dealer, and in return, agents and employees of the Broker-Dealer split the revenue the Broker-Dealer generated from this trading business with Gonzalez.   During this time period, the Broker-Dealer generated over $60 million in commissions from trades with BANDES.   In order to conceal their conduct, Chinea, DeMeneses and their co-conspirators routed the payments to Gonzalez, frequently in six-figure amounts, through third-parties posing as “foreign finders” and into offshore bank accounts.   In several instances, Chinea personally signed checks worth millions of dollars that were made payable to one of these purported “foreign finders” and later deposited in a Swiss bank account.

As further alleged in court documents, as a result of the bribery scheme, BANDES quickly became the Broker-Dealer’s most profitable customer.   As the relationship continued, however, Gonzalez became increasingly unhappy about the untimeliness of the payments due her from the Broker-Dealer, and she threatened to suspend BANDES’s business.   In response, DeMeneses and Clarke agreed to pay Gonzalez approximately $1.5 million from their personal funds.   Chinea and DeMeneses agreed to use Broker-Dealer funds to reimburse DeMeneses and Clarke for these bribe payments.   To conceal their true nature, Chinea and DeMeneses agreed to hide these reimbursements in the Broker-Dealer’s books as sham loans from the Broker-Dealer to corporate entities associated with DeMeneses and Clarke.

Court documents also allege that beginning in or around November 2010, the SEC commenced a periodic examination of the Broker-Dealer, and from November 2010 through March 2011, the SEC’s exam staff made several visits to the Broker-Dealer’s offices in Manhattan.   In or about early 2011, DeMeneses and others involved in the scheme discussed that the SEC was examining the Broker-Dealer’s relationship with BANDES.   DeMeneses and others agreed they would take steps to conceal the true facts of the Broker-Dealer’s relationship with BANDES, including by deleting emails, in order to hide the actual relationship from the SEC.

Chinea and DeMeneses were each charged with one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and the Travel Act, five counts of violating the FCPA, and five counts of violating of the Travel Act.   Chinea and DeMeneses were also charged with one count of conspiracy to commit money laundering and three counts of money laundering. DeMeneses was further charged with one count of conspiracy to obstruct justice.

Previously, on Aug. 29 and Aug. 30, 2013, Lujan, Hurtado and Clarke each pleaded guilty in Manhattan federal court to conspiring to violate the FCPA, to violate the Travel Act and to commit money laundering, as well as substantive counts of these offenses, relating, among other things, to the scheme involving bribe payments to Gonzalez.   On Nov. 18, 2013, Gonzalez pleaded guilty in Manhattan federal court to conspiring to violate the Travel Act and to commit money laundering, as well as substantive counts of these offenses, for her role in the corrupt scheme.

The charges contained in the indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

This ongoing investigation is being conducted by the FBI, with assistance from the Criminal Division’s Office of International Affairs.   The department appreciates the substantial assistance provided by the SEC.

Senior Deputy Chief James Koukios and Trial Attorney Maria Gonzalez Calvet of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Harry A. Chernoff and Jason H. Cowley of the Southern District of New York’s Securities and Commodities Fraud Task Force are in charge of the prosecution.   Assistant U.S. Attorney Carolina Fornos is responsible for the forfeiture aspects of the case.

TWO CHARGED WITH USING OFFSHORE ACCOUNTS TO LAUNDER MONEY

FROM:  U.S. JUSTICE DEPARTMENT 
Monday, March 24, 2014

U.S. and Canadian Citizens Charged with Using Offshore Accounts and Foreign Nominee Entities to Launder $200,000

Three Caribbean-Based Defendants Charged with Laundering $200,000 of Purported Bank Fraud Proceeds in Undercover Sting

Joshua Vandyk, a U.S. citizen, and Eric St-Cyr and Patrick Poulin, Canadian citizens, were indicted for conspiracy to launder monetary instruments, the Department of Justice and Internal Revenue Service (IRS) announced.  The indictment alleges that Vandyk, St-Cyr and Poulin conspired to conceal and disguise the nature, location, source, ownership and control of property believed to be the proceeds of bank fraud.  The Caribbean-based defendants allegedly assisted undercover law enforcement agents, posing as U.S. clients, in laundering purported criminal proceeds through an offshore structure designed to conceal the true identity of the proceeds’ owners.  Vandyk and St-Cyr invested the laundered funds on the clients’ behalf and represented the funds would not be reported to the U.S. government.

The indictment was returned in the Eastern District of Virginia on March 6, 2014, and unsealed on March 12, 2014, when all three defendants were arrested in Miami, Fla.  In addition to the conspiracy charge, Vandyk, St-Cyr and Poulin were each charged with two counts of money laundering.

