District Not Recorded

A federal court has ordered a Baltimore-area importer of marble and granite to pay its payroll taxes as they become due, the Justice Department announced today.  Judge Ellen L. Hollander of the U.S. District Court for the District of Maryland entered a permanent injunction requiring Alexander Stone Inc. d/b/a MMG Marble & Granite and its owners, Soultana Efthimiadis and Kyriakos Efthimiadis, to pay their federal payroll tax liabilities as they became due and owing.

According to the United States’ complaint, Alexander Stone has repeatedly failed to make timely and adequate federal employment tax deposits since 2008 and has amassed substantial employment tax liabilities.  The defendants agreed to entry of the injunction but did not admit or deny the substance of the allegations in the United States’ civil complaint.

Under the terms of the injunction, the business must deposit its payroll taxes and file its employment tax returns on a timely basis.  The defendants are also required to notify the Internal Revenue Service (IRS) that the requisite tax deposits have been made and tell the IRS if they begin operating any new business.  The defendants are precluded from assigning property or making any payments to other creditors until the employment tax and withholding liabilities are paid.  The injunction is effective immediately and will ensure that Alexander Stone stays current on its federal employment tax obligations.  Acting Assistant Attorney General Caroline D. Ciraolo of the Tax Division thanked IRS Field Collection and its revenue officer for investigating and preparing the civil case.

Conspired With Other Canadian Citizens to File False Tax Returns Using Fraudulent Forms 1099-OID

A Ontario, Canada, man was sentenced to 135 months in prison today following his conviction for one count of conspiracy to defraud the United States and commit theft of government funds, one count of making a false claim against the United States and two counts of transferring stolen money in foreign commerce, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney William J. Hochul Jr. of the Western District of New York.

Kevin Cyster, 52, of Burlington, Ontario, was convicted in September by a federal jury after a six-day trial in Rochester, New York.  According to court documents and testimony at trial, Cyster was part of a group of Canadian citizens that filed tax returns with the Internal Revenue Service (IRS) that contained fraudulent Forms 1099-OID.  On these tax returns, Cyster and his co-conspirators falsely claimed that nearly $10 million in federal income taxes had been withheld on their behalf by various Canadian financial institutions and paid over to the IRS.  The testimony at trial established that these false Forms 1099-OID were created and filed with the IRS by an individual in California named Ronald Brekke, 55, of Orange County, California, and not by the financial institutions.  No federal income taxes were paid over to the IRS on behalf of Cyster and his co-conspirators and they were not entitled to the refunds claimed on their tax returns.  The IRS paid out more than $3.5 million of the requested refunds before detecting the fraud.  Renee Jarvis, 51, of Ontario one of Cyster’s co-conspirators, testified that co-conspirators held meetings at Cyster’s home at which Cyster promoted the 1099-OID scheme. 

Jarvis pleaded guilty in June 2014 to conspiracy to defraud the United States and to commit theft of government funds.  Her sentencing is set for Jan. 12, 2016.  Brekke was sentenced in June 2012 to 12 years in prison after a jury convicted him of promoting a 1099-OID fraud scheme.

Chief U.S. District Judge Frank P. Geraci, Jr. of the Western District of New York, who also presided over Cyster’s trial, imposed the sentence.  In addition to the prison term, Cyster was ordered to serve three years of supervised release and pay restitution to the IRS in the amount of $3,553,303.35.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Hochul commended the special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Shantelle P. Kitchen, who investigated the case and Assistant U.S. Attorney John J. Field of the Western District of New York and Trial Attorneys Jeffrey A. McLellan and Thomas F. Koelbl of the Tax Division, who prosecuted the case.

Additional information about the Tax Division and its enforcement efforts may be found on the division website.

Earlier today the Attorney General sent the attached memorandum to U.S. Attorneys thanking them for their impressive work on ending the scourge of violence against women.  The memorandum also outlines enforcement steps that have been taken and encourages them to continue building partnerships with state, local and tribal law enforcement and community groups to stop domestic violence.

Memorandum on Federal Efforts to Improve Safety of Domestic Violence Victims (791.24 KB)

Emanuel L. Lutchman, 25, was arrested and charged by criminal complaint with attempting to provide material support to the Islamic State of Iraq and the Levant (ISIL), a designated foreign terrorist organization.  The charge carries a maximum penalty of 20 years in prison and a $250,000 fine.  

The announcement was made by Assistant Attorney General for National Security John P. Carlin, U.S. Attorney William J. Hochul Jr. of the Western District of New York and Special Agent in Charge Adam S. Cohen of the Federal Investigation Bureau’s (FBI) Buffalo Division.

“According to the complaint, as part of Emanuel Lutchman’s attempt to provide material support to ISIL, he planned to kill innocent civilians on New Year’s Eve in the name of the terrorist organization.” said Assistant Attorney General Carlin.  “Thankfully, law enforcement was able to intervene and thwart Lutchman's deadly plans.”

“This New Year’s Eve prosecution underscores the threat of ISIL even in upstate New York but demonstrates our determination to immediately stop any who would cause harm in its name,” said U.S. Attorney Hochul.  “What began as an ISIL directive to harm the community ended with the arrest of this defendant and a message for any other individuals considering similar behavior - you will be caught, you will be prosecuted, and you will be punished.  While law enforcement is well equipped for such investigations, the public is reminded to remain vigilant and report any suspicious activity.  I assure members of the public that the excellent work of our law enforcement partners with the cooperation of the public is the best way to ensure the safety of our community.” 

“The FBI thwarted Emanuel Lutchman’s intent to kill civilians on New Year's Eve,” said Special Agent in Charge Cohen.  “The FBI remains concerned about people overseas who use the Internet to inspire people in the United States to commit acts of violence where they live.”

According to court records, the defendant, claiming to receive direction from an overseas ISIL member, planned to commit an armed attack against civilians at a restaurant/bar located in the Rochester, New York, area today, New Year’s Eve on behalf of ISIL and in furtherance of his plan to join ISIL overseas.   

The defendant made an initial appearance this morning before U.S. Magistrate Judge Marian W. Payson of the U.S. Western District of New York.  

The case is being investigated by the FBI’s Rochester Joint Terrorism Task Force (JTTF).  The case is being prosecuted by Assistant U.S. Attorney Brett A. Harvey with the assistance of Trial Attorney Lawrence Schneider of the National Security Division’s Counterterrorism Section.

The fact that a defendant has been charged with a crime is merely an accusation and the defendant is presumed innocent until and unless proven guilty.

The Department of Justice announced today that Bank Lombard Odier & Co Ltd (Lombard Odier) and DZ Privatbank (Schweiz) AG (DZ Privatbank) reached resolutions under the department’s Swiss Bank Program.  These banks collectively will pay penalties of more than $107 million.

The Swiss Bank Program, which was announced on Aug. 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States.  Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts.  Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.

Under the program, banks are required to:

• Make a complete disclosure of their cross-border activities;

• Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;

• 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;

• Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and

• Pay appropriate penalties.

Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.

According to the terms of the non-prosecution agreements signed today, each bank agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay a penalty in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.

Lombard Odier is a partner-owned private bank that was founded in 1796 and is based in Geneva, Switzerland.  It is organized under the laws of Switzerland and is part of the Lombard Odier Group, which consists of 23 operating entities owned by LO Holding S.A., a Swiss holding company.  Lombard Odier provides private banking, asset management and technology and business infrastructure services to individuals and entities located inside and outside Switzerland. 

Lombard Odier was aware that U.S. taxpayers had a legal duty to report to the Internal Revenue Service (IRS) and pay taxes on all of their income, including income earned in accounts that these U.S. taxpayers maintained at Lombard Odier.  Lombard Odier nonetheless opened, maintained and serviced accounts for U.S. persons that it knew or had reason to know were likely not declared to the IRS or the Treasury Department, as required by U.S. law.

Lombard Odier offered traditional Swiss banking services, such as numbered accounts and holding clients’ mail, that assisted U.S. clients in the concealment of assets and income from the IRS.  Lombard Odier also assisted U.S. clients in concealing their assets and income by opening and maintaining accounts in the names of non-U.S. corporations, foundations, trusts or other entities that it knew were beneficially owned by U.S. persons.  Lombard Odier maintained at least 32 entity accounts that were operated without compliance with the requisite corporate formalities.  The non-U.S. jurisdictions in which the entities were incorporated or formed included the British Virgin Islands, Liechtenstein and Panama.  In some instances, Lombard Odier referred clients to its Swiss-based affiliate, Favona SA, which is also part of the Lombard Odier Group, to set up entity structures.  In addition, Favona provided administrative services, including accounting services and supplying corporate directors.

A Zurich-based law firm (the Zurich firm) and a Zurich-based lawyer (the Zurich lawyer) referred U.S.-related accounts to Lombard Odier with aggregate assets under management of over $63 million.  The Zurich lawyer was the accountholder and had signature authority and/or power of attorney over all of the U.S.-related accounts that he referred, and was also a director of the Panama corporation that was the accountholder of one of those accounts.  In some instances, the Zurich firm and Zurich lawyer operated in cooperation with a U.S. lawyer in New York, New York.  The Zurich firm and Zurich lawyer referred 13 accounts to Lombard Odier that the U.S. lawyer – or that person’s friends or family members – beneficially owned.

Effective in or about January 2001, Lombard Odier entered into a Qualified Intermediary (QI) Agreement with the IRS.  The QI Agreement was designed to help ensure that non-U.S. persons were subject to the proper U.S. withholding tax rates and that U.S. persons were properly paying U.S. tax with respect to U.S. securities held in an account with Lombard Odier.  As a consequence of Lombard Odier entering into a QI Agreement with the IRS, certain relationship managers and supervisory relationship managers opened accounts for U.S. clients in the names of sham offshore entities.  In connection with these accounts, Lombard Odier employees knowingly accepted and included in its account records IRS Forms W-8BEN or Lombard Odier’s substitute forms provided by the directors of the offshore companies that falsely represented under penalty of perjury that such companies were the beneficial owners of the assets in the accounts for U.S. federal income tax purposes.  Certain relationship managers, supervisory relationship managers and others caused Lombard Odier to certify compliance with the QI Agreement even though the true beneficial owners were not reflected in the Forms W-8BEN in the account files. 

Since Aug. 1, 2008, Lombard Odier maintained accounts with an aggregate value of more than $24 million that were owned by insurance companies and which held assets relating to insurance products that were issued to U.S. taxpayer clients of the respective insurance companies.  Such accounts, commonly known as “insurance wrappers,” were titled in the names of insurance companies, but were funded with assets that were transferred to the accounts for the beneficial owners of the insurance products.

Lombard Odier’s senior management decided, in June 2008, to prohibit new U.S. taxpayer clients coming from UBS and to refrain from hiring UBS relationship managers with U.S. taxpayer clients.  Shortly thereafter, Lombard Odier implemented a Regularize or Leave Action Plan, the tenets of which were described in a written policy, dated Oct. 8, 2008, to be communicated verbally to the group heads of Lombard Odier’s private banking business unit.  Pursuant to the plan, Lombard Odier’s management required that relationship managers instruct each of their U.S. clients to sign a Form W-9, voluntarily disclose their accounts to the IRS or close their accounts.  According to the written policy, relationship managers were to propose that U.S. clients who wished to close their accounts do so via withdrawal of cash, checks or gold; transfers to another bank; or donations to non-U.S. relatives or charitable institutions.  In connection with the plan, Lombard Odier closed 50 U.S.-related accounts with cash withdrawals exceeding $51 million.  Lombard Odier also closed at least 12 U.S.-related accounts via fictitious donations, where the clients transferred the funds in their accounts to other accounts at Lombard Odier, or to external accounts that were controlled by the U.S. clients but held by their non-U.S. relatives or associates.

Since Aug. 1, 2008, Lombard Odier had 1,121 U.S.-related accounts, comprising maximum assets under management of approximately $4.45 billion, including assets of declared accounts.  Lombard Odier will pay a penalty of $99.809 million.

DZ Privatbank was founded in 1975 as BEG Bank Europäischer Genossenschaftsbanken, a public limited liability company under Swiss law.  In early 2006, following several internal reorganizations and name changes, its name was changed to DZ Privatbank (Schweiz) AG.  DZ Privatbank’s sole office is in Zurich, Switzerland.  DZ Privatbank’s ultimate owners are regionally-based German cooperative banks, whose customers are primarily individuals and small- to medium-sized companies.  DZ Privatbank’s primary business focus has always been to provide private banking services in Switzerland for customers of the German cooperative banks, and it has always defined and marketed itself as the “Germany specialist in Switzerland.”

Through its managers, employees and/or others, DZ Privatbank knew or had reason to know that some U.S. taxpayers who had opened and maintained accounts at DZ Privatbank were not complying with their U.S. income tax and reporting obligations.  During much of the time after Aug. 1, 2008, DZ Privatbank conducted a U.S. cross-border banking business that aided and assisted certain of its U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income they held in these accounts from the U.S. government.  DZ Privatbank offered a variety of traditional Swiss banking services that it knew could assist, and did in fact assist, U.S. clients in the concealment of assets and income from the IRS.  These services included numbered accounts, the ability for customers to have their mail held at DZ Privatbank and the use of a post office box held in the name of a DZ Privatbank employee.

In 2008, DZ Privatbank decided to expand its international business operations.  DZ Privatbank’s international expansion plan focused on customers domiciled in various countries, including Great Britain, Hungary, Poland, Russia, Turkey and the United States.  DZ Privatbank opened 222 new U.S.-related accounts with maximum aggregate assets under management of approximately $106 million between Jan. 1 and Oct. 31, 2009.  Prior to that period, DZ Privatbank had approximately 110 U.S.-related accounts with maximum aggregate assets under management of $133 million.

In May 2009, DZ Privatbank began accepting customers from Credit Suisse who had either terminated their relationship with Credit Suisse or whom Credit Suisse had terminated.  In addition to Credit Suisse, since Aug. 1, 2008, DZ Privatbank accepted the transfer of more than two dozen U.S.-related accounts from other Swiss banks under investigation by the department.  DZ Privatbank knew or should have known that some clients who transferred assets from these banks during this period were undeclared to the IRS.  By opening these U.S.-related accounts, DZ Privatbank aided and abetted those U.S. clients in concealing income and assets from the IRS.

DZ Privatbank employees corresponded and met with Credit Suisse personnel in connection with the transfer of accounts to DZ Privatbank.  In an email dated Dec. 17, 2009, one Credit Suisse relationship manager notified a client that the account had to be closed before the end of December 2009, but indicated “DZ PRIVATBANK . . . will probably be an option for you.”  This email was forwarded to DZ Privatbank’s general email address by Credit Suisse.  In another email dated May 6, 2010, the head relationship manager for U.S. accounts at Credit Suisse contacted an employee of DZ Privatbank regarding the transfer of an account to DZ Privatbank: “I’m away during his stay.  I have now ordered the gold so he can take it physically and can carry it ‘over the road.’  After I give him some cash, we will then close the relationship.  [A third Credit Suisse relationship manager] has reviewed the documents and will supervise the case.”

Credit Suisse personnel also provided advice to DZ Privatbank personnel related to clients’ potential participation in the IRS’s offshore voluntary disclosure programs (OVDP) to DZ Privatbank personnel.  For example, in or about April 2011, a DZ Privatbank relationship manager who had learned that some legal advisors were recommending a “quiet OVDP” filing sought the views of a Credit Suisse relationship manager on that topic and was informed it was “really dangerous,” tantamount to “giv[ing] [the customer] the rope (to hang themselves),” and should never be recommended.

As a result of the inflow of customers from Credit Suisse, a preliminary, interim protocol for U.S. customers was developed by several DZ Privatbank employees that, in part, incorporated the recommendations of the head relationship manager for U.S. accounts at Credit Suisse, mentioned above.  This was effective beginning in or about November 2009 and remained effective until February 2010, when portions of it were incorporated in a Cross-Border Handbook, which noted: “The bank has the following aims” listing first, “The bank wants – in the meaning of a side-business (Nebensegment) – [to] start business relations with U.S.-Customers.”  The handbook continued that “U.S. clients need to be treated due to several regulatory requirements with extreme caution and reluctance.”

In or about July 2010, DZ Privatbank accepted a U.S.-related account from Credit Suisse where the customer may have been concealing the existence of the account from U.S. authorities and was likely actively attempting to conceal his account from the IRS.  This customer and a former DZ Privatbank relationship manager engaged in discussions related to various ways in which the customer could withdraw money from his account at DZ Privatbank, with the stated intention of not “attracting attention.”  It was ultimately agreed that checks would be sent monthly to the customer in an amount set by him.  The customer failed to provide forms required by DZ Privatbank when it began its program to implement the Foreign Account Tax Compliance Act (FATCA), and as a result, the account was blocked and ultimately closed for non-compliance.  Nevertheless, DZ Privatbank unblocked the account several times through November 2012, against DZ Privatbank’s internal guidelines, so that the customer could continue to receive monthly checks.

Since Aug. 1, 2008, DZ Privatbank had a total of 691 U.S.-related accounts with aggregated assets under management of approximately $498 million.  DZ Privatbank will pay a penalty of $7.452 million.

In accordance with the terms of the Swiss Bank Program, each bank mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. accountholders at these banks who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts.  On Aug. 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement.  With today’s announcement of these non-prosecution agreements, noncompliant U.S. accountholders at these banks must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division thanked the IRS and in particular, IRS-Criminal Investigation and the IRS Large Business & International Division for their substantial assistance.  Acting Assistant Attorney General Ciraolo also thanked Tracy L. Gostyla, Kimberly M. Shartar and Carl D. Wasserman, who served as counsel on these matters, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer, Senior Litigation Counsel Nanette L. Davis and Attorney Kimberle E. Dodd of the Tax Division.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

Defendant also Charged with Being ‘Straw Purchaser’ of Two Assault Rifles Later Used in San Bernardino Attack that Killed 14 People

Enrique Marquez Jr., 24, of Riverside, California, a longtime friend of Sayed Rizwan Farook, the male shooter in the San Bernardino, California, terrorist attack, was named today in a federal grand jury indictment that charges him with conspiring with Farook in 2011 and 2012 to provide material support to terrorists.

Marquez was also charged today with two counts of making a false statement in relation to the purchase of two assault rifles that were used in the deadly shooting at the Inland Regional Center (IRC) on Dec. 2, 2015.

The five-count indictment additionally charges Marquez with marriage fraud and making a false statement on immigration paperwork in relation to an alleged sham marriage with a member of Farook’s family.

Marquez  is currently being held in federal custody without bond and is scheduled to be arraigned in U.S. District Court in Riverside on Jan. 6, 2016.

“Enrique Marquez Jr. has been indicted for his role in plotting terrorist attacks on American soil with Sayed Rizwan Farook in 2011 and 2012, attacks which were, fortunately, not carried out.  He is also charged with firearms violations for making straw purchases of weapons for Farook – weapons that were eventually used to carry out the recent terrorist attack in San Bernardino,” said Assistant Attorney General for National Security John P. Carlin.  “This indictment is the next step in holding Mr. Marquez accountable.  I would like to extend my gratitude to all the members of law enforcement involved in this ongoing investigation.”

“This indictment demonstrates that we will hold accountable all individuals who collaborate with terrorists in executing their plans," said United States Attorney Eileen M. Decker.  "Defendant Marquez's extensive plotting with Sayed Rizwan Farook in 2011 and 2012 and his purchase of explosive powder and two firearms provided the foundation for the murders that occurred this month.  This indictment is the result of sustained and coordinated efforts by many federal and state prosecutors, agents and officers, and I thank them for their efforts."

"Mr. Marquez is charged for his role in a conspiracy several years ago to target innocent civilians in our own backyard with cold-blooded terror attacks, and with providing weapons to an individual whose endgame was murder," said David Bowdich, the Assistant Director in Charge of the FBI's Los Angeles Field Office. "The covert nature of the defendant's alleged actions is a stark reminder of the challenges we face in preventing attacks planned in the name of violent jihad, and underscores the critical need for those with knowledge about terror plots to come forward."

Today’s indictment charges Marquez with conspiring with Farook to provide material support and resources, including weapons, explosives and personnel, to terrorists, knowing and intending that such support was to be used in preparation for and in carrying out the use of fire or explosive to maliciously damage or destroy any institution or organization receiving federal financial assistance and property used in interstate or foreign commerce or in any activity affecting interstate or foreign commerce.

In addition to the conspiracy count, Marquez is charged with two counts of making a false statement when purchasing two assault rifles for Farook – a Smith and Wesson, model M&P-15 Sport, 5.56-caliber rifle that was bought on Nov. 14, 2001, and a DPMS, model A-15, 5.56-caliber rifle that was bought on Feb. 22, 2012 – which, according to an affidavit previously filed in this case, were used in the Dec. 2 attack on the IRC that killed 14 people and wounded 22 others.  Specifically, he is charged with stating on a Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) form that he was the actual buyer, a statement that was, and which defendant knew to be, false.

The final two counts in the indictment allege that Marquez entered into a sham marriage with a member of Farook’s family in November 2014 and that on July 17, 2015, he signed an immigration form, under penalty of perjury, that he was living with the purported spouse in Corona, California, when he was not actually living there.

An indictment contains allegations that a defendant has committed a crime.  Every defendant is presumed innocent until and unless proven guilty in court.

The charge of providing material support to terrorists carries a maximum sentence of 15 years in federal prison.  The charges of making a false statement in connection with acquisition of firearms each carry a statutory maximum penalty of 10 years in federal prison.  The marriage fraud count carries a statutory maximum sentence of 5 years in prison, and the charge of making a false statement on immigration paperwork carries a statutory maximum sentence of 10 years in prison.

Today’s indictment in the result of an ongoing investigation that is being conducted by several members of the Inland Empire Joint Terrorism Task Force, including agents and detectives from the FBI; the San Bernardino Police Department; the San Bernardino County Sheriff’s Department; ATF; U.S. Immigration and Customs Enforcement’s Homeland Security Investigations; the Riverside County Sheriff’s Department; the Ontario Police Department and the Riverside Police Department.  Several agencies are providing considerable assistance to the investigation, including the San Bernardino County District Attorney’s Office and detectives with the Chino, California, Police Department; the Redlands, California, Police Department and the Corona Police Department.  Additionally, investigators have collaborated with sister task forces in the region and throughout the country, as well as with the intelligence community, foreign law enforcement partners and various FBI Legal Attachés located overseas.

The case against Marquez is being prosecuted by the U.S. Attorney’s Office of the Central District of California and the Counterterrorism Section of the Department's National Security Division.

Under two settlements with the Department of Justice and the U.S. Environmental Protection Agency (EPA), three Puerto Rico government agencies have agreed to upgrade portions of storm water systems they own within the Municipality of San Juan.  These upgrades, which will be performed by the Department of Natural and Environmental Resources, the Department of Transportation and Public Works from the Commonwealth of Puerto Rico and the Puerto Rico Highways and Transportation Authority, are aimed at eliminating or minimizing future discharges of sewage and other pollutants into water bodies in and around San Juan, including the Condado Lagoon, the Martin Peña Channel and the Atlantic Ocean.  The EPA estimates that over 6 million gallons of untreated sewage is being discharged into waterways in and around San Juan every day which amounts to more than 2.2 billion gallons discharged annually.

“These structural and operational improvements to the storm water infrastructure are critical and desperately needed for the public health and well-being of San Juan’s residents,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “This agreement will improve storm water collection systems that will reduce contamination from sewage that is presently escaping into water bodies around the city each day.”

“For far too long, harmful discharges of sewage and other contaminants have polluted water bodies in communities in Puerto Rico,” said Regional Administrator Judith A. Enck of the EPA.  “These legal agreements will drive water quality improvements and protect the health of the people of Puerto Rico.”

The Puerto Rico agencies will invest an estimated $77 million in infrastructure upgrades and other actions over the life of the two legal agreements.  The settlements are related to an agreement with the Municipality of San Juan that was announced on Oct. 26, 2015 in which San Juan agreed to take actions to upgrade its separate storm sewer system.

Stormwater runoff in San Juan is collected through municipal separate storm sewer systems and is discharged into local waterways.  When rain falls on roofs, streets and parking lots, the water cannot soak into the ground and carries trash, bacteria, heavy metals and other pollutants into streams, threatening public health.  In addition, property and infrastructure can be damaged by storm water runoff due to erosion.  Additionally, sanitary sewer lines or industrial discharges can also be illegally connected to the storm sewer, leading to untreated sewage or other pollutants reaching water bodies.

Between 2005 and 2013, the EPA documented that the Puerto Rico agencies were discharging untreated sewage and other pollutants from their storm sewer systems into water bodies, in violation of the Clean Water Act.  The waters receiving the untreated sewage include those that are classified for activities where people may come into contact with the water, such as fishing, boating, swimming, wading and/or other recreational and commercial activities.  Untreated sewage can carry bacteria, viruses and other harmful pollutants that can cause a number of illnesses.  Direct and indirect human exposure to or contact with untreated sewage and contaminated waters discharged on a daily basis presents an imminent and substantial endangerment to human health and welfare.

The EPA waived the collection of any monetary civil penalties due to financial challenges currently facing the Puerto Rico government; however, the agreements will include financial penalties if the agencies fail to complete the work and meet the deadlines.

In the complaint filed in 2014, the EPA alleges that the Puerto Rico Department of Natural and Environmental Resources was discharging pollutants without a permit from its Baldorioty de Castro, De Diego and Stop 18 stormwater pump stations.  These three pump stations were designed to control flooding in the San Juan area by pumping large volumes of storm water into receiving waters.  These three Department of Natural and Environmental Resources pump stations have been receiving flow from various sources which contain untreated sewage.  The agreement with the Department of Natural and Environmental Resources requires it to invest an estimated $33 million to upgrade its system over the life of the settlement, including:

• Obtain a proper permit and implement a Storm Water Management Program.
• Install, inspect, maintain, monitor and replace warning signs at all pump station outfalls and replace booms at all pump stations.
• Upgrade the Baldorioty de Castro Pump Station and install electronic monitoring equipment and lighting fixtures at pump station wet wells.
• Routinely clean and maintain its pump stations and develop methods for sludge sampling, disposal and water level management.
• Develop a Spill Prevention Control and Countermeasures Plan.
• Pay $650,000 each year into a Court Registry Account to be used by the Municipality of San Juan, Department of Transportation and Public Works and the Highways and Transportation Authority to support the implementation of work plans for work in the collection systems that flow to DNER’s three pump stations.

The EPA also alleges that the Puerto Rico Department of Transportation and Public Works and the Puerto Rico Highway and Transportation Authority was discharging storm water containing untreated sewage through the storm water systems they own and operate to provide drainage for their roads and highways.  Flow from these systems is conveyed to the Department of Natural and Environmental Resources’ pump stations.  Under a legal agreement, the Puerto Rico Department of Transportation and Public Works and the Puerto Rico Highways and Transportation Authority will invest an estimated $44 million over the life of the agreement to:

• Comply with the permit and develop and implement a Storm Water Management Program.
• Eliminate all illegal connections and discharges to their storm water systems under an EPA-approved schedule.
• Address complaints from residents and government agencies by developing a registry of complaints of illegal discharges into their storm water systems and address those complaints.
• Install, inspect, maintain, monitor and/or replace warning signs at outfalls.
• Submit a vacuum truck sludge disposal plan and submit standard operating procedures for pump stations.
• HTA must investigate the Barrio Obrero Vacuum Sewer System and either enter into an agreement to transfer the system to PRASA, or repair the system.
• Develop a program, subject to EPA review, to inspect, clean and repair the storm water system.
• Develop plans to prevent and respond to spills.
• Sample water quality at all outfalls and maintain outfall information.
• Complete an inventory of all of outfalls in the city of San Juan.
• Actively identify ways to incorporate green infrastructure into plans to comply with the agreement.

The settlement, lodged today in the U.S. District Court for the District of Puerto Rico, is subject to a 30-day public comment period and approval by the federal court.  The settlement will be available for viewing at www.justice.gov/enrd/Consent_Decrees.html.

DNER Consent Decree

DTPW HTA Consent Decree

The Department of Justice announced today that Bank J. Safra Sarasin AG (Safra Sarasin), Coutts & Co Ltd (Coutts), Gonet & Cie (Gonet) and Banque Cantonal du Valais (BC Valais) reached resolutions under the department’s Swiss Bank Program.  These banks collectively will pay penalties of more than $178 million.

“With today’s resolutions under the Swiss Bank Program, the department has reached agreements with 75 Swiss banks, imposed penalties in excess of $1 billion, and secured voluminous and detailed information regarding the illegal conduct of financial institutions, professionals and accountholders around the world,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. “Building on the success of the Swiss Bank Program, the civil and criminal offshore enforcement efforts of the department and its partners in the IRS will be a top priority in 2016.”

The Swiss Bank Program, which was announced on Aug. 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States.  Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts.  Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.

Under the program, banks are required to:

• Make a complete disclosure of their cross-border activities;
• Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
• 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;
• Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and
• Pay appropriate penalties.

Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.

According to the terms of the non-prosecution agreements signed today, each bank agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay a penalty in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.

Safra Sarasin is a Swiss bank with its head office in Basel. Safra Sarasin was formed in June of 2013 through the merger of two Swiss banks, Banque J. Safra (Suisse) SA (Safra) and Bank Sarasin & Cie AG (Sarasin).  In Switzerland, Safra Sarasin has branches in Berne, Geneva, Lucerne, Lugano and Zurich.  Safra Sarasin specializes in providing investment advice and asset management services to private and institutional clients, as well as to investment funds.  It offers clients portfolio management, secured lending and financial analysis, among other services.

In 2001, Safra and Sarasin each entered into a Qualified Intermediary (QI) Agreement with the Internal Revenue Service (IRS).  The QI regime provided a comprehensive framework for U.S. information reporting and tax withholding by a non-U.S. financial institution with respect to U.S. securities. After signing their respective QI Agreements, Safra and Sarasin continued to service certain U.S. customers without disclosing the customers’ identity to the IRS and without regard for the impact of U.S. criminal law on that decision.

Through at least 2014, Safra Sarasin knew that it was highly probable that some U.S. taxpayers who had opened and maintained accounts at Safra Sarasin were not complying with their U.S. income tax and reporting obligations. Safra and Sarasin took the position that they could service U.S. clients that they knew or had reason to believe were engaged in tax evasion so long as Safra and Sarasin prohibited their accountholders from trading in U.S.-based securities or required that the account be nominally structured in the name of a non-U.S.-based entity.

With respect to structured accounts, U.S. clients would create an entity, such as a Liechtenstein foundation, a Panama corporation or a British Virgin Islands corporation, and pay a fee to third parties to act as corporate directors. Those third parties, at the direction of the U.S. client, would then open an account at Safra or Sarasin in the name of the entity or transfer a pre-existing Swiss bank account from another Swiss bank. In certain cases that involved a non-U.S.-based entity, Safra or Sarasin was aware that a U.S. taxpayer was the true beneficial owner of an account. Despite this, the respective bank would obtain from the entity’s directors an IRS Form W-8BEN or equivalent bank document in which the directors falsely declared that the beneficial owner was not a U.S. taxpayer. Although it was highly probable that in such cases the U.S. taxpayer was avoiding U.S. taxes, some of these accounts were permitted to trade in U.S. securities without the respective bank reporting account earnings or transmitting any withholding taxes to the IRS, as required by its QI Agreement.

In some instances, relationship managers at Safra and Sarasin met with or took directions or instructions from the U.S. taxpayer beneficial owner of an offshore structure account, instead of the directors or other authorized parties on the account.  Some of these relationship managers interacted with corporate service providers, including Swiss lawyers, who assisted U.S. taxpayers in setting up nominee entities for their undeclared accounts. In some instances, relationship managers referred U.S. clients who were interested in creating nominee offshore entities to these corporate service providers. After these entities were created, relationship managers assisted these clients in opening and maintaining accounts at Safra Sarasin.

For example, a Geneva-based lawyer assisted U.S. clients in opening undeclared accounts in the names of Panama corporations. These accounts had high balances totaling approximately $250 million during the period since Aug. 1, 2008. The Geneva-based lawyer had signature authority and power of attorney over these accounts and was a director of some of these entities. With respect to one of these accounts, the lawyer signed an IRS Form W-8BEN falsely certifying that a Panama entity was the taxpayer, and not the U.S. client. In December 2010, in connection with the closing of one of these accounts, the lawyer assisted a U.S. client in transferring the funds to a bank in Hong Kong.  During 2011, in connection with the closing of seven of these accounts, the lawyer assisted the U.S. clients in transferring the funds to a Swiss bank under investigation by the department.

Safra Sarasin assisted some U.S. clients in other ways, in concealing assets and income from the IRS upon the closure of their accounts. Approximately 20 percent of the funds in U.S.-related accounts closed by Safra Sarasin were transferred to banks in countries other than Switzerland and the United States, including Israel, Hong Kong and Liechtenstein.  In one instance, Safra Sarasin assisted a U.S. client, whose account was held in the name of a Panama company, to withdraw $2.9 million in gold at the account closing. In another instance, Safra Sarasin processed five cash withdrawals of $190,000 each for a U.S. client, comprising a total aggregate amount of $950,000 in cash over a two-day period.

A number of U.S.-related accounts held at Sarasin were managed by external asset managers.  From June through August 2008, one of these external asset managers used intermediary accounts at Sarasin to assist five U.S. clients in transferring $21.1 million from a large Swiss bank into undeclared bank accounts at Sarasin. These intermediary accounts were opened in the name of the external asset manager’s company and were used when a U.S. client wanted to deposit funds into his or her account or transfer funds to a third party. This added a layer of concealment when transferring the assets of a client or third party to or from the U.S. client’s bank account at Sarasin.  In 2012, this same external asset manager was charged, in a U.S. federal court, with conspiring to impede and impair the IRS in the ascertainment, computation, assessment and collection of U.S. income taxes, in connection with the external asset manager’s activities at Swiss banks other than Safra Sarasin.

In the period since Aug. 1, 2008, Sarasin maintained six accounts, with an aggregate value of $24 million, that were owned by insurance companies and held assets relating to insurance products that were issued to U.S. taxpayer clients of the respective insurance companies. Such accounts, known commonly as “insurance wrappers,” were titled in the names of insurance companies but funded with assets that were transferred to the accounts for the beneficial owners of the insurance products.  Two of the six insurance wrapper accounts were held in the name of a Cayman Islands corporation, and another account was held in the name of a Singapore company.

Since Aug. 1, 2008, Safra Sarasin had 1,275 U.S.-related accounts with an aggregate maximum value of approximately $2.2 billion.  Safra Sarasin will pay a penalty of $85.809 million.

Coutts is a Swiss private bank headquartered in Zurich with branches in Geneva, Hong Kong, Monaco and Singapore.  Coutts also has operating subsidiaries in Geneva and on the Isle of Man. During the period since Aug. 1, 2008, Coutts was part of the international Wealth Management Division of The Royal Bank of Scotland Group plc, which is majority-owned by the United Kingdom government, and had no offices, branches or subsidiaries in the United States.  Coutts closed its New York branch in 1997, and the bank closed its representative office in Florida in 2005, shortly after Coutts had acquired the Florida office as part of its acquisition of Bank von Ernst & Cie AG in 2003.

Coutts was aware that U.S. taxpayers had a legal duty to report to the IRS and pay taxes on all of their income, including income earned in accounts that these U.S. taxpayers maintained at Coutts. Coutts nonetheless opened, serviced and profited from accounts for U.S. clients who Coutts knew or had reason to know were likely not complying with these obligations.  Since August 2008, Coutts has accepted over $150 million in inflows from other Swiss banks that were being investigated by the department, and Coutts opened 465 accounts for U.S. clients, some of whom did not comply with their obligations regarding U.S. tax or Reports of Foreign Bank and Financial Accounts (FBARs).

Prior to December 2008, several relationship managers from the Coutts private banking desks traveled to the United States to maintain existing relationships with U.S. clients and recruit new clients.  After 2008, Coutts relationship managers continued to travel to the United States to meet with clients, including three relationship managers employed by other group entities located outside of Switzerland who made 11 trips to the United States.

Coutts relationship managers in Switzerland aided and assisted certain U.S. clients with undeclared accounts at Coutts to evade their income taxes by placing their assets in the names of structures formed, maintained and managed by various subsidiary trust companies of Coutts. Coutts has operated its own trust companies in Liechtenstein and Switzerland. These companies provided structuring services to Coutts clients, including the creation of foundations, trusts and companies incorporated or based in offshore locations such as the Bahamas, British Virgin Islands, Channel Islands, Liechtenstein and Panama.  By operation of Swiss bank secrecy laws, the U.S. client’s ownership of these structures would not be disclosed to U.S. authorities.  In all, more than 500 of the 1,337 U.S. client accounts held at Coutts since August of 2008, with more than $1 billion in assets under management, had some type of structure with a U.S. beneficial owner.

In addition to the relationships they had with affiliated trust companies, Coutts relationship managers coordinated with external trust companies to create and administer offshore structures for its U.S. clients that were incorporated or based in offshore locations such as the British Virgin Islands, Liechtenstein and Panama.  For example, one relationship manager had three U.S. clients with undeclared accounts held in the names of British Virgin Islands companies.  These three accounts totaled approximately $130 million.

Because Swiss law requires Coutts to identify the true beneficial owner of structures on a document called a Form A, it knew that these were U.S. client accounts. Nonetheless, for numerous such accounts, Coutts relationship managers and other employees knowingly accepted and included in Coutts’ account records IRS Forms W-8BEN or equivalent bank documents provided by the directors of the offshore companies that falsely represented under penalty of perjury that such companies were the beneficial owners, for U.S. income tax purposes, of the assets in the Coutts accounts. This aided and assisted the U.S. clients in concealing these assets and income from the IRS.

Coutts also assisted U.S. clients in concealing the assets and income in their undeclared accounts by processing requests from U.S. taxpayers to transfer assets from accounts being closed to non-U.S.-related Coutts accounts, or to Coutts accounts that were restructured to eliminate the U.S. connection.  For example, in one instance in 2001, a joint account was opened by couple living in Singapore.  The husband was a U.S. citizen, and the wife was a French citizen.  After Coutts asked the accountholder to provide an IRS Form W-9, the husband instructed Coutts to close the joint account and internally transfer assets totaling $15.1 million to a Coutts account held jointly by his wife and children.  The husband had signatory authority over the newly opened account based on a general power of attorney, and he continued to manage the assets and was the only contact person for Coutts with respect to this account.  In another case, between July 2011 and April 2014, Coutts assisted a U.S. client in transferring $33 million from an undeclared account held in the name of a Belize corporation to 11 other accounts at Coutts held in the names of nominee entities.

Since Aug. 1, 2008, Coutts held and managed 1,337 U.S.-related accounts, which included both declared and undeclared accounts, with a peak of assets under management of approximately $2.1 billion.  Coutts will pay a penalty of $78.484 million.

Gonet is a family-owned private bank headquartered in Geneva, Switzerland.  Gonet operates a branch office in Lausanne, Switzerland, which was opened in 2011, and a representative office in Abu Dhabi, United Arab Emirates, which was opened in 2014.  In 1982, Gonet opened a subsidiary in Nassau, Bahamas, which offers traditional private banking services.  In 2008, Gonet acquired a minority interest in an entity in Monaco, and three years later Gonet established a subsidiary in Singapore.  In 2014, Gonet sold the entities in Monaco and Singapore.

Gonet enabled some U.S. taxpayers to evade their U.S. tax and filing obligations, resulting in the filing of false income tax returns with the IRS and allowing U.S. taxpayers to hide offshore assets from the IRS.  Gonet opened accounts for U.S. taxpayers who had left other Swiss banks that were known targets of investigations by the department, including UBS and Credit Suisse.  With respect to the majority of these accounts, Gonet knew or should have known that the beneficial owners were attempting to evade U.S.  taxes and foreign account reporting requirements.  Gonet also opened and maintained a number of U.S.-related accounts held by non-U.S. entities with the knowledge that U.S. persons were the true beneficial owners of the assets maintained in the accounts. Two of the accounts held by non-U.S. entities were insurance wrapper accounts.

With respect to structured accounts, U.S. clients, with the assistance of their external advisors, would create an entity, such as a Liechtenstein foundation, Panamanian corporation or British Virgin Islands corporation, and pay a fee to third parties to act as corporate directors. Those third parties, at the direction of the U.S. client, would then open a bank account at Gonet in the name of the non-U.S. entity or transfer funds from a pre-existing account from another bank.  Gonet employees provided prospective U.S. clients with referrals to external advisors who could assist with the creation and management of such an entity.  In certain cases, Gonet was aware that a U.S. client was the true beneficial owner of the account. Despite this, Gonet would sometimes obtain from the entity’s directors an IRS Form W-8BEN or equivalent bank document that falsely declared that the beneficial owner was not a U.S. taxpayer.

Since Aug. 1, 2008, Gonet held 150 U.S.-related accounts with an aggregate maximum balance of approximately $254.5 million.  Gonet will pay a penalty of $11.454 million. 

BC Valais, founded in 1917, is headquartered in the Canton of Valais, Switzerland.  BC Valais was founded by the government of the Canton of Valais to provide banking services to assist in the development of the regional economy and to provide credit services to residents of the Canton of Valais. As a cantonal bank, the Canton of Valais is BC Valais’ majority shareholder, and pursuant to cantonal law, the Canton of Valais guarantees all of the bank’s liabilities.

In 2001, BC Valais entered into a QI Agreement with the IRS. If an accountholder wanted to trade in U.S. securities without being subjected to mandatory U.S. tax withholding, the agreement required BC Valais to obtain the consent of the accountholder to disclose the client’s identity to the IRS. In the years following the signing of its QI Agreement, BC Valais’ position was that it could service U.S. clients that it knew or had reason to believe were non-compliant with their U.S. tax obligations as long as the account did not trade or hold U.S. securities.  For example, an internal memorandum written to BC Valais’ board of directors in October 2009 stated that BC Valais had 63 American clients whose accounts traded securities, but only seven of those 63 clients submitted Forms W-9 to BC Valais that authorized income generated from those securities to be reported to the IRS. The other 56 American clients had not authorized their names to be disclosed to the IRS and, because of the QI Agreement, “[t]he other clients [did] not hold any American securities.”

Prior to the time that BC Valais signed its QI Agreement in 2001, BC Valais requested that its accountholders sign an IRS Form W-9 if they wished to continue to trade in U.S. securities.  One accountholder, who lived in New York and had an open BC Valais account for more than 25 years, signed a form declaring that “I am an American taxpayer … [and I] prohibit the Bank from divulging my name and authorize it to sell in the course of the year 2000 all of my American securities held by the Bank. I take note of the fact that the Bank will not invest in American securities for me anymore.”

Since Aug. 1, 2008, BC Valais maintained 185 U.S.-related accounts with a maximum aggregate value of approximately $72 million.  BC Valais will pay a penalty of $2.311 million.

In accordance with the terms of the Swiss Bank Program, each bank mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. accountholders at these banks who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts.  On Aug. 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement.  With today’s announcement of these non-prosecution agreements, noncompliant U.S. accountholders at these banks must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

“Today’s resolutions reflect the continued, strong progress of the Department of Justice’s Swiss Bank Program,” said acting Deputy Commissioner International David Horton of the IRS Large Business & International Division (LB&I). “Financial institutions that aided non-compliance and evasion are putting this conduct behind them and cooperating, leading us to those U.S. taxpayers who have failed to report their foreign accounts and pay their income taxes.”

“The end of the year does not signal the end to our enforcement efforts to bring to justice those who would circumvent our nation’s tax laws by hiding their money overseas,” said Chief Richard Weber of IRS Criminal Investigation (CI).  “In fact, with the wealth of information gathered from the Swiss Bank Program, we have already begun to track those individuals who think they are above the law and continue to hide their money offshore.  The decision to evade taxes will certainly be one they regret when they face criminal sanctions.”

Acting Assistant Attorney General Ciraolo thanked the IRS and in particular, IRS-CI and the IRS LB&I Division for their substantial assistance.  Acting Assistant Attorney General Ciraolo also thanked the counsel on these matters, John E. Sullivan, Mark W. Kotila, Thomas G. Voracek and Thomas J. Sawyer, who serves as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program, as well as Senior Litigation Counsel Nanette L. Davis and Attorney Kimberle E. Dodd of the Tax Division.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

The Department of Justice announced today that Banque Cantonale Vaudoise (BC Vaudoise) reached a resolution under the department’s Swiss Bank Program.  BC Vaudoise will pay a penalty of more than $41 million.

The Swiss Bank Program, which was announced on Aug. 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States.  Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts.  Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.

Under the program, banks are required to:

• Make a complete disclosure of their cross-border activities;
• Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
• 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;
• Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and
• Pay appropriate penalties.

Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.

According to the terms of the non-prosecution agreement signed today, BC Vaudoise agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay a penalty in return for the department’s agreement not to prosecute this bank for tax-related criminal offenses.

Founded in 1845 and headquartered in Lausanne, Switzerland, BC Vaudoise was established by an Act of the Vaud Cantonal Parliament as a corporation organized under public law. The Canton of Vaud must hold a majority share of BC Vaudoise, and the Canton currently holds more than two third of the shares of BC Vaudoise.  

BC Vaudoise is a retail bank whose legal mission has always been to provide banking services to the local community.  Because BC Vaudoise is a cantonal bank serving the residents of the Canton of Vaud, most of its business relates to three core areas: retail banking, including home mortgages and savings accounts; small and medium enterprises; and onshore private banking. BC Vaudoise also provides private banking services to clients residing outside of Switzerland through its International Private Banking Department.

BC Vaudoise was aware that U.S. persons had a legal duty to report to the Internal Revenue Service (IRS) and pay taxes on the basis of all their income, including income earned in accounts that the U.S. persons maintained at BC Vaudoise.  BC Vaudoise knew or had reason to know that it was likely that some U.S. taxpayers who maintained accounts at BC Vaudoise were not complying with their U.S. reporting obligations.

In 2008, BC Vaudoise opened approximately 10,000 more new client accounts bank-wide than in the previous years. A large portion of these accounts were for ex-UBS clients who left UBS during the financial crisis. Out of this overall influx of clients, between August 2008 and February 2009, BC Vaudoise opened 265 new U.S. taxpayer accounts, comprising an aggregate of $171 million in new assets under management, without determining whether the relevant U.S. taxpayer clients were tax compliant in the United States.

BC Vaudoise had several relationships with independent asset managers who brought 93 U.S. taxpayer-clients to BC Vaudoise between August 2008 and February 2009.  BC Vaudoise did not require evidence of tax compliance with respect to these accounts, which resulted in the opening of many undeclared accounts for U.S. taxpayer-clients. One of these asset managers received a finders’ fee of 300,000 Swiss francs for introducing accounts to BC Vaudoise.

BC Vaudoise offered a variety of traditional Swiss banking services – including hold mail service, numbered accounts and code named accounts – that it knew could assist, and that did assist, U.S. taxpayers in concealing assets and income from the IRS. BC Vaudoise permitted U.S. taxpayer-clients to close undeclared U.S.-related accounts by transferring account funds to non-U.S.-related accounts, while continuing to exercise control or retain entitlement to the funds.  Close to or while closing accounts, BC Vaudoise also allowed U.S. taxpayer-clients to make large cash withdrawals totaling millions of dollars and to cash millions of dollars in checks drawn on the accounts.

BC Vaudoise opened and maintained potentially undeclared accounts beneficially owned by U.S. taxpayers and held in the name of structures, which were formed in the British Virgin Islands, Cayman Islands, Panama, Switzerland and the United Kingdom. U.S. taxpayers were beneficial owners of those nominee entities, which enabled U.S. taxpayer clients to conceal their identities from the IRS. In some instances, BC Vaudoise provided U.S. taxpayers with the names of outside service providers who could create these types of structures.  BC Vaudoise also permitted relationship managers in some cases to have direct contact with and accept instructions from U.S. beneficial owners who did not have powers of attorney over the entity accounts, including accounts that were held by entities incorporated in the British Virgin Islands and Panama.

Since Aug. 1, 2008, BC Vaudoise held approximately 2,088 U.S.-related accounts, which included both undeclared and not undeclared accounts, with total assets of approximately $1.3 billion.  BC Vaudoise will pay a penalty of $41.677 million.

In accordance with the terms of the Swiss Bank Program, BC Vaudoise mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. accountholders at BC Vaudoise who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts.  On Aug. 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement.  With today’s announcement of this non-prosecution agreement, noncompliant U.S. accountholders at BC Vaudoise must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

Acting Deputy Assistant Attorney General Larry J. Wszalek of the Justice Department’s Tax Division thanked the IRS and in particular, IRS-Criminal Investigation and the IRS Large Business & International Division for their substantial assistance.  Acting Deputy Assistant Attorney General Wszalek also thanked W. Damon Dennis, who served as counsel on this matter, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer, Senior Litigation Counsel Nanette L. Davis and Attorney Kimberle E. Dodd of the Tax Division.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

 

President and Company to Plead Guilty for Agreeing Not to Compete

The president and CEO of a California-based heir location services provider and his firm have agreed to plead guilty to allocating customers with another heir location firm, announced Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.

Bradley N. Davis, president of Brandenburger & Davis, and his firm will plead guilty to conspiring between 2003 and 2012 to eliminate competition in the heir location services industry.  Heir location services firms identify people who may be entitled to an inheritance from the estate of a relative who died without a will.  The heir location services firms then help heirs secure their inheritances in exchange for a contingency fee paid out of the inheritances they are due to receive. 

“The defendants conspired for nearly a decade to enrich themselves at the expense of beneficiaries,” said Assistant Attorney General Baer.  “Heirs of relatives who died without a will deserve better.  Working with the FBI and our other law enforcement partners, the Antitrust Division will continue to hold the leaders of companies that corrupt the competitive process accountable for their crimes.”

Brandenburger & Davis has agreed to pay an $890,000 criminal fine for its role in the conspiracy.  In a separate plea agreement, Davis and the Antitrust Division have jointly agreed to allow the court to determine an appropriate criminal sentence.  In addition, both the company and Davis have agreed to assist the government in its investigation.  The charge was filed today in the U.S. District Court of the Northern District of Illinois.  The terms of the plea agreements are subject to approval of the court.

Today’s charge is the first to result from an ongoing federal antitrust investigation into customer allocation, price fixing, bid rigging and other anticompetitive conduct in the heir location services industry, being conducted by the Antitrust Division’s Chicago Office and the FBI’s Salt Lake City Division, with assistance from the U.S. Attorney’s Office of the Northern District of Illinois. 

Anyone with information concerning the focus of this investigation should contact the Antitrust Division’s Chicago Office at 312-984-7200, visit www.justice.gov/atr/contact/newcase.html or call the FBI’s Salt Lake City office at 801-579-1400.

BD and Bradley Davis Information (596.08 KB)

The Justice Department announced today that Coloplast Corp., a manufacturer of ostomy and continence care products, and Liberator Medical Supply, Inc., a supplier of medical products, have agreed to pay $3.16 million and $500,000, respectively, to resolve allegations that Coloplast paid kickbacks to several medical suppliers, including Liberator, to induce them to conduct promotional campaigns designed to refer individual users to Coloplast products.  

The settlement with Coloplast resolves allegations that it paid kickbacks to Byram Healthcare Centers, Inc.; CCS Medical, Inc.; Liberator; Liberty Medical, Inc. and Handi Medical, Inc., in return for marketing promotions and conversion campaigns.  In the case of Byram, Liberty and Handi, Coloplast’s promotional campaigns allegedly included kickbacks in the form of funding for cash incentives – sometimes known as “spiffs” – paid to the suppliers’ sales personnel to induce them to refer patients to Coloplast products.  In other instances, Coloplast allegedly gave rebates or price concessions as inducements for the promotional campaigns.  The settlement with Liberator resolves Liberator’s alleged receipt of kickbacks from Coloplast in the form of price concessions, in return for Liberator’s agreement to conduct two campaigns promoting Coloplast ostomy products to Liberator’s customers.

“This settlement displays the commitment of the Justice Department to protect vulnerable patients in federal health care programs from corporate marketing practices that are not in those patients’ best interests,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. 

 “The payment of kickbacks to induce purchases of medical supplies undermines our federal health care programs, ultimately distorting consumer purchasing decisions, and increasing health care costs,” said U.S. Attorney Carmen M. Ortiz of the District of Massachusetts.

“Both of these companies acted with their own self-interests in mind, putting profits over patient care,” said Special Agent in Charge Harold H. Shaw of the FBI Boston Field Office.  “The decision on which medical products to refer should be based on what is best for the patient, not on cash incentives or rebates.”

The False Claims Act settlements resolve allegations brought in a whistleblower lawsuit filed by two former employees of Coloplast under the qui tam provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and to share in any recovery.  Under the False Claims Act, a whistleblower is entitled to receive a share of the federal recovery.  The whistleblowers’ share of the Coloplast and Liberator settlements has not been determined.  Claims against other defendants in the case remain outstanding.

The investigation was conducted by the FBI and the Department of Health and Human Services Office of Inspector General.  The case is being handled by the Civil Division’s Commercial Litigation Branch and the U.S. Attorney’s Office of the District of Massachusetts.

The case is captioned United States ex rel. Herman, et al. v. Coloplast Corp., et al. Case No. 11-cv-12131-RWZ (D. Mass.).  The claims resolved by the settlements are allegations only, and there has been no determination of liability. 

Proposed Settlement Preserves Competition for Broadcast Television Advertisers

The Department of Justice’s Antitrust Division filed a civil antitrust lawsuit today in the U.S. District Court of the District of Columbia challenging Gray Television, Inc.’s proposed acquisition of Schurz Communication, Inc., and simultaneously filed a proposed settlement that would resolve the competitive harm alleged in the lawsuit.

The division alleged that the proposed transaction would have eliminated head-to-head competition between Gray’s and Schurz’s television stations for the business of local and national advertisers on television stations in South Bend, Indiana, and Wichita, Kansas.  The division determined that elimination of this competition would have resulted in higher prices and lower quality services to broadcast television spot advertisers in these markets.  The proposed settlement – which must be approved by the court – requires Gray to divest two television stations – the CBS-affiliated WSBT-TV in South Bend and the ABC-affiliated KAKE-TV in Wichita – to department-approved buyers.

“We remain vigilant in protecting competition in local television markets,” said Assistant Attorney Bill Baer of the Justice Department’s Antitrust Division.  “Combining these stations under common ownership would have made it more costly for advertisers to communicate with consumers.  The antitrust laws render those transactions unlawful.” 

Gray is incorporated in the state of Georgia, with its headquarters in Atlanta.  Schurz is a privately owned company, with its headquarters in Mishawaka, Indiana.  Both Gray and Schurz operate broadcast television stations in various metropolitan areas throughout the United States.

As required by the Tunney Act, the proposed settlement, along with the department’s competitive impact statement, will be published in the Federal Register.  Any person may submit written comments concerning the proposed settlement during a 60-day comment period to David Kully, Chief, Litigation III Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Fourth Floor, Washington, D.C. 20530.  At the conclusion of the 60-day comment period, the court may enter the final judgment upon a finding that it serves the public interest.

Gray Schurz PFJ (49.77 KB)

Gray Schurz CIS (56.14 KB)

Gray Schurz Explanation (23.31 KB)

Gray Schurz HSSO (1.32 MB)

Gray Schurz Complaint (145.69 KB)

Yesterday, a federal jury in Honolulu found that the state of Hawaii and the Hawaii Department of Transportation’s Airports Division (HDOT) discriminated against former employee Sherry Valmoja by subjecting her to sexual harassment.  The verdict was returned in a case that the Justice Department filed last year, alleging that the defendants violated Title VII of the Civil Rights Act of 1964, which prohibits discrimination on the basis of race, color, national origin, sex and religion.

The evidence presented at trial showed that during her employment as an explosives detection canine handler at the Honolulu International Airport, Valmoja was subjected to sexual harassment in the form of lewd and unwelcome comments and physical intimidation by a co-worker.  The unwelcome conduct and intimidation began as early as November 2008, when both Valmoja and her co-worker were employed by a private company that contracted with the defendants.  After both Valmoja and the co-worker became employed by the State of Hawaii, the harassment and intimidation continued. 

The jury found that despite timely complaints by Valmoja about her co-worker’s conduct, the defendants failed to take prompt and effective action to remedy the harassment, which continued until March 2011 and created an abusive and hostile working environment.  The jury awarded Valmoja $38,000 to compensate her for the pain and suffering she endured because of the harassment.  Decisions about additional injunctive relief are still pending; the department has asked for a permanent injunction prohibiting the state of Hawaii from discriminating against its employees, review and revision of defendants’ sexual harassment policies and complaint procedures and training for its employees on discrimination.

“The Justice Department vigorously enforces Title VII to ensure that people can work free from sexual harassment and retaliation,” said Principal Deputy Assistant Attorney Vanita Gupta, head of the Civil Rights Division.  “This jury’s verdict sends a loud message and a clear reminder that we will continue to effectively combat sex-based discrimination whenever it occurs in a public sector workplace.”

Valmoja originally filed her sexual harassment charge against HDOT with the Honolulu Field Office of the Equal Employment Opportunity Commission (EEOC), which investigated and determined that there was reasonable cause to believe that discrimination had occurred and referred the matters to the Department of Justice.  This lawsuit was brought by the Department of Justice as a result of a project designed to ensure vigorous enforcement of Title VII against state and local governmental employers by enhancing cooperation between EEOC and the Civil Rights Division.

“Sexual harassment remains a significant problem for our nation’s workforce,” said EEOC Chair Jenny R. Yang.  “EEOC takes very seriously its obligation to obtain redress for employees who are victims of these egregious practices.  This verdict serves as a reminder to employers that they must remain vigilant in preventing and remedying harassment in their workplace.”

More information about Title VII and other federal employment laws is available at the division’s Employment Litigation Section website.  The continued enforcement of Title VII is a priority of the Civil Rights Division.  Additional information about the Civil Rights Division of the Department of Justice is available on the division website.

EEOC enforces federal laws prohibiting employment discrimination. Further information about EEOC is available on its website.  

The Department of Justice announced today that University Furnishings LP and its general partner, Freedom Furniture Group Inc. (collectively University Furnishings) agreed to pay $15 million to resolve a lawsuit brought under the False Claims Act alleging that the companies made or conspired with others to make false statements to avoid paying duties on wooden bedroom furniture imported from the People’s Republic of China.  Texas-based University Furnishings sells furniture for student housing. 

“Those who introduce goods into the United States must comply with the law, including the payment of customs duties meant to protect domestic companies and American workers from unfair competition abroad,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department of Justice will zealously pursue those who seek an unfair advantage in U.S. markets by evading the duties owed on goods imported into this country.”

The government alleged that between 2009 and mid-2012, University Furnishings knowingly misclassified or conspired with others to misclassify wooden bedroom furniture on documents presented to U.S. Customs and Border Protection (CBP) to avoid paying antidumping duties on imports of wooden bedroom furniture manufactured in the People’s Republic of China.  Specifically, University Furnishings allegedly classified the furniture as office and other types of furniture not subject to duties while selling the furniture in the student housing market for use in dormitory bedrooms.  The Department of Commerce assesses and CBP collects antidumping duties to protect U.S. businesses by offsetting unfair foreign pricing and foreign government subsidies.   

“Companies that cheat, by fraudulently mislabeling their imports, undermine U.S. manufacturers and others that obey the rules, and hurt consumers and taxpayers,” said U.S. Attorney Richard L. Durbin Jr. of the Western District of Texas.  “We are hopeful that today’s settlement will help deter others from this type of scheme.”

The allegations resolved by the settlement were originally brought by University Loft Company under the qui tam or whistleblower provisions of the False Claims Act.  The act permits private parties to sue on behalf of the United States those who falsely claim federal funds or, as in this case, those who avoid paying funds owed to the government or cause or conspire in such conduct.  The act also allows the whistleblower to receive a share of any funds recovered through the lawsuit.  University Loft Company will receive $2.25 million as its share of the settlement.

The case was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Western District of Texas, CBP’s Office of Field Operations, Office of Regulatory Audit and Office of Chief Counsel; and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations. 

The lawsuit is captioned United States ex rel. University Loft Company v. University Furnishings, LP, et al., No. A13-CV-678 (W.D. Tex.).  The claims resolved by this settlement are allegations only; there has been no determination of liability.

Southwest Airlines Co. (Southwest) and the United States settled a lawsuit involving allegations that Southwest violated Federal Aviation Administration (FAA) safety regulations in its maintenance of its Boeing 737s, as well as other pending administrative matters, announced the Department of Justice.  The settlement requires operational changes by Southwest designed to enhance its oversight of and control over third parties that perform maintenance on Southwest aircraft.  Southwest also agreed to pay a $2.8 million civil penalty and up to $5.5 million in deferred civil penalties if it does not implement the operational changes set forth in the settlement agreement.

“The Justice Department believes the settlement agreement with Southwest Airlines Co. will provide meaningful improvements in safety and compliance and further ensure the integrity of FAA air safety regulations,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. 

“Safety depends on compliance with our regulations,” said FAA Administrator Michael Huerta.  “This agreement provides strong incentives for Southwest to take specific steps to address the compliance problems that the FAA investigations uncovered.”

This case was handled by the Civil Division’s Federal Programs Branch, with the assistance of the U.S. Attorney’s Office of the Western District of Washington, the FAA’s Office of General Counsel and the FAA’s Northwest Mountain Region.

The lawsuit is captioned United States v. Southwest Airlines Co., 14-cv-1693-JCC (W.D. Wa.).  The claims resolved by the settlement are allegations only; there has been no determination of liability.

A Chilean tapestry, the Bark Washington painting, and the Ames Stradivarius violin were returned to their rightful owners following the investigative work and partnerships of the FBI’s New York Art Crime Team. The team is composed of Special Agents Meridith Savona and Christopher McKeogh, whose primary investigative work includes recovering art and cultural property and bringing those responsible for the theft, fraud, looting and trafficking to justice.

The Chilean tapestry known as The Ambassadors of Rome Offering the Throne to Numa Pompilio was returned in September 2015 to the owner’s attorney. The tapestry had been stolen from the owner’s residence in Santiago, Chile, in November 2006, and the theft was reported to INTERPOL Washington. The tapestry was recovered when it was placed for auction in New York in 2014. INTERPOL Washington requested the assistance of the FBI’s New York Art Crime Team on behalf of the Santiago Police to take custody of the tapestry. The case remains open with the Santiago Police. There were no charges filed against the parties attempting to auction the tapestry.

The Bark Washington painting was returned to the Oysterponds Historical Society in Orient, New York, by the FBI’s New York Art Crime Team in September. The painting, along with the Jennie French Potter painting and two whale busks, were stolen in March 2001. The return of the Bark Washington painting was made possible by an individual who bought the painting at an antique shop in East Marion, New York in 2001 for a few hundred dollars. The individual researched the painting on the FBI’s Stolen Art Database  and discovered it was stolen. He then contacted the FBI, generously agreeing to return it to the rightful owner. The thief was never, and the case remains open.

A 1734 Stradivarius violin, the Ames Stradivarius, was returned in August to the heirs of deceased violinist Roman Totenberg. The violin was stolen from Mr. Totenberg in 1980, along with two antique bows, following a concert in the Longy School of Music in Cambridge, Massachusetts. It was recovered by the FBI’s New York Art Crime Team in June 2015. The bows are still missing, and the FBI case remains open.

The FBI reminds the public to come forward with any information they may have about the missing items. Tips may be submitted to the FBI’s Art Crime Team at (212) 384-1000 or on our webpage (https://tips.fbi.gov/). Tipsters may remain anonymous. Art and cultural item buyers are recommended to review the FBI’s Stolen Art Database prior to a purchase to avoid civil forfeiture of stolen items.

The Department of Justice today announced that both Acting Director David Harlow of the U.S. Marshals Service (USMS) and Deputy Director Thomas E. Brandon of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) will continue to serve as the heads of their respective agencies for the duration of this administration.

“Over the course of their decades in law enforcement, David Harlow and Thomas Brandon have demonstrated themselves to be outstanding public servants and extraordinary partners in the work of building a stronger, safer nation,” said Attorney General Loretta E. Lynch.  “As head of the U.S. Marshals Service, David Harlow has led on a range of important issues, from helping to expand the ability of USMS to assist in cases involving missing children, to promoting an understanding of implicit bias, to apprehending violent fugitives.  As the leader of ATF, Thomas Brandon has forged broad-based partnerships, advanced intelligence-driven policing and helped shape ATF’s impact as a guardian of public safety.  In all of their efforts, they have worked to fulfill America’s highest priorities and most deeply-held values.  I am pleased that the American people will continue to receive the benefit of their professionalism, integrity and devotion to duty.”

Harlow became Acting Director of the U.S. Marshals on July 26, 2015.  Pursuant to the Vacancies Reform Act, the title of acting director will expire on Feb. 20, 2016, at which time Harlow will continue leading the Marshals as Deputy Director for the duration of this administration.

Brandon became Acting Director of ATF on April 1, 2015.  Pursuant to the Vacancies Reform Act, his title of acting director expired on Oct. 27, 2015, and he will continue leading ATF in his role as Deputy Director for the duration of this administration.

Biography of Acting Director David Harlow

David Harlow became the Acting Director of the U.S. Marshals on July 26, 2015, following more than 30 years of dedicated service in the agency.  He leads the nation’s oldest and most versatile federal law enforcement agency, responsible for federal judicial security, fugitive apprehension, witness security, asset forfeiture and prisoner operations.

Acting Director Harlow was named the agency’s Deputy Director in February 2014.  Since that time, he has focused on ensuring accountability and excellence, and bringing about successful organizational change.

From 2012 to 2014, Acting Director Harlow was the Associate Director for Operations, managing the USMS Operational Directorate, which includes Investigative Operations, Judicial Security, Witness Security, Tactical Operations, Prisoner Operations and the Justice Prisoner and Alien Transportation System.

In May 2012, Acting Director Harlow was promoted to the Senior Executive Service when he was selected as the Assistant Director of the Investigative Operations Division (IOD), overseeing the agency’s extensive fugitive investigations mission.  Prior to assuming the position, he was the Acting Deputy Assistant Director of IOD for approximately one year.

Acting Director Harlow served as Chief of the Sex Offender Investigations Branch from 2008 to 2011, overseeing the development and deployment of the agency’s newest investigative program, the Sex Offender Apprehension Program.  He also oversaw the interagency National Sex Offender Targeting Center and developed the USMS Behavioral Analysis Unit to assist with prioritizing and targeting non-compliant and fugitive sex offenders.

Before arriving at USMS Headquarters, Acting Director Harlow was the Chief Deputy U.S. Marshal (CDUSM) for the Eastern District of Virginia from 2007 to 2008.  Prior to that, he was CDUSM for the Northern District of Ohio, where he served from the time he joined the USMS as a Deputy U.S. Marshal in 1983 until 2007.  He made numerous contributions to Northern Ohio over the years, including serving as Commander of Operation FALCON 2007, serving as Deputy Commander of Operation FALCON III, developing the first cooperative fugitive apprehension team consisting of multiple law enforcement agencies in the Toledo area and overseeing the development of the Northern Ohio Violent Fugitive Task Force.

Throughout his career, Acting Director Harlow has received numerous awards, including Attorney General’s Awards, Director’s Awards and several other special act and performance awards.  He is also an active member of the Federal Law Enforcement Officers Association.

Acting Director Harlow holds a bachelor’s degree in Law Enforcement Administration from Western Illinois University.  He and his wife, Lisa, have two sons, Sean and Brian.

Biography of Deputy Director Thomas E. Brandon

Thomas E. Brandon serves as the Deputy Director and head of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF).  He was appointed ATF's Deputy Director in October 2011.  On April 1, 2015, he was named Acting Director of the agency, and served in that position until October 27th, 2015, when pursuant to the Vacancies Act the title expired.   As Deputy Director and head of ATF, Mr. Brandon is responsible for the unique law enforcement agency within the U.S. Department of Justice charged with enforcing firearms and explosives laws and regulations that protect communities from violent criminals and criminal organizations.

At the time of his appointment as Deputy Director in 2011, Mr. Brandon was serving as the Special Agent in Charge of the Phoenix Field Division, directing field operations for ATF in Arizona and New Mexico.

 A member of the Senior Executive Service and a seasoned law enforcement professional, Mr. Brandon began his ATF career as a Special Agent in 1989, with Detroit as his first office assignment. Rising through the ranks at ATF, he has served in many management positions including Special Agent in Charge of the Phoenix Field Division and Special Agent in Charge of the Detroit Field Division; Supervisory Special Agent of the Detroit Arson and Explosives Enforcement Group; Special Agent with the Office of Inspection in Washington, D.C.; Supervisory Special Agent of the Achilles Enforcement Group in Los Angeles, California; and as the Division Intelligence Officer with the Phoenix, Arizona, Field Division. Mr. Brandon also held the position of Chief, ATF National Academy, in Glynco, Georgia.

 Mr. Brandon is a member of several professional organizations including the International Association of Chiefs of Police (IACP).  He earned his Bachelor of Science degree in Business Administration from Oakland University in Rochester, Michigan, in 1987.

 Mr. Brandon proudly served in the United States Marine Corps from 1978 to 1982, where his assignments included Embassy duty in Rome, Italy, and Dhahran, Saudi Arabia.  Mr. Brandon is a native of New Jersey.

Deputy Attorney General Sally Quillian Yates released the following statement after the clemency announcement made today by President Obama:

“The president’s decision today to commute the prison terms of 95 individuals is another sign of this administration’s strong commitment to ensuring fairness in the criminal justice system.  The Justice Department has pursued that goal by changing charging policies through our Smart on Crime initiative, working cooperatively with the U.S. Sentencing Commission to reduce guidelines for certain drug offenders, urging Congress to enact meaningful and comprehensive sentencing reform legislation and identifying appropriate candidates for executive clemency. While the clemency initiative is just one prong in the larger effort to reform sentencing practices, it is one to which we are strongly committed.”

Maryland-based splint supplier Dynasplint Systems Inc., and its founder and president, George Hepburn, have agreed to pay approximately $10.3 million to resolve allegations that they violated the False Claims Act by improperly billing Medicare for splints provided to patients in skilled nursing facilities, the Department of Justice announced today. 

“Health care companies and their principals who flout Medicare rules will be held accountable,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Today’s settlement demonstrates our continuing vigilance to ensure that companies and individuals do not plunder taxpayer funded programs for their own enrichment.”

“The civil False Claims Act is a valuable weapon in our office’s arsenal to combat abuse of federal healthcare funds here in the Eastern District of Louisiana and nationwide,” said U.S. Attorney Kenneth Allen Polite Jr. of the Eastern District of Louisiana.  “The favorable resolution and settlement of the claims in this case serve as a reminder to all in the industry to stay vigilant for signs of waste and abuse by providers in our healthcare markets.”

The government alleged that Hepburn and Dynasplint knowingly mischarged Medicare for splints used by patients in Medicare-certified skilled nursing facilities.  Patients staying in skilled nursing facilities, or their insurers such as Medicare, pay a bundled payment to these facilities that cover all of a patient’s needs, including such items as splints, and thus no separate Medicare reimbursement for such devices is permitted.   To circumvent Medicare rules, defendants allegedly mispresented that patients were in their homes or other places that were not skilled nursing facilities.   

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $26.7 billion through False Claims Act cases, with more than $16.8 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlement resolves allegations originally brought in a lawsuit filed by Meredith Deane, a former sales executive for Dynasplint, under the whistleblower, or qui tam, provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and to share in any recovery.  The United States may intervene in such an action as it did here.  Ms. Deane will receive at least $1.98 million for the settlement.

In August 2013, the U.S. Department of Health and Human Services (HHS) Centers for Medicare & Medicaid Services (CMS) suspended payments to Dynasplint based upon credible allegations of fraud.  As part of the settlement, defendants are agreeing to forfeit all funds held by this payment suspension, approximately $8.5 million. 

“CMS’ highest priority is protecting people with Medicare benefits and taxpayers and the agency will continue to hold health care providers and suppliers accountable for following Medicare rules,” said Acting Administrator Andy Slavitt of HHS CMS.  “We are pleased to partner with the Department of Justice and law enforcement to safeguard patients, taxpayer funding and the integrity of our programs.”

The case was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office of the Eastern District of Louisiana and HHS’ Office of Inspector General. 

The lawsuit is captioned U.S. ex rel. Deane v. Dynasplint Health Systems, Inc. and George Hepburn, Case No. 10-cv-2085 (E.D. La.).  The claims resolved by this settlement are allegations only and there has been no determination of liability. 

Today, President Barack Obama granted commutations of sentence to 95 individuals and pardons to two individuals.

The President granted commutations of sentence to the following 95 individuals:

• Donald Allen – Lynn Haven, FL

Offense:  Conspiracy to possess with intent to distribute cocaine base; possession with intent to distribute cocaine base; possession of a firearm during a felony drug offense (Northern District of Florida)

Sentence:  Life plus five years’ imprisonment; 10 years’ supervised release (Aug. 17, 1998)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Royal Deandre Allen – Houston, TX

Offense:  Conspiracy to possess with intent to distribute cocaine base; possession with intent to distribute cocaine base (Southern District of Texas)

Sentence:  Life imprisonment; 10 years’ supervised release; $17,500 fine (May 13, 1996)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016, and balance of the fine remitted.

 

• Sandra Avery – Sarasota, FL

Offense:  Conspiracy to possess with the intent to distribute 50 grams or more of cocaine base; possession with intent to distribute a quantity of cocaine base; possess with the intent to distribute 50 grams or more of cocaine base (three counts); possess with the intent to distribute a quantity of cocaine; possess with the intent to distribute a quantity of cocaine base (Middle District of Florida)

Sentence:  Life imprisonment; 10 years’ supervised release (Jan. 3, 2007)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016. 

 

• Jose Aviles – Chicago, IL

Offense:  Conspiracy to possess with intent to distribute more than five kilograms of cocaine (Middle District of Florida)

Sentence:  Life imprisonment (Apr. 23, 1993)

Commutation Grant:  Prison sentence commuted to expire on December 18, 2016.

 

• George Andre Axam – Atlanta, GA

Offense:  Possession of a firearm by a convicted felon (Northern District of Georgia)

Sentence:  180 months’ imprisonment; four years’ supervised release (Jun. 12, 2007)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Ray Bennett – Hazlehurst, GA

Offense:  Knowingly conspiring to distribute cocaine base (commonly known as “crack”); knowingly possessing with intent to distribute and causing to be possessed with intent to distribute a quantity of cocaine base (commonly known as “crack”) (Middle District of Florida)

Sentence:  Life imprisonment; 10 years’ supervised release (Nov. 22, 1991)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Wendell Edward Betancourt – Washington, D.C.

Offense:  Conspiracy to possess with intent to distribute and to distribute “crack” cocaine (Northern District of West Virginia)

Sentence:  220 months’ imprisonment; five years’ supervised release (Jun. 11, 2002)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Edward B. Betts – Carbondale, IL

Offense:  Conspiracy to distribute in excess of 100 kilograms of marijuana (Southern District of Illinois)

Sentence:  360 months’ imprisonment; eight years’ supervised release (Jul. 27, 1992)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016, and eight-year term of supervised release commuted to two years of supervised release.

 

• Anthony Bosley – Spokane, WA

Offense:  Possession with intent to distribute 50 grams or more of cocaine base (Eastern District of Washington)

Sentence:  240 months’ imprisonment; 10 years’ supervised release (Jun. 13, 2006)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Ramona Brant – Freeport, NY

Offense:  Conspiracy to possess with intent to distribute and distribute a quantity of cocaine and cocaine base (Western District of North Carolina)

Sentence:  Life imprisonment; five years’ supervised release (Feb. 2, 1995)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Ivory Charles Brinson – Wabasso, FL

Offense:  Possession with intent to distribute five grams or more of cocaine base (Southern District of Florida)

Sentence:  360 months’ imprisonment; eight years’ supervised release (Nov. 15, 2004)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Carolyn Yvonne Butler – San Antonio, TX

Offense:  Armed bank robbery (three counts); using a firearm during a crime of violence (three counts) (Western District of Texas

Sentence:  48 years’ imprisonment; three years’ supervised release; $1,200 fine; $3,339 restitution (Jul. 30, 1992)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016. 

 

• Arnold Charles Cabarris – Victoria, VA

Offense:  Distribution of cocaine base; conspiracy to distribute cocaine base (Eastern District of Virginia)

Sentence:  262 months’ imprisonment; five years’ supervised release (Feb. 19, 1999)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Jimmy Lee Carter – Okeechobee, FL

Offense:  Possession with intent to distribute cocaine base (Southern District of Florida)

Sentence:  Life imprisonment; 10 years’ supervised release (Jul. 21, 1993)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Sherman Dionne Chester – St. Petersburg, FL

Offense:  Conspiracy to possess with intent to distribute cocaine; conspiracy to possess and distribute heroin; distribution of cocaine (six counts); distribution of heroin (five counts); possession with intent to distribute cocaine (Middle District of Florida)

Sentence:  Life imprisonment (Feb. 11, 1994)

Commutation Grant:  Prison sentence commuted to expire on December 18, 2016.

 

• Herbert Lee Christopher, Jr. – Cordele, GA

Offense:  Conspiracy to possess with intent to distribute 50 grams or more of cocaine base (Middle District of Florida)

Sentence:  Life imprisonment; 10 years’ supervised release (Oct. 4, 1991)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016. 

 

• Jawariel Coffie – Hollywood, FL

Offense:  Conspiracy to possess with intent to distribute cocaine base (Northern District of Florida)

Sentence:  Life imprisonment; five years’ supervised release (Oct. 5, 1993)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Michael Reese Coffman – Milton, FL

Offense:  Conspiracy to distribute and possession with intent to distribute 500 grams or more of a mixture and substance containing methamphetamine (Northern District of Florida)

Sentence:  Life imprisonment; 10 years’ supervised release (Jul. 21, 2005)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Oscar Cole, Jr. – Bessemer, AL

Offense:  Possession with intent to distribute fifty (50) grams or more of a mixture and substance containing cocaine base and cocaine hydrochloride (Northern District of Alabama)

Sentence:  240 months’ imprisonment; 10 years’ supervised release (Sep. 21, 2006)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016. 

 

•  Alex Contreras – Anchorage, AK

Offense:  Drug conspiracy; distribution of a controlled substance (four counts); possession with intent to distribute a controlled substance (four counts); using, carrying, possessing firearm during drug trafficking crime (three counts) (District of Alaska)

Sentence:  481 months’ imprisonment; five years’ supervised release (Jul. 11, 2002); prison sentence amended to 480 months’ imprisonment (May 27, 2008)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Eddie Lee Cooks – Monroe, LA

Offense:  Conspiracy to distribute cocaine base; distribution of cocaine base (three counts) (Western District of Louisiana)

Sentence:  Life imprisonment (May 24, 1994)

Commutation Grant:  Prison sentence commuted to expire on December 18, 2016.

 

• Lelus Crawford – St. Louis, MO

Offense:  Distribution of cocaine base (“crack”) (two counts); possession with intent to distribute cocaine base (“crack”) (Eastern District of Missouri)

Sentence:  240 months’ imprisonment; 10 years’ supervised release (Jun. 15, 2007)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Dewayne Crompton – Bakersfield, CA

Offense:  Possession with intent to distribute cocaine base (Western District of Wisconsin)

Sentence:  Life imprisonment (May 28, 1993)

Commutation Grant:  Prison sentence commuted to expire on December 18, 2016.

 

• Charles Frederick Cundiff – Altoona, FL

Offense:  Conspiracy to possess with intent to distribute 1,000 kilograms or more of marijuana; attempt to possess with intent to distribute 1,000 kilograms or more of marijuana (Northern District of Florida)

Sentence:  Life imprisonment (Jan. 8, 1992)

Commutation Grant:  Prison sentence commuted to expire on December 18, 2016.

 

• Thomas Daniels – Philadelphia, PA

Offense:  Distribution of cocaine; distribution of cocaine base ("crack cocaine") (Eastern District of Pennsylvania)

Sentence:  Life imprisonment (Jun. 26, 1996)

Commutation Grant:  Prison sentence commuted to expire on December 18, 2016.

 

• Joe Nathan Darby – Salters, SC

Offense:  Possession with intent to distribute and distribution of five grams or more of crack cocaine (two counts); possession with intent to distribute and distribution of 50 grams or more of crack cocaine (District of South Carolina)

Sentence:  240 months’ imprisonment; 10 years’ supervised release (May 25, 2006)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Alphonso Davis – Ridgeway, SC

Offense:  Conspiracy to violate narcotic laws (crack) (Western District of North Carolina)

Sentence:  Life imprisonment; 10 years’ supervised release (Feb. 12, 1996)

Commutation Grant:  Prison sentence to expire on April 16, 2016.

 

• William Ervin Dekle – Lake City, FL

Offense:  Conspiracy to import 1,000 kilograms or more of marijuana; conspiracy to possess with intent to distribute 1,000 kilograms or more of marijuana; importation of 100 kilograms of marijuana (four counts); possession with intent to distribute 100 kilograms of marijuana (four counts) (Northern District of Florida)

Sentence:  Life imprisonment; 10 years’ supervised release; four years’ special parole (Jun. 7, 1991)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Dianne Demar  -- St. Petersburg, FL

Offense:  Conspiracy to distribute in excess of 100 grams of methamphetamine; possession with intent to distribute methamphetamine (two counts); unlawful manufacturing of methamphetamine (two counts); possession of a firearm during a drug trafficking crime (Northern District of Georgia)

Sentence:  Life plus five years’ imprisonment; 10 years’ supervised release (Dec. 13, 1991)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016. 

 

• Eric T. Downs – Mansfield, OH

Offense:  Possession with intent to distribute cocaine base (Northern District of Ohio)

Sentence:  Life imprisonment (July 18, 1996)

Commutation Grant:  Prison sentence commuted to expire on December 18, 2016.

 

• Ernest R. Eads – Seneca, MO

Offense:         1. Conspiracy to distribute methamphetamine (Western District of Missouri

                        2. Felon in possession of firearms (Western District of Missouri)

Sentence:        1. Life imprisonment; 10 years’ supervised release (Mar. 7, 1997)

                        2. 12 months’ imprisonment (consecutive) (Mar. 7, 1997)

Commutation Grant:  Prison sentences commuted to expire on April 16, 2016. 

 

• Reginald Gerard Ennis – Mobile, AL

Offense:  Conspiracy to possess with intent to distribute crack cocaine (Southern District of Alabama)

Sentence:  240 months’ imprisonment; 10 years’ supervised release (Apr. 22, 2004)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Jimmy Lee Fields – Dundee, FL

Offense:  Conspiracy to possess with intent to distribute cocaine and cocaine base (Middle District of Florida)

Sentence:  Life imprisonment (Jan. 16, 1996)

Commutation Grant:  Prison sentence commuted to expire on December 18, 2016.

 

• Pedro Figueroa – Philadelphia, PA

Offense:  Conspiracy to distribute controlled substance; distribution of controlled substance, aiding and abetting (three counts); possession of controlled substance with intent to distribute, aiding and abetting (Eastern District of Pennsylvania)

Sentence:  240 months’ imprisonment; five years’ supervised release; $1,000 fine (Jul. 15, 2003)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Donald Lee Gill – Cincinnati, OH

Offense:  Conspiracy to possess with intent to distribute crack cocaine; possession with intent to distribute crack cocaine and aiding and abetting; carrying firearm during a drug trafficking crime (Eastern District of Kentucky)

Sentence:  Life imprisonment (Aug. 20, 1997)

Commutation Grant:  Prison sentence commuted to expire on December 18, 2016.

 

• Calvin C. Gillings – Chicago, IL

Offense:  Possession with intent to distribute cocaine base, “crack”; possession with intent to distribute cocaine (Southern District of Iowa)

Sentence:  360 months’ imprisonment; eight years’ supervised release (Jul. 18, 1997)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Glenn D. Gold – Clarksville, TN

Offense:  Conspiracy to possess with intent to distribute cocaine and cocaine base; possession with intent to distribute cocaine and cocaine base; use of a firearm during and in relation to a drug trafficking crime; felon in possession of a firearm (Middle District of Tennessee)

Sentence:  Life plus 60 months’ imprisonment; five years’ supervised release (Apr. 23, 1997)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Alberto Gonzalez – Philadelphia, PA

Offense:  Conspiracy to distribute more than 500 grams of cocaine; distribution of 1,003 grams of cocaine (Eastern District of Pennsylvania)

Sentence:  262 months’ imprisonment; eight years’ supervised release (May 19, 2003)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Willie James Griffin, Jr. – Pensacola, FL

Offense:  Conspiracy to possess with intent to distribute cocaine and cocaine base; possession with intent to distribute cocaine (Northern District of Florida)

Sentence:  252 months’ imprisonment; 10 years’ supervised release; $1,000 fine (Dec. 2, 1999); prison sentence amended to 240 months’ imprisonment (Apr. 14, 2008)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016 and balance of the fine remitted. 

 

• Doyle Grimes, Jr. – Miami, FL

Offense:  Conspiracy to possess with intent to distribute 50 grams or more of cocaine base; possession with intent to distribute a detectable amount of cocaine base; possession with intent to distribute five grams or more of cocaine base (Middle District of Florida)

Sentence:  292 months’ imprisonment; 10 years’ supervised release (Apr. 8, 2003); prison sentence amended to 240 months’ imprisonment (Dec. 5, 2014)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Kenneth Hamlin, Jr. – Pittsburgh, PA

Offense:  Conspiracy to possess with intent to distribute and distribution of in excess of 50 grams of cocaine base, in excess of 100 grams of heroin, and a quantity of marijuana; possession with intent to distribute and distribution of in excess of 100 grams of heroin

(Western District of Pennsylvania)

Sentence:  360 months’ imprisonment; 10 years’ supervised release (Mar. 4, 1999)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Glenn A. Harris – Elizabeth City, NC

Offense:  Distribution of more than five grams of cocaine base (crack) (Eastern District North Carolina)

Sentence:  188 months’ imprisonment; five years’ supervised release; $2,100 restitution (Aug. 8, 2005)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016, and balance of the restitution obligation remitted.

 

• Lisa Harris – Arcadia, FL

Offense:  Possession with intent to distribute fifty grams or more of cocaine base, crack cocaine; conspiracy to possess with intent to distribute five grams or more of cocaine base, crack cocaine (Middle District of Florida)

Sentence:  235 months’ imprisonment; five years’ supervised release (Nov. 30, 2005)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Antorrian Adrionne Hawkins – Lilburn, GA

Offense:  Felon in possession of a firearm; possession with intent to distribute cocaine; possession with intent to distribute cocaine base; possession of a firearm during a drug trafficking crime (Eastern District of Michigan)

Sentence:  300 months’ imprisonment; 10 years’ supervised release (Apr. 12, 2005)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Eugene L. Haywood – Peoria, IL

Offense:  Conspiracy to distribute cocaine base (crack); possession of cocaine base (crack) (Central District of Illinois)

Sentence:  Life imprisonment; 10 years’ supervised release (Jul. 12, 2002)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Jerome A. Jackson – Washington, DC

Offense:  Conspiracy to distribute 50 grams or more of cocaine base: unlawful distribution of cocaine base (two counts) (District of Columbia)

Sentence:  Life imprisonment; 10 years’ supervised release (Feb. 18, 1994)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.  

 

• Gloria Louise James – Fort Madison, IA

Offense:  Conspiracy to distribute methamphetamine (Southern District of Iowa)

Sentence:  188 months’ imprisonment; five years’ supervised release (Feb. 9, 2004)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Angie Jenkins – Klamath Falls, OR

Offense:  Conspiracy to manufacture methamphetamine; manufacture of methamphetamine; possession with intent to distribute methamphetamine (District of Oregon)

Sentence:  360 months’ imprisonment; five years’ supervised release (Sep. 22, 1998); prison sentence amended to 324 months’ imprisonment (Jan. 29, 2015)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Allen Johnson – Live Oak, FL

Offense:  Distribution of five grams or more of cocaine base (Middle District of Florida)

Sentence:  188 months’ imprisonment; five years’ supervised release (Oct. 3, 2003)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Javon Tyrone Johnson – Saginaw, MI

Offense:  Distribution of 50 grams or more of cocaine base (Eastern District of Michigan)

Sentence:  240 months’ imprisonment; 10 years’ supervised release (Sep. 30, 2004)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Mario Alonzo Johnson – Stockton, CA

Offense:  Possession with intent to distribute crack cocaine (Eastern District of California)

Sentence:  288 months’ imprisonment; five years’ supervised release (Jan. 20, 1999)

 Commutation Grant:  Prison sentence to expire on April 16, 2016.    

 

• Tommy Lynn Johnson – Athens, TX

Offense:  Conspiracy to manufacture, distribute and possess with intent to manufacture and distribute methamphetamine; conspiracy to possess a listed chemical knowing it will be used to manufacture a controlled substance; possession of a listed chemical with intent to manufacture a controlled substance (two counts); possession and distribution of a listed chemical with intent to manufacture a controlled substance (two counts); use, carrying and possession of a firearm in furtherance of a drug trafficking crime (two counts); possession of an unregistered firearm (Eastern District of Texas)

Sentence:  511 months’ imprisonment; five years’ supervised release (Jul. 21, 2003); prison sentence amended to 481 months’ imprisonment (Oct. 6, 2015)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Sharanda Purlette Jones – Terrell, TX

Offense:  Conspiracy to distribute cocaine base (Northern District of Texas)

Sentence:  Life imprisonment; five years’ supervised release (Nov. 10, 1999)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Ryan O’Neil Lansdowne – Haymarket, VA

Offense:  Conspiracy to distribute 50 grams or more of cocaine base (Eastern District of Virginia)

Sentence:  292 months’ imprisonment; 10 years’ supervised release (Oct. 20, 2000); prison sentence amended to 262 months’ imprisonment (Apr. 28, 2009)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Chad Robert Latham – Tacoma, WA

Offense:  Conspiracy to manufacture marijuana; manufacturing marijuana (Western District of Washington)

Sentence:  180 months’ imprisonment; five years’ supervised release (Jan. 18, 2006)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Jimmy Ewell Lee – Bonifay, FL

Offense:  Conspiracy to distribute and possess with intent to distribute more than 50 grams of methamphetamine (actual) and more than 500 grams of a mixture and substance containing methamphetamine (Northern District of Florida)

Sentence:  240 months’ imprisonment; 10 years’ supervised release (May 4, 2005)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Carlos Lopez – Lawrence, MA

Offense:  Conspiracy to distribute cocaine base; distribution of cocaine base (four counts); possess and carry a firearm during a drug crime; possession of firearm by a prohibited person; possession of firearm with an obliterated serial number (District of New Hampshire)

Sentence:  300 months’ imprisonment; 10 years’ supervised release (May 14, 2003)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

•  Kevin McDonald – Lawrenceville, NJ

Offense:  Conspiracy to distribute cocaine base “crack” (Eastern District of Virginia)

Sentence:  Life imprisonment (Oct. 17, 2005)

Commutation Grant:  Prison sentence commuted to expire on December 18, 2016. 

 

• Terry Dennard McNeair – Lexington, NC

Offense:  Possess with intent to distribute cocaine base (crack) (Middle District of North Carolina)

Sentence:  360 months’ imprisonment; five years’ supervised release (Nov. 18, 1996)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Michael McRae – Wadesboro, NC

Offense:  Conspiracy to possess with intent to distribute cocaine base (Western District of North Carolina)

Sentence:  Life imprisonment; 10 years’ supervised release (May 22, 2006)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Juan Fernando Mendoza-Cardenas – Houston, TX

Offense:  Conspiracy to possess with intent to distribute marijuana (Northern District of Georgia)

Sentence:  240 months’ imprisonment; 10 years’ supervised release (Jan. 28, 2004)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Billy R. Mercer, Jr. – Slapout, AL

Offense:  Possession with intent to distribute methamphetamine; use/carry firearm during and in relation to a drug trafficking crime (Middle District of Alabama)

Sentence:  292 months’ imprisonment; 72 months’ supervised release (May 24, 2006)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Alton D. Mills – Chicago, IL

Offense:  Conspiracy to possess with intent to distribute and distribution of cocaine base and cocaine and conspiracy to use communication facilities in the commission of drug trafficking offenses; use of communication facility to possess with intent to distribute cocaine base (two counts); possession with intent to distribute cocaine base (Northern District of Illinois)

Sentence:  Life imprisonment; (July 14, 1994)

Commutation Grant:  Prison sentence commuted to expire on December 18, 2016.

 

• Alphonso Ravon Morrison – Lincolnton, NC

Offense:  Conspiracy to possess with intent to distribute and distribute, a quantity of cocaine and cocaine base (Western District of North Carolina)

Sentence:  Life imprisonment; 10 years’ supervised release (May 7, 2001)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Matthew Murphy, III – Moreno Valley, CA

Offense:  Conspiracy to distribute and possess with intent to distribute in excess of five kilograms of cocaine (Western District of Pennsylvania)

Sentence:  360 months’ imprisonment; 10 years’ supervised release (Nov. 13, 1997)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Darnell Jamar Nash – Ardmore, OK

Offense:  Drug conspiracy (Eastern District of Oklahoma)

Sentence:  264 months’ imprisonment; 10 years’ supervised release (Mar. 18, 2004)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016, and 10-year term of supervised release commuted to three years of supervised release.

 

• Eric L. Orington – Danville, IL

Offense:  Possession with intent to distribute more than 50 grams of (crack) cocaine (Central District of Illinois)

Sentence:  Life imprisonment; 10 years’ supervised release; $2,000 fine (Sep. 1, 1995)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Lynette Owens – Lehigh Acres, FL

Offense:  Possession with intent to distribute five or more grams of cocaine base, “crack cocaine” (Middle District of Florida)

Sentence:  188 months’ imprisonment; four years’ supervised release (Jan. 22, 2007)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• David Padilla – Philadelphia, PA

Offense:  Conspiracy; possession with intent to distribute cocaine; carrying a firearm during a drug trafficking crime (Eastern District of Pennsylvania)

Sentence:  Life imprisonment plus 60 months’ imprisonment; 10 years’ supervised release (Nov. 18, 1997)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• LaShawn D. Patton – Cahokia, IL

Offense:  Conspiracy to distribute cocaine and cocaine base; possession with intent to distribute cocaine; felon in possession of firearm; possession of a firearm in relation to a drug trafficking crime (Southern District of Illinois)

Sentence:  180 months’ imprisonment; eight years’ supervised release (Feb. 24, 2006)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016, and eight-year term of supervised release commuted to four years of supervised release.

 

• Donald Lamont Postell – Miami, FL

Offense:  Conspiracy to possess with intent to distribute five kilograms of cocaine (Western District of North Carolina)

Sentence:  600 months’ imprisonment; 10 years’ supervised release; $20,000 fine (Feb. 1, 1989)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016, and balance of the fine remitted.

 

• Lalanda Price – Wellington, FL

Offense:  Conspiracy to distribute and to possess with intent to distribute more than 50 grams of cocaine base; possession with intent to distribute more than 50 grams of cocaine base (Northern District of Florida)

Sentence:  240 months’ imprisonment; 10 years’ supervised release (Nov. 29, 2004)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Lamar Roberson – Savannah, GA

Offense:  Conspiracy; distribution of cocaine (two counts) (Southern District of Georgia)

Sentence:  Life imprisonment; five years’ supervised release (Dec. 6, 1991)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Kenneth Cordell Robinson – Houston, TX

Offense:  Distribution of cocaine base (Southern District of Texas)

Sentence:  262 months’ imprisonment; five years’ supervised release; $5,000 fine (Apr. 21, 2000)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Amador Rodriguez – Chicago, IL

Offense:  Conspiracy to distribute cocaine (Northern District of Illinois)

Sentence:  Life imprisonment; $25,000 fine (Apr. 24, 1991)

Commutation Grant:  Prison sentence commuted to expire on December 18, 2016.

 

• Felix Roman, Jr. – Reading, PA

Offense:  Possession of five grams or more of cocaine base “crack” with the intent to distribute; possession of marijuana with intent to distribute (Eastern District of Pennsylvania)

Sentence:  262 months’ imprisonment; 10 years’ supervised release (Apr. 15, 2003)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.        

 

•  Angel Sanchez – Atlantic Beach, FL

Offense:  Possession with intent to deliver five or more grams of cocaine (crack); possession of a firearm during or in relation to a drug trafficking crime; felon in possession of a firearm (Eastern District of Pennsylvania)

Sentence:  240 months’ imprisonment; eight years’ supervised release; $1,000 fine (Mar. 13, 2006)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016, and balance of the fine remitted.

 

• Timothy Bernard Sanchious – Richmond, VA

Offense:  Possession with intent to distribute cocaine base, to wit: “crack” (Eastern District of Virginia)

Sentence:  204 months’ imprisonment; five years’ supervised release (Dec. 16, 2004)        

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Michael Santoyo – Saginaw, MI

Offense:  Conspiracy to possess with intent to distribute cocaine; possession with intent to distribute cocaine (three counts) (Eastern District of Michigan)

Sentence:  Life imprisonment; 20 years’ supervised release; $80,000 fine (May 24, 1993)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Wilbert L. Shoemaker – Tallulah, LA

Offense:  Conspiracy to possess with intent to distribute cocaine base and marijuana (Western District of Louisiana)

Sentence:  240 months’ imprisonment; 10 years’ supervised release (Feb. 2, 2004)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Marcus Stovall – Etowah, TN

Offense:  Possession of cocaine base with intent to distribute (Eastern District of Tennessee)

Sentence:  240 months’ imprisonment; 10 years’ supervised release (Oct. 21, 2002)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Daron Benjamin Swygert – Gaston, SC

Offense:  Possessing with intent to distribute cocaine base (District of South Carolina)

Sentence:  240 months’ imprisonment; 10 years’ supervised release (Apr. 13, 2001)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Billie Marie Taylor – Houston, TX

Offense:  Did knowingly and willfully conspire, combine, confederate and agree together, with each other, and with other persons, to manufacture methamphetamine; did knowingly and intentionally possess a listed chemical, namely ephedrine, with intent to manufacture methamphetamine; did knowingly use and carry a firearm, namely, a 12 gauge Harrington and Richardson, Inc. shotgun, serial number AX492667, during and in relation to a drug trafficking crime for which the defendant may be prosecuted in a court of the United States, namely, conspiracy to manufacture methamphetamine; did knowingly possess a firearm, namely, a 12 gauge Harrington and Richardson, Inc. shotgun, serial number AX492667, with a barrel length of less than 18 inches and a weapon made from a shotgun with an overall length of less than 26 inches, and such firearm was not registered to the defendant in the National Firearms Registration and Transfer Record (Eastern District of Texas)

Sentence:  412 months’ imprisonment; five years’ supervised release (Feb. 28, 1992); prison sentence amended to 355 months’ imprisonment (Jul. 15, 2015)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016. 

• Eric Desmond Thomas – Houston, TX

Offense:  Conspiracy to possess with intent to distribute cocaine; possession with intent to distribute cocaine base (Southern District of Texas)

Sentence:  Life imprisonment; 10 years’ supervised release; $20,000 fine (Sep. 26, 1996)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016, and balance of the fine remitted. 

 

• Raymond Allen Thomas – Fairbanks, AK

Offense:  Possession of controlled substance with intent to distribute (District of Alaska)

Sentence:  265 months’ imprisonment; eight years’ supervised release (Feb. 7, 2005); prison sentence amended to 216 months’ imprisonment (Mar. 4, 2015)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Bruce Lamar Thompson – Dalton, GA

Offense:  Conspiracy to possess with the intent to distribute in excess of 500 grams of methamphetamine after sustaining a prior felony drug conviction (Northern District of Georgia)

Sentence:  240 months’ imprisonment; 10 years’ supervised release (Jul. 30, 2004)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Keith Demond Thompson – Eastpointe, MI

Offense:  Distribution of five grams of more of cocaine base (two counts) (Eastern District of Michigan)

Sentence:  188 months’ imprisonment; eight years’ supervised release (May 24, 2006)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Otis Lee Thompson, Jr. – Houston, TX

Offense:  Possession with intent to distribute five grams or more of cocaine base; possession of a firearm in furtherance of a drug trafficking crime; possession of a firearm by a convicted felon; possession with intent to distribute codeine (Southern District of Texas)

Sentence:  195 months’ imprisonment; eight years’ supervised release (Dec. 6, 2005); prison sentence amended to 180 months’ imprisonment (May 20, 2008)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Charles Lee Torian – South Boston, VA

Offense:  Conspiracy to possess with intent to distribute more than 50 grams of cocaine base; possess with intent to distribute more than five grams of cocaine base (two counts); possess with intent to distribute more than 50 grams of cocaine base (Western District of Virginia)

Sentence:  300 months’ imprisonment; five years’ supervised release (Apr. 19, 2002)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Maurice Junior Turpin – Lynchburg, VA

Offense:  Conspiracy to distribute 50 grams or more of cocaine base (Western District of Virginia)

Sentence:  240 months’ imprisonment; 10 years’ supervised release; $500.00 fine (Jul. 19, 2007)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Tommie Sand Tyree – Birmingham, AL

Offense:  Distribution of 50 grams or more of “crack” cocaine (Northern District of Alabama)

Sentence:  Life imprisonment; 96 months’ supervised release (Feb. 7, 2007)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Alfonzo Samuel Wallace – Lake Worth, FL

Offense:  Conspiracy to distribute cocaine base; possession of cocaine base with intent to distribute, distribution and manufacturing of cocaine base (three counts); possession of cocaine (Southern District of Florida)

Sentence:  Life imprisonment; 10 years’ supervised release (Oct. 23, 1997)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• John Thomas Watters – Midlothian, TX

Offense:  Conspiracy to possess with intent to distribute controlled substance (two counts); maintaining drug involved premises; felon in possession of firearms (Northern District of Oklahoma)

Sentence:  240 months’ imprisonment; 10 years’ supervised release (May 26, 2006) Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Monica Ann White – Rock Island, IL

Offense:  Conspiracy to distribute cocaine base (“crack”); possess with intent to distribute cocaine base (“crack”); distribute cocaine base (“crack”) (Southern District of Iowa)

Sentence:  Life imprisonment; 10 years’ supervised release (Nov. 17, 1998)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

• Shelton L. Williams – Galveston, TX

Offense:  Conspiracy to possess with intent to distribute 50 grams or more of crack cocaine; possession with intent to distribute 50 grams or more of crack cocaine (Southern District of Texas)

Sentence:  Life imprisonment; 10 years’ supervised release (May 1, 1997)

Commutation Grant:  Prison sentence commuted to expire on April 16, 2016.

 

The President granted pardons to the following two individuals:

• Jon Dylan Girard – Centerville, OH

Offense:  Making counterfeit obligations (Southern District of Ohio)

Sentence:  Three years' probation, with the special condition of six months' home confinement (Nov. 7, 2002).

 

• Melody Eileen Homa, fka Melody Eileen Childress – New Kent, VA

Offense:  Aiding and abetting bank fraud (Eastern District of Virginia)

Sentence:  Thirty days’ home detention; three years’ supervised release conditioned on performance of 200 hours of community service (Dec. 16, 1991).

 

A resident of Lima, Peru, charged with operating call centers that lied to and threatened Spanish-speaking victims in the United States, convincing them to pay fraudulent settlements, was sentenced today to more than four years in prison in federal district court in Miami, Florida, the Department of Justice and the U.S. Postal Inspection Service (USPIS) announced.

Cesar Luis Kou Reyna, 40, was sentenced to serve 58 months in federal prison to be followed by three years of supervised release for operating telemarketing call centers in Peru that threatened Spanish-speaking victims across the United States with phony debts and other consequences of failure to pay the alleged debts that they did not owe. On Oct. 14, Reyna pleaded guilty to conspiracy to commit mail and wire fraud. 

“The threats made by the defendant’s call centers frightened and intimidated Spanish-speaking victims across the United States,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “As this case and other recent ones show, we will track down those responsible for defrauding and threatening American consumers, no matter where the fraudsters reside, what language they speak or which populations they target.”

“The U.S. Postal Inspection Service has a long tradition of protecting postal customers from these types of fraud and bringing those responsible to justice,” said Acting Inspector in Charge Delany De Leon-Colon of the USPIS’s Miami Division. “Every day we protect our postal customers and the general public from falling victim to these scams.”

Kou Reyna owned and controlled a corporation called Fonomundo FC, which operated call centers in Peru and payment and fulfilment operations in Miami.  Fonomundo FC and its affiliated call centers used Internet-based telephone calling services to place cold calls to Spanish-speaking residents in the United States.  The callers falsely claimed to be attorneys and said that victims had failed to pay for or receive a delivery of products, although the victims had not ordered these products. 

The callers claimed that victims would be sued and that the companies would obtain large monetary judgements against them.  Some victims were also threatened with negative marks on their credit reports, imprisonment or deportation.  The callers said these threatened consequences could be avoided if the victims immediately paid “settlement fees.”  Many victims made monetary payments based on these threats. 

Kou Reyna was originally charged by criminal complaint and was arrested by USPIS on July 30.  He has remained incarcerated since his arrest and was later indicted on Aug. 27. 

Principal Deputy Assistant Attorney General Mizer commended USPIS for its investigative efforts and thanked the U.S. Attorney’s Office of the Southern District of Florida for its contributions to the case.  The case is being prosecuted by Trial Attorneys Phil Toomajian and Stephen T. Descano of the Civil Division’s Consumer Protection Branch.

The Department of Justice announced today that Edmond de Rothschild (Suisse) SA and Edmond de Rothschild (Lugano) SA (collectively EdR Switzerland) reached a joint resolution under the department’s Swiss Bank Program.  EdR Switzerland will pay a penalty of more than $45 million.

The Swiss Bank Program, which was announced on Aug. 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States.  Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts.  Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.

Under the program, banks are required to:

• Make a complete disclosure of their cross-border activities;
• Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
• 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;
• Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and
• Pay appropriate penalties.

Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.

According to the terms of the joint non-prosecution agreement signed today, EdR Switzerland agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay a penalty in return for the department’s agreement not to prosecute EdR Switzerland for tax-related criminal offenses.

Edmond de Rothschild (Suisse) SA is a corporation organized under the laws of Switzerland with its headquarters in Geneva, Switzerland, and it operates a subsidiary called Edmond de Rothschild (Lugano) SA (collectively EdR Switzerland).  EdR Switzerland, one of the largest private banks in Switzerland, also operates a financial services business in Geneva, Lausanne, Fribourg and Lugano, Switzerland.  It offers private banking and wealth management services for individual clients around the world, including U.S. citizens, legal permanent residents and resident aliens.

EdR Switzerland is affiliated with the Edmond de Rothschild Group, an independent, family-controlled financial group focused on high-net-worth individual clients.  The Edmond de Rothschild Group was founded in 1953 and currently operates in 19 countries worldwide.  In 2012, EdR Switzerland agreed to acquire the Lugano-based Sella Bank AG, which became part of Edmond de Rothschild (Lugano) SA in 2013. 

For decades prior to and through 2013, EdR Switzerland aided and assisted U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income they held in these accounts. EdR used a variety of means to assist U.S. clients in concealing their undeclared accounts, including by:

• Providing traditional Swiss banking products such as hold mail, code name and numbered account services;
• Assisting clients in using sham entities, such as structures as nominee beneficial owners of the undeclared accounts;
• Providing offshore credit cards, cash cards and debit cards to repatriate funds from the undeclared accounts;
• Structuring transfers of funds from undeclared accounts to evade currency transaction reporting requirements;
• Facilitating the covert repatriation of undeclared accounts via cash withdrawals, the purchase of luxury goods and transfers to the foreign bank accounts of non-U.S. friends, family and business associates;
• Accepting and suggesting the use of Internal Revenue Service (IRS) forms that falsely stated under penalties of perjury that the sham entities beneficially owned the assets in the undeclared accounts; and
• Divesting U.S. securities from its undeclared U.S. accounts for the purpose of subverting its Qualified Intermediary (QI) Agreement with the IRS.

EdR Switzerland relationship managers assisted numerous U.S. clients in covertly repatriating undeclared account funds by structuring transfers in amounts under $10,000 to avoid detection by U.S. authorities.  For example, after numerous discussions with one U.S. client regarding his intent to covertly repatriate his undeclared account funds, an EdR Switzerland relationship manager issued a series of checks in the amount of $8,500 made out to the U.S. client drawn on EdR Switzerland’s bank account at UBS in Switzerland.  The same relationship manager also assisted this U.S. client in withdrawing $11,000 in cash before re-depositing $2,000 based on “customs limitations.”  In another instance, an EdR Switzerland relationship manager assisted a U.S. client in transferring 145,000 Swiss francs to the Swiss UBS account of a luxury watch maker.

Several EdR Switzerland employees notated the advice they provided regarding the repatriation of undeclared U.S. client funds.  One relationship manager noted the following about his discussion with a U.S. client: “Telephonic contact with the account holder.  Explained to him the situation with respect to U.S. citizen account holders. Asked what to do. Suggested to him to make a donation to his wife.”  An assistant to a different relationship manager made this note in an account file: “Explained to [the niece] our need to close the account (client residing in USA) and only possible solution transfer of account to a person not resident in the USA.”

Certain relationship managers assisted or otherwise facilitated some U.S. individual taxpayers in establishing and maintaining undeclared accounts in a manner that concealed the U.S. taxpayers’ ownership or beneficial interest in said accounts.  At least one EdR Switzerland relationship manager coordinated with an external trust company to create and administer an offshore structure incorporated in Singapore.  EdR Switzerland relationship managers also knew or had reason to know that U.S. clients used external trust companies and attorneys to create and administer structures incorporated or based in offshore locations such as the British Virgin Islands, Panama and Liechtenstein.  For certain U.S. client accounts, EdR Switzerland relationship managers and other employees knowingly accepted and included in EdR Switzerland’s account records IRS Forms W-8BEN (or EdR Switzerland’s substitute forms) provided by the directors of the offshore companies that falsely represented under penalty of perjury that such companies were the beneficial owners.

At least one relationship manager assisted two U.S. clients in closing their undeclared accounts at EdR Switzerland by briefly opening up new individual accounts at EdR Switzerland, into which EdR Switzerland transferred the funds from the undeclared accounts, and then transferred the funds from the new accounts to insurance wrapper accounts in Liechtenstein.  Insurance wrappers were marketed to U.S. clients by third-party providers in the wake of the UBS investigation as a means of disguising the beneficial ownership of U.S. clients.

Throughout its participation in the Swiss Bank Program, EdR Switzerland has made comprehensive disclosures regarding its U.S.-related accounts.  Among other things, EdR Switzerland provided actionable information concerning numerous U.S. client accounts held at EdR Switzerland since August of 2008 permitting the department to make treaty requests to the Swiss competent authority for U.S. client account records.  EdR Switzerland also described in detail its U.S. cross-border business, including the policies or lack of policies that contributed to misconduct committed by relationship managers, supervisory relationship managers and EdR Switzerland management; the supervisory chain overseeing relationship managers; and the names of senior management and legal and compliance officials.

Since Aug. 1, 2008, EdR Switzerland held and managed approximately 950 U.S. client accounts, which included both declared and undeclared accounts, with aggregate peak of assets under management of $2.16 billion. EdR Switzerland will pay a penalty of $45.245 million.

In accordance with the terms of the Swiss Bank Program, EdR Switzerland mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. accountholders at EdR Switzerland who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts.  On Aug. 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement.  With today’s announcement of this non-prosecution agreement, noncompliant U.S. accountholders at EdR Switzerland must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division thanked the IRS and in particular, IRS-Criminal Investigation and the IRS Large Business & International Division for their substantial assistance.  Acting Assistant Attorney General Ciraolo also thanked Kevin F. Sweeney, who served as counsel on this matter, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer, Senior Litigation Counsel Nanette L. Davis and Attorney Kimberle E. Dodd of the Tax Division.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

Thirty-two hospitals located throughout 15 states have agreed to pay the United States a total of more than $28 million to settle allegations that the health care facilities submitted false claims to Medicare for minimally-invasive kyphoplasty procedures, the Justice Department announced today.  The Justice Department has now reached settlements with more than 130 hospitals totaling approximately $105 million to resolve allegations that they mischarged Medicare for kyphoplasty procedures. 

Kyphoplasty is a minimally-invasive procedure used to treat certain spinal fractures that often are due to osteoporosis.  In many cases, the procedure can be performed safely and effectively as an outpatient procedure without any need for a more costly inpatient hospital admission.  The settlements announced today resolve allegations that the 32 settling hospitals frequently billed Medicare for kyphoplasty procedures on a more costly inpatient basis, rather than an outpatient basis, in order to increase their Medicare billings.

“Charging the government for higher cost inpatient services that patients do not need wastes the country’s vital health care dollars,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “The Department of Justice is committed to ensuring that Medicare funds are expended appropriately, based on the medical needs of patients rather than the desire to maximize hospital profits.”

The settling facilities and the amounts they have agreed to pay, include the following: 

• The Cleveland Clinic in Cleveland, Ohio, has agreed to pay $1.74 million.

• Citrus Memorial Health System in Inverness, Florida, has agreed to pay $2.6 million.

• Cullman Regional Medical Center in Cullman, Alabama, has agreed to pay $350,000.

• Martin Memorial Medical Center in Stuart, Florida, has agreed to pay $2 million.

• MultiCare Tacoma General Hospital in Tacoma, Washington, has agreed to pay $983,000.

• Norwalk Hospital in Norwalk, Connecticut, has agreed to pay $920,000.

• Princeton Community Hospital Association in Princeton, West Virginia, has agreed to pay $1,513,500.

• Sacred Heart Medical Center in Spokane, Washington, has agreed to pay $906,000.

• Sarasota Memorial Hospital in Sarasota, Florida, has agreed to pay $972,000.

• Spartanburg Regional Health Services District Inc. in Spartanburg, South Carolina, has agreed to pay $1.725 million.

• St. Cloud Hospital in St. Cloud, Minnesota, has agreed to pay $500,000.

• Tampa General Hospital in Tampa, Florida, has agreed to pay $2 million.

• Five hospitals affiliated with Community Health Systems Inc., in Franklin, Tennessee, have agreed to pay a total of $3.5 million.These include:Crestwood Medical Center in Huntsville, Alabama; St. Joseph’s Hospital in Fort Wayne, Indiana; Carolinas Hospital System in Florence, South Carolina; Mary Black Health System in Spartanburg, South Carolina; and Trinity Medical Center in Birmingham, Alabama.

• Five hospitals affiliated with Tenet Health Care Corporation in Dallas, Texas, have agreed to pay a total of $2.2 million. These include:East Cooper Medical Center in Mt. Pleasant, South Carolina; North Fulton Hospital in Roswell, Georgia; Providence Memorial Hospital in El Paso, Texas; St. Francis Hospital in Memphis, Tennessee; and Sierra Medical Center in El Paso.

• Five hospitals formerly owned and operated by Health Management Associates Inc., in Naples, Florida, have agreed to pay a total of $2 million.These include:Biloxi Regional Medical Center in Biloxi, Mississippi; Davis Regional Medical Center in Statesville, North Carolina; Lancaster Regional Medical Center in Lancaster, Pennsylvania; Physicians Regional Medical Center in Naples, Florida; and Riley Hospital in Meridian, Mississippi.

• Three hospitals affiliated with BayCare Health System in Clearwater, Florida, have agreed to pay a total of $1.5 million.These include:Winter Haven Hospital in Winter Haven, Florida; St. Joseph’s Hospital in Tampa, Florida; and St. Anthony’s Hospital in St. Petersburg, Florida.

• Two hospitals affiliated with Banner Health in Phoenix, Arizona, have agreed to pay a total of $2.685 million.These include Banner Boswell Medical Center in Sun City, Arizona, and Banner Thunderbird Medical Center in Glendale, Arizona.

“As has been shown throughout this successful investigation, we will never allow hospitals to put profits ahead of patients,” said U.S. Attorney William J. Hochul Jr. of the Western District of New York. “Decisions regarding potential procedures should be made using sound medical judgment only, not with an eye toward increasing Medicare reimbursements. The public should be assured that any hospital involved in improper kyphoplasty billing will be held accountable for its actions.”      

In addition to settlements with over 130 hospitals, the government previously settled with Medtronic Spine LLC, the corporate successor to Kyphon Inc., for $75 million to settle allegations that the company caused false claims to be submitted to Medicare by counseling hospital providers to perform kyphoplasty procedures as inpatient rather than outpatient procedures.       

All but three of the settling facilities announced today were named as defendants in a qui tam, or whistleblower, lawsuit brought under the False Claims Act, which permits private citizens to bring lawsuits on behalf of the United States and receive a portion of the proceeds of any settlement or judgment awarded against a defendant.  The lawsuit was filed in federal district court in Buffalo, New York, by Craig Patrick and Charles Bates.  Patrick is a former reimbursement manager for Kyphon, and Bates was formerly a regional sales manager for Kyphon in Birmingham.  The whistleblowers will receive a total of approximately $4.75 million from the settlements announced today. 

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $26.7 billion through False Claims Act cases, with more than $16.8 billion of that amount recovered in cases involving fraud against federal health care programs.

The settlements were the result of a coordinated effort among the U.S. Attorney’s Office for the Western District of New York, the Civil Division’s Commercial Litigation Branch and the Department of Health and Human Services’ Office of Inspector General and Office of Counsel to the Inspector General.

The claims resolved by these settlements are allegations only, and there have been no determinations of liability. 

21st Century Oncology LLC, has agreed to pay $19.75 million to the government to resolve allegations that it violated the False Claims Act by billing federal health care programs for laboratory tests that were not medically necessary, the Justice Department announced today.  21st Century is a nationwide provider of integrated cancer care services that is headquartered in Fort Myers, Florida. 

“Today’s settlement demonstrates our unwavering commitment to protect the Medicare trust fund against unscrupulous providers,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Providers who waste taxpayer dollars by billing for unnecessary services will face serious consequences.”

The settlement announced today resolves allegations that 21st Century submitted claims to Medicare and Tricare for fluorescence in situ hybridization, or “FISH,” tests that were not medically necessary.  FISH tests are laboratory tests performed on urine that can detect genetic abnormalities associated with bladder cancer.  The government alleged that 21st Century submitted claims for unnecessary FISH tests that were ordered by four of its urologists, Dr. Meir Daller, Dr. Steven Paletsky, Dr. David Spellberg and Dr. Robert Scappa, all of whom practiced in the Fort Myers area.  The government also alleged that 21st Century encouraged these physicians to order unnecessary FISH tests by offering bonuses that were based in part on the number of tests referred to 21st Century’s laboratory.  Today’s settlement resolves the civil liability of 21st Century only. 

“Charging the government for clearly unnecessary medical services squanders taxpayer dollars,” said U.S. Attorney A. Lee Bentley, III of the Middle District of Florida.  “Our office will continue to pursue health care providers who defraud the United States, thereby threatening the viability of government health care programs, such as Medicare.”

“These tests were ordered to increase profits, not improve the healthcare of patients,” said Special Agent in Charge Shimon Richmond of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “This kind of unvarnished fraud is an attack on Medicare by unscrupulous providers and the OIG and its federal partners will take whatever steps are necessary to stop them.”

“This settlement demonstrates the commitment of the Defense Criminal Investigative Service (DCIS) and its law enforcement partners to protect the integrity of the U.S. military health care program (TRICARE) against fraudulent claims for medical services, said Special Agent in Charge John F. Khin of DCIS’s Southeast Field Office.”

The settlement resolves allegations originally brought in a lawsuit filed by a whistleblower under the qui tam provisions of the False Claims Act, which allow private parties to bring suit on behalf of the government and to share in any recovery.  The whistleblower, a former 21st Century Oncology LLC medical assistant, will receive $3.2 million as her share of the recovery in this case.

The investigation was handled by the Civil Division’s Commercial Litigation Branch and the Fort Myers Division of the U.S. Attorney’s Office of the Middle District of Florida with assistance from HHS-OIG, DCIS and the FBI. 

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $26.7 billion through False Claims Act cases, with more than $16.8 billion of that amount recovered in cases involving fraud against federal health care programs.  

The lawsuit is captioned United States, State of Florida, ex rel. Mariela Barnes v. Dr. David Spellberg, 21st Century Oncology and Naples Urology Associates, Civil Action No. 2:13-cv-228-FtM-38DNF (M.D. Fla.).  The claims resolved by the settlement are allegations only, and there has been no determination of liability. 

Justice Department’s Environment and Natural Resources Division Will Work with the Department of Labor and U.S. Attorneys for Broader Look at Environmental and Workplace Safety Crimes

In an effort to prevent and deter crimes that put the lives and the health of workers at risk, the Departments of Justice and Labor announced today a plan to more effectively prosecute such crimes.  Under the new plan, the Justice Department’s Environment and Natural Resources Division and the U.S. Attorneys’ Offices will work with the Department of Labor’s Occupational Safety and Health Administration (OSHA), Mine Safety and Health Administration (MSHA) and Wage and Hour Division (WHD) to investigate and prosecute worker endangerment violations.

“On an average day in America, 13 workers die on the job, thousands are injured and 150 succumb to diseases they obtained from exposure to carcinogens and other toxic and hazardous substances while they worked,” said Deputy Attorney General Sally Quillian Yates.  “Given the troubling statistics on workplace deaths and injuries, the Department of Justice is redoubling its efforts to hold accountable those who unlawfully jeopardize workers’ health and safety.”

“Safety and security in the workplace are a shared commitment.  Workplace injuries and illnesses cause an enormous amount of physical, financial and emotional hardship for workers and their families and underscore the urgent need for employers to provide a safe workplace for their employees,” said Department of Labor Deputy Secretary Chris Lu.  “Today’s announcement demonstrates a renewed commitment by both the Department of Labor and the Department of Justice to utilize criminal prosecution as an enforcement tool to protect the health and safety of workers.”

Starting last year, the Departments of Justice and Labor began meetings to explore a joint effort to increase the frequency and effectiveness of criminal prosecutions of worker endangerment violations.  This culminated in a decision to consolidate the authorities to pursue worker safety statutes within the Department of Justice’s Environment and Natural Resource Division’s Environmental Crimes Section.  In a memo sent today to all 93 U.S. Attorneys across the country, Deputy Attorney General Yates urged federal prosecutors to work with the Environmental Crimes Section in pursuing worker endangerment violations.  The worker safety statutes generally provide for only misdemeanor penalties.  However, prosecutors have now been encouraged to consider utilizing Title 18 and environmental offenses, which often occur in conjunction with worker safety crimes, to enhance penalties and increase deterrence.  Statutes included in this plan are the Occupational Safety and Health Act (OSH Act), the Migrant and Seasonal Agricultural Worker Protection Act (MSPA) and the Mine Safety and Health Act (MINE Act).

“We have seen that employers who are willing to cut corners on worker safety laws to maximize production and profit, will also turn a blind eye to environmental laws,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “Working with our partners in the Department of Labor and law enforcement, we will remove the profit from these crimes by vigorously prosecuting employers who break safety and environmental laws at the expense of American workers.”

“Every worker has the right to come home safely.  While most employers try to do the right thing, we know that strong sanctions are the best tool to ensure that low road employers comply with the law and protect workers lives,” said Assistant Secretary for Occupational Safety and Health Dr. David Michaels.  “More frequent and effective prosecution of these crimes will send a strong message to those employers who fail to provide a safe workplace for their employees.  We look forward to working with the Environment and Natural Resources Division to enforce these life-saving rules when employers violate workplace safety, workers’ health and environmental regulations.”

In addition to prosecuting environmental crimes, the Environment and Natural Resources Division has also been strengthening its efforts to pursue civil cases that involve worker safety violations under statutes such as the Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act and the Toxic Substances Control Act.  Violations of a number of provisions under these statutes can have a direct impact on workers tasked with handling dangerous chemicals and other materials, cleaning up spills and responding to hazardous releases. 

For more information, visit: www.justice.gov/enrd/worker-endangerment/

A Portland, Oregon, resident was indicted by a federal grand jury yesterday for one count of conspiracy to defraud the United States, 12 counts of wire fraud, 12 counts of filing false claims for tax refunds, four counts of theft of government funds and one count of aggravated identity theft, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division, Acting U.S. Attorney Billy J. Williams for the District of Oregon and Special Agent in Charge Teri L. Alexander for the Internal Revenue Service (IRS) Criminal Investigation.

Danyelle Calcagno is alleged to have conspired with others to file fraudulent income tax returns with the IRS between January 2008 and April 2011.  Calcagno is alleged to have checked into Portland-area hotel rooms to use the hotels’ Internet connections to file at least 32 fraudulent federal income tax returns using the personal identifying information of third parties seeking refunds of at least $167,932.  According to the indictment, Calcagno received more than $25,000 in fraudulently procured refunds into her own bank account.  Additionally, Calcagno allegedly directed the IRS to deposit refunds onto stored-value debit cards issued in other people’s names. 

If convicted, Calcagno faces a statutory maximum sentence of 10 years in prison for the conspiracy charge, five years in prison for each count of filing false claims, 10 years in prison for each count of theft of government funds and 20 years in prison for each count of wire fraud.  Calcagno is subject to a mandatory two year sentence on the aggravated identity theft charge, which will run consecutive to any other term of imprisonment she receives. If convicted, Calcagno could be subject to fines, monetary penalties and mandatory restitution.

Acting Assistant Attorney General Ciraolo, Acting U.S. Attorney Williams and Special Agent in Charge Alexander thanked special agents of the IRS-Criminal Investigation’s Stolen Identity Refund Fraud Task Force, who investigated the case and Trial Attorney Leslie A. Goemaat of the Tax Division, who is prosecuting the case.

An indictment merely alleges that crimes have been committed.  The defendant is presumed innocent until proven guilty beyond a reasonable doubt.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

A Brooklyn, New York tax return preparer pleaded guilty today in the U.S. District Court for the Eastern District of New York to one count of aiding and assisting in the preparation of false tax returns, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

Phillip Baynes, 51, was charged in a 31-count indictment with preparing false tax returns for tax years 2008, 2009 and 2010 for 12 clients of his tax return preparation business, Small Mans Accounting and Tax Service, located in Brooklyn.  The indictment filed last March alleged that Baynes included false and fraudulent expenses on the clients’ tax returns, including false itemized deductions for charitable contributions and unreimbursed employee expenses. 

U.S. District Judge Kiyo A. Matsumoto set sentencing for May 31, 2016.  Baynes faces a statutory maximum sentence of three years in prison and a $250,000 fine. 

Acting Assistant Attorney General Ciraolo thanked agents of Internal Revenue Service– Criminal Investigation, who investigated the case and Trial Attorneys Mark Kotila and Brittney N. Campbell of the Tax Division, who are prosecuting the case.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website. 

The Department of Justice announced today that Bordier & Cie Switzerland (Bordier), PBZ Verwaltungs AG (PBZ) and PostFinance AG reached resolutions under the department’s Swiss Bank Program.  These banks collectively will pay penalties of more than $15 million.

The Swiss Bank Program, which was announced on Aug. 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States.  Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts.  Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.

Under the program, banks are required to:

• Make a complete disclosure of their cross-border activities;

• Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;

• 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;

• Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and

• Pay appropriate penalties.

Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.

According to the terms of the non-prosecution agreements signed today, each bank agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay a penalty in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.

Bordier was founded in 1844 in Geneva, Switzerland, where it maintains its headquarters.  Five generations of the Bordier family have run the bank over the subsequent 170 years.  Bordier has three additional Swiss offices in Zurich, Bern and Nyon, and outside of Switzerland, Bordier has two asset management companies – one in London and one in Paris.  Additionally, Bordier is affiliated with two independent entities with local banking licenses: Bordier Bank (TCI) Ltd., established in 1986 under the laws of the Turks and Caicos, and Bordier & Cie (Singapore) Ltd., established in 2011 under the laws of Singapore.  Structurally, Bordier is led by its “Comité de Direction,” which is composed of the partners, the chief financial/administrative officer, the General Counsel, the communications director and two senior wealth managers.

Bordier was aware that some of its U.S. clients were using their accounts at Bordier to evade U.S. taxes and reporting requirements.  In certain account files, Bordier had notes stating, “Declared: No.”  In other instances, the U.S. taxpayer-client informed Bordier that he or she did not plan to declare his or her account in the United States.  For one account, a U.S. taxpayer-client refused to provide a copy of his passport, despite repeated requests from Bordier, and in 1998, this client signed bank forms with a fake signature to avoid potential recognition.  This accountholder eventually told Bordier that he did not want to declare the account in the United States because he was a lawyer and would be disbarred.  In 2000, one U.S. taxpayer-client informed Bordier, “I am glad to know that there are no U.S. securities subject to U.S. withholding tax.  I do not intend to declare this account to the U.S. authorities.”  For one account where the ultimate beneficial owner was a U.S. person, Bordier noted in the files, “Client will introduce a South African friend domiciled in Monaco who will invest in USA and transfer funds to the client.”

In a limited number of instances, Bordier actively facilitated the evasion of U.S. taxes and reporting requirements for some of its U.S. accountholders.  For example, Bordier made repeated transfers of undeclared assets under $10,000 to the Montreal bank account of a U.S. taxpayer-client in Canada in order to help the client avoid U.S. tax and reporting obligations and keep the undeclared assets hidden. For one such transfer, the U.S. taxpayer-client requested his “usual order of chocolate” from Bordier in order to institute these transfers.  Bordier was aware that the U.S. taxpayer-client withdrew the amounts in cash: “Telephone [call from U.S. taxpayer-client].  Please transfer US$8,000 to Montreal as usual.  He will pick up the cash. . . .”  In 2002, according to file notes made by the former relationship manager, Bordier transmitted undeclared assets to a U.S. taxpayer-client in a hidden manner (“sous forme cache” in French).  Bordier’s conduct allowed the bank to increase the undeclared U.S. taxpayer assets that it managed, thereby increasing the fees it generated.

Another U.S. taxpayer-client refused to sign Bordier’s Declaration of Non-U.S. Status form, which would have indicated that she was a U.S. person, despite it being required as part of Bordier’s account opening procedures.  When the U.S. taxpayer-client asked Bordier about the impact of the UBS investigation, Bordier told the U.S. taxpayer-client that she “cannot call, that her capital is protected and that she multiplies her risks by calling the bank often.  She should only call once a year when she is in Europe.” 

From 2008 to the present, Bordier maintained approximately 292 U.S.-related accounts with a total of $440.8 million in assets under management.  Bordier will pay a penalty of $7.827 million.

PBZ was a private bank operating in Zurich.  From 2001 to November 2013, PBZ Verwaltungs AG operated as AKB Privatbank Zürich AG and was a subsidiary of Aargauische Kantonalbank.  Prior to 2001, PBZ operated as BFZ Bankfinanz AG, a bank founded in 1988 and headquartered in Zurich.  In November 2013, Aargauische Kantonalbank sold AKB Privatbank to Privatbank IHAG Zürich AG, and since July 2014 it has operated as PBZ Verwaltungs AG.  PBZ Verwaltungs AG has ceased its banking activities and had its banking license revoked by Aug. 29, 2014.

As early as 2008, PBZ knew that some U.S.-related accounts held untaxed funds, which were described within PBZ in one instance as “Schwarzgeld” or “black money.”  PBZ knew that U.S. persons had a duty under U.S. law to report their income to the Internal Revenue Service (IRS) and to pay taxes on that income, including all income earned in accounts maintained by PBZ in Switzerland.  Despite this knowledge, PBZ opened, maintained and serviced accounts for U.S. persons that it knew or had reason to know were likely not declared to the IRS or the U.S. Department of the Treasury, as U.S. law required.  As of Feb. 19, 2010, PBZ formally renounced its previous practice of accepting “manifestly untaxed assets from foreign clients.” 

In 2001, PBZ entered into a Qualified Intermediary (QI) agreement with the IRS.  As a QI, PBZ agreed to supply the IRS with information and to withhold tax in connection with trades in U.S. securities.  The agreement’s purpose was to ensure that, with respect to U.S. securities held in an account at PBZ, non-U.S. accountholders would be subject to the proper U.S. tax rates on withholding and that U.S. accountholders would properly pay U.S. taxes.  As a practical matter, PBZ reported income pursuant to the QI agreement on only one of its U.S.-related accounts.  For each U.S. client who did not provide a W-9, PBZ blocked any trading in U.S. securities, which, in PBZ’s view, obviated any payment or reporting obligation under the QI agreement.

PBZ opened accounts for foundations and other entities set up in Panama, Liechtenstein and any of several island countries – the Bahamas, the British Virgin Islands, the Cayman Islands, the Marshall Islands, St. Kitts and Nevis and the Turks and Caicos Islands – that PBZ knew were beneficially owned by U.S. persons.  For instance, accounts were opened for three British Virgin Islands corporations that really belonged to a single U.S. person as the beneficial owner.  In another instance, a U.S. resident beneficial owner of a Marshall Islands corporation gave instructions on an account nominally held by a domiciliary entity that resulted in the transfer of the account to the beneficial owner’s brother, who lived abroad. 

PBZ also offered a variety of traditional Swiss banking services – including hold mail and numbered accounts – that it knew could assist, and did assist, U.S. taxpayers in concealing their identity from the IRS by minimizing the paper trail associated with their undeclared assets and income.  From time to time, PBZ assisted its U.S. clients in sending money to themselves, relatives, business partners or other businesses in the United States by issuing checks drawn on PBZ’s own bank account.  Issuing such checks is a service routinely provided by banks to clients and is similar to cashier’s checks in the United States.  But under the circumstances present with respect to the U.S. clients, because these checks listed only PBZ as the accountholder, they did not reveal that the funds were ultimately paid out of the U.S. clients’ Swiss bank account.  One such check issued was in the amount of $301,000. U.S. clients were thus able to utilize this technique to conceal their ownership of a Swiss bank account.

From at least 2008 through 2014, PBZ maintained and serviced 171 U.S.-related accounts having a maximum aggregate value of more than $101 million. PBZ will pay a penalty of $5.57 million.

PostFinance, headquartered in Bern, is a wholly-owned subsidiary of Swiss Post, the Swiss state-owned enterprise responsible for Swiss postal and other essential public infrastructure services.  The Swiss parliament established PostFinance’s predecessor in 1906 to provide payment services to retail customers.  PostFinance operated as a division of Swiss Post until June 26, 2013, when it became a bank under Swiss law.

For decades, PostFinance has provided the predominant means of payment in Switzerland.  Customers pay bills and receive payments, electronically or in person, at post offices in Switzerland through PostFinance accounts.  PostFinance has 45 branch offices, all in Switzerland, and roughly 40 percent of Swiss residents have an account with PostFinance.  Until 2008, the names of PostFinance’s customers were publicly available.  PostFinance was not subject to Swiss bank secrecy laws until June 26, 2013, when it received its license to operate as a bank under Swiss law.

Before and since Aug. 1, 2008, PostFinance was required by Swiss law and government mandate to provide accounts to persons living in Switzerland, regardless of nationality, and to Swiss nationals living outside of Switzerland.  Consequently, PostFinance provided accounts to U.S. taxpayers living in Switzerland, as well as to Swiss nationals living in the United States, including U.S.-related accountholders who transferred assets to PostFinance from UBS or other banks under investigation by the department.  

PostFinance has never offered private banking or wealth management services to any of its customers.  Instead, PostFinance engaged in basic consumer retail banking and payment services. U.S. taxpayers resident in Switzerland, as well as U.S.-Swiss dual nationals, may obtain “current” accounts, which are comparable to checking accounts in the United States. Savings accounts, fixed income retirement accounts and credit cards may be obtained only by Swiss residents.

PostFinance was aware that citizens and resident aliens of the United States had a legal duty to report their assets and income to the IRS and to pay taxes on the basis of all their income, including income earned from accounts that PostFinance maintained on their behalf.  Largely due to its obligations under Swiss law, however, PostFinance nevertheless opened and maintained undeclared accounts belonging to customers who were subject to U.S. tax and were not complying with their U.S. tax obligations.

Since Aug. 1, 2008, PostFinance maintained a total of 2,731 U.S.-related accounts having a maximum aggregate value of approximately $290 million.  PostFinance will pay a penalty of $2 million.

In accordance with the terms of the Swiss Bank Program, each bank mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. accountholders at these banks who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts.  On Aug. 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement.  With today’s announcement of these non-prosecution agreements, noncompliant U.S. accountholders at these banks must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division thanked the IRS and in particular, IRS-Criminal Investigation and the IRS Large Business & International Division for their substantial assistance.  Acting Assistant Attorney General Ciraolo also thanked Kaycee M. Sullivan, Brian D. Bailey and Paul G. Galindo, who served as counsel on these matters, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer, Senior Litigation Counsel Nanette L. Davis and Attorney Kimberle E. Dodd of the Tax Division.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

A former tax return preparer and resident of New Orleans, Louisiana, pleaded guilty today to one count of theft of public funds and one count of aggravated identity theft, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U. S. Attorney Kenneth A. Polite, Jr. for the Eastern District of Louisiana. 

Donald Stewart, 59, prepared tax returns under the business names Stewart’s Tax Service and Stewart LTD from approximately 2001 through 2008, before the Internal Revenue Service (IRS) suspended his Electronic Filing Information Number, according to court documents.  Stewart admitted that he used the means of identification of individuals, including their names and social security numbers, without lawful authority, to electronically file false federal income tax returns with the IRS that claimed income refunds.  From January 2011 through February 2012, Stewart caused approximately $37,809 in federal and state tax refunds in the names of others to be electronically deposited into bank accounts under his control.  Stewart also admitted to cashing or depositing U.S. Treasury checks totaling approximately $539,393 and payable to other individuals at a bank in the New Orleans area. 

U.S. District Judge Eldon E. Fallon set sentencing for March 17, 2006.  Stewart faces a statutory maximum sentence of 10 years in prison for the theft of public money charge and a mandatory term of two years in prison for the aggravated identity theft charge, which must run consecutive to any other prison term he receives.  As to each count, Stewart also faces a fine of $250,000, or twice the gross gain or loss caused by the offense and terms of supervised release.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Polite thanked special agents of IRS-Criminal Investigation, who investigated the case and Assistant U.S. Attorney Hayden Brockett and Trial Attorney Lauren M. Castaldi of the Tax Division, who prosecuted the case.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

The U.S. Departments of Justice, Homeland Security and Labor announced today the selection of six new Anti-Trafficking Coordination Teams.  These teams will lead Phase II of the ACTeam Initiative, an interagency effort to streamline federal criminal investigations and prosecutions of human trafficking offenses.

The six new ACTeams will be based in Cleveland; Minneapolis; Newark, New Jersey; Portland, Maine; Portland, Oregon; and Sacramento, California.  Each team will serve under the leadership of the local U.S. Attorney and the highest-ranking federal investigative agents in the regional field offices of the FBI, U.S. Immigration and Customs Enforcement (ICE) and Department of Labor. 

“Human trafficking robs victims of their liberty, exploits them for labor and for sex, and infringes not only on their rights, but on their essential humanity,” said Attorney General Loretta E. Lynch.  “Through the ACTeam Initiative, we are harnessing resources across the federal government to ensure that our multi-agency fight against human trafficking is as comprehensive and effective as possible.  In the days and months ahead, the Department of Justice will continue to work alongside our federal partners to prosecute wrongdoing, support survivors, and bring this devastating crime to an end.”

“The Anti-Trafficking Coordination Team (ACTeam) Initiative is an important tool in our collective ability to combat sex trafficking, forced labor and domestic servitude here in the United States,” said Secretary Jeh C. Johnson of Homeland Security.  “It highlights our commitment to increase capacity to rescue victims and bring perpetrators of these terrible crimes to justice.  Our collective efforts are amplified when we work together in furtherance of shared missions like this.  And, through DHS’s Blue Campaign, we will remain focused on ending human trafficking in the United States.”

“A trafficking victim shouldn’t have to spend time trying to determine whether they have a Department of Labor issue or a Department of Justice issue,” said Secretary Thomas Perez of the Department of Labor.  “Their basic rights are being violated, and we can accomplish so much more to redress those crimes when we work together.  The Anti-Trafficking Coordination Team Initiative, by bringing our respective departments’ collective resources and expertise to bear, is helping us build a whole even greater than the sum of our individual parts.”

“Human trafficking is a modern day form of slavery that destroys lives and exploits the most vulnerable in our society,” said Director James B. Comey of the FBI.  “These Anti-Trafficking Coordination Teams are the most effective way to investigate human trafficking by allowing us to work in a collaborative, victim-oriented manner.”

The new teams were selected by unanimous consensus of the Federal Enforcement Working Group after a rigorous, competitive and nationwide selection process.  The group includes subject matter experts from the Department of Justice (including the Civil Rights Division’s Human Trafficking Prosecution Unit, the Executive Office of U.S. Attorneys and the FBI’s Civil Rights Unit); the Department of Homeland Security (including ICE and Homeland Security Investigations’ Human Smuggling and Trafficking Unit); and the Department of Labor (including the Office of the Inspector General and the Wage and Hour Division).

The new ACTeams will collaborate with the human-trafficking subject matter experts in the Federal Enforcement Working Group to implement a strategic action plan in their respective districts.  Over the next two years, teams are expected to develop high-impact federal investigations and prosecutions, dismantle human-trafficking networks, vindicate the rights of human-trafficking victims and bring traffickers to justice.

Launched in 2011 by the Attorney General and Secretaries of Labor and Homeland Security, the ACTeam Initiative established six Phase I ACTeams in Atlanta; El Paso, Texas; Kansas City, Missouri; Los Angeles; Memphis, Tennessee; and Miami.  In these ACTeam districts, prosecutions of forced labor, international sex trafficking and adult sex trafficking rose even more markedly than they did nationally.  For instance, the number of defendants convicted rose 86 percent in ACTeam districts, compared to 14 percent in non-ACTeam districts, and 26 percent nationwide.  Based on this demonstrated record of success, Attorney General Lynch, Labor Secretary Perez and Homeland Security Secretary Johnson launched Phase II of the ACTeam Initiative earlier this year.  The fight against human trafficking remains a top priority for the three officials and they have committed to collaborating with other governmental and non-governmental partners to continue to enhance their anti-trafficking efforts. 

A federal grand jury sitting in Raleigh, North Carolina, returned an indictment, which was unsealed today against a Raleigh man, charging him with one count of conspiracy to commit theft of public money and 22 counts of theft of public money, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Thomas G. Walker for the Eastern District of North Carolina. 

According to the indictment, in 2011 and 2012, Wilfredo Acosta Hidalgo conspired with two check cashers to cash U.S. Treasury checks issued as a result of fraudulent tax returns filed in the names of third-parties.  Hidalgo provided U.S. Treasury checks ranging in value from $4,000 to $8,000 to the check cashers.  These checks were issued to third parties in whose names the fraudulent tax returns were filed.  The third-party payees purportedly lived in Florida, North Carolina, Virginia, Maryland, Delaware, Pennsylvania and New Jersey.  The check cashers deposited the U.S. Treasury checks into their business bank accounts and then provided Hidalgo with cash equal to the value of the check minus a check cashing fee.  The third-party payees were not present when the checks were cashed. 

If convicted, Hidalgo faces a statutory maximum sentence of five years in prison for the conspiracy charge and 10 years in prison for each count of theft of public funds.  He also faces substantial monetary penalties, supervised release and restitution.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Walker commended special agents of IRS-Criminal Investigation, who investigated the case and Trial Attorneys Nathan P. Brooks and Lauren M. Castaldi of the Tax Division, who are prosecuting this case.  Acting Assistant Attorney General Ciraolo also thanked the U.S. Attorney’s Office for the Eastern District of North Carolina for its assistance.

An indictment merely alleges that crimes have been committed.  The defendant is presumed innocent until proven guilty beyond a reasonable doubt.

The Department of Justice announced today that it has reached a settlement with the Chicago Board of Education, which oversees the third largest school district in the United States, to resolve allegations that the board discriminated against pregnant teachers in violation of federal law. 

The civil lawsuit, filed on Dec. 23, 2014, in federal district court in Chicago, alleged that the board engaged in a pattern or practice of discrimination against pregnant teachers employed at Scammon Elementary School by subjecting them to terminations because of their pregnancies.  The board’s actions violated Title VII of the Civil Rights Act of 1964, according to the department’s complaint.  Title VII is a federal statute that prohibits employment discrimination on the basis of sex, race, color, national origin and religion.  Federal law explicitly prohibits employers from discriminating against female employees due to pregnancy, childbirth or related medical conditions. 

“Today, the Chicago Board of Education takes an important step toward ensuring that no woman loses her job, faces discipline or endures threats because of her pregnancy,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division.  “Our settlement establishes critical measures to provide a workplace environment free from sex-based discrimination.”

Under the terms of the settlement agreement, which must be approved by the district court, the board must change its personnel policies to guard employees against discrimination on the basis of sex and pregnancy; establish training requirements for supervisors and staff that reinforce its commitment to providing a workplace environment free of sex-based discrimination; and pay $280,000 in back pay and compensatory damages to eight women harmed by the practices challenged by the department.

The department brought this lawsuit as a result of a joint effort to enhance collaboration between the Equal Employment Opportunity Commission (EEOC) and the Department’s Civil Rights Division for vigorous enforcement of Title VII.  “Stronger policies and training to prevent pregnancy discrimination are critical to the economic security of women and their families,” said Chair Jenny R. Yang of EEOC.  “Firing a woman because she is pregnant is simply against the law and EEOC remains committed to vigorous enforcement of the law.”

The Chicago District Office of EEOC investigated charges of discrimination made by Scammon teachers.  After finding reasonable cause that discrimination occurred, EEOC attempted to resolve the charges before referring them to the Department of Justice for litigation. 

“That a public school engaged in a pattern of firing teachers because of their pregnancies is dismaying to say the least,” said Director Julianne Bowman of EEOC’s Chicago District.  “This settlement puts in place meaningful measures to eradicate the kind of antiquated thinking that resulted in the loss of these dedicated female educators from Scammon Elementary School.”

The continued enforcement of Title VII has been a priority of the Justice Department’s Civil Rights Division.  Additional information on the Civil Rights Division’s work is available on its website at www.justice.gov/crt/.  EEOC has made addressing pregnancