On April 13, 2011, another U.S. taxpayer with an offshore HSBC bank account, Josephine Bhasin…
Another Customer with Unreported Offshore Bank Accounts Pleads Guilty
George Landegger, CEO of pulp and paper company, pleaded guilty last week in New York to a federal charge of failing to file a required report to the IRS about the account. He admitted that he maintained the undeclared account worth $8.4 million at the Swiss Bank in Zurich from the early part of the last decade to 2010.
Landegger, 77, of Ridgefield, Connecticut, agreed as part of his plea bargain to pay a civil penalty of more than $4.2 million and back taxes of more than $71,000. A judge set his sentencing for May 12′ he faces a maximum of five years in prison, although the actual punishment likely will be less.
“As he admitted, George Landegger maintained secret Swiss bank accounts he repeatedly failed to declare to the IRS, and he took steps to conceal his ownership of the accounts,” Manhattan U.S. Attorney Preet Bharara said in a prepared statement. “The benefits of citizenship or residency in the United States come with certain obligations, including, as George Landegger well knew, the legal requirement to report foreign bank accounts. He will now pay for his illegal conduct.”
Parsons & Whittemore employed hundreds of people at a pair of pulp mills in Monroe County but sold them in 2010 to Georgia-Pacific, a subsidiary of Koch Industries.
Court records in the criminal case indicate that in 2005, a representative of Swiss Bank recommended to Landegger that he use a Zurich-based lawyer to create a sham trust to hold the executive’s undeclared accounts at the bank. That trust – named “Onicuppac,” or cappucino spelled backwards – was organized under the laws of Lichtenstein and kept money in the bank, outside of the reach of the IRS.
Court records describe an April 2009 meeting between Landegger, an unnamed Swiss Bank official and a third person in which they discussed news accounts of the United States cracking down on untaxed earnings hidden in foreign bank accounts. At the time, U.S. officials were investigating UBS AG regarding allegations that the Swiss bank was helping U.S. taxpayers maintain undeclared accounts.
Landegger and the Swiss Bank official discussed the possibility of entering the IRS’s offshore voluntary disclosure program but rejected the idea. Instead, he and the bank official decided to empty the accounts of their assets by slowly moving funds out of Switzerland. Court records show that between May 2009 and July 2010, Landegger, with the assistance of the banker and others, began transferring the assets from his account to a new, declared account in Canada. He then transferred the remaining funds to an account maintained by another person in Hong Kong.
During the time Landegger kept undeclared accounts at the Swiss Bank, capital gains and losses were generated in the account from his investments in foreign securities, according to the plea agreement.
IRS Acting Special Agent-in-Charge Thomas E. Bishop said “The Internal Revenue Service has made uncovering hidden offshore accounts and income a top priority and, working with the Department of Justice, we continue to demonstrate our success in doing so.” “The prosecutions of individuals who decide to keep their foreign assets concealed and of those who advise and assist them serve as clear warnings to anyone who doubts the U.S. government’s resolve.”
A timely OVDP submission (or maybe SDOP filing) may have saved Mr. Landegger. The case is interesting because it reveals the discussions between the bankers and client, which ultimately were criminally used against the client. In recent years, foreign banks have come under great scrutiny by the US government. We expect more banks to reveal more information in order to avoid civil and criminal complications for the bank. The case provides a valuable lesson: be careful of all verbal and written communications with bankers.