“These charges result from an extensive investigation and are the latest demonstration of the Department’s resolve to find and prosecute those who aid money laundering and tax fraud globally," said Deputy Attorney General James M. Cole.

According to the indictment, Vandyk and St-Cyr lived in the Cayman Islands and worked for an investment firm based in the Cayman Islands.  St-Cyr was the founder and head of the investment firm, whose clientele included numerous U.S. citizens.  Poulin, an attorney at a law firm based in Turks and Caicos, worked and resided in Canada and in the Turks and Caicos.  His clientele also included numerous U.S. citizens.

According to the indictment, Vandyk, St-Cyr and Poulin solicited U.S. citizens to use their services to hide assets from the U.S. government.  Vandyk and St-Cyr directed the undercover agents posing as U.S. clients to create offshore foundations with the assistance of Poulin and others because they and the investment firm did not want to appear to deal with U.S. clients.  Vandyk and St-Cyr used the offshore entities to move money into the Cayman Islands and used foreign attorneys as intermediaries for such transactions.

According to the indictment, Poulin established an offshore foundation for the undercover agents posing as U.S. clients and served as a nominal board member in lieu of the clients.  Poulin transferred wire payments from the offshore foundations to the Cayman Islands, where Vandyk and St-Cyr invested those funds outside the United States in the name of the offshore foundation.  The investment firm represented that it would neither disclose the investments or any investment gains to the U.S. government, nor would it provide monthly statements or other investment statements to the clients.  Clients were able to monitor their investments online through the use of anonymous, numeric passcodes.  Upon request from the U.S. client, Vandyk and St-Cyr would liquidate investments and transfer money, through Poulin, back to the United States.  According to Vandyk and St-Cyr, the investment firm would charge clients higher fees to launder criminal proceeds than to assist them in tax evasion.

“I commend IRS Criminal Investigation and the Division’s prosecutors for the extraordinary work that they have done over many months in this investigation,” said Assistant Attorney General Kathryn Keneally for the Tax Division.  “In particular, it is important to note that the IRS’s voluntary disclosure policy excludes disclosures after the government has received information about taxpayers’ identities.  If the investigation team now has the names of account holders who have not yet come forward, time has run out for them.”

“As alleged in the indictment, these defendants were in the business of creating layers of transactions so their US clients could launder criminal proceeds,” said Chief of IRS-Criminal Investigation Richard Weber.  “IRS Criminal Investigation is committed to unraveling complex financial and money laundering schemes and holding those accountable for creating mechanisms to hide assets offshore and dodge the tax system.”

An indictment merely alleges that crimes have been committed, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, each defendant faces a maximum potential sentence of 20 years in prison for each count.

The case was investigated by special agents of the IRS-Criminal Investigation.  Trial Attorneys Todd Ellinwood and Caryn Finley of the Department’s Tax Division and Assistant U.S. Attorney Kosta Stojilkovic of the U.S. Attorney’s Office for the Eastern District of Virginia are prosecuting the case.

FOREIGN CURRENCY TRADING PONZI SCHEME AND OFFSHORE ACCOUNT TAX EVASION

FROM: U.S. DEPARTMENT OF JUSTICE
Monday, August 13, 2012
Residents of California and Utah Sentenced for Tax Fraud
　
David L. Johnson and Michael L. Putnam were sentenced today following their convictions for tax crimes related to their involvement in the Genesis Fund, the Justice Department and Internal Revenue Service (IRS) announced. Both Johnson and Putnam had previously pleaded guilty before U.S. District Judge Dale S. Fischer in the Central District of California. According to the original indictment filed in this case, the Genesis Fund was a private investment fund that was marketed as investing in foreign currency trading, but that operated as a Ponzi scheme.

Johnson, 73, of Loma Linda, Calif., was sentenced to 30 months in prison for filing two false tax returns in which he failed to disclose his bank account in Costa Rica to the IRS. According to the plea agreement, Johnson used this bank account to conceal Genesis Fund distributions from the IRS. Judge Fischer also ordered Johnson to pay restitution of $2.3 million: approximately $1.9 million to investors in the Genesis Fund and $400,000 to the IRS.

Putnam, 68, of St. George, Utah, formerly of Huntington Beach, Calif., was sentenced to 12 months and a day in prison for conspiracy and tax fraud and ordered to pay over $13 million in restitution: approximately $10 million to investors in the Genesis Fund and $3 million to the IRS. According to court documents, Putnam had cooperated with the government in the prosecution of other defendants charged for their involvement in the Genesis Fund.

According to court documents, Johnson and Putnam received significant distributions that they hid in foreign bank accounts and did not report to the IRS. Johnson received over $2.4 million while Putnam received over $1.5 million.  Johnson and Putnam are the 10th and 11th defendants to be sentenced for crimes related to the promotion of the Genesis fund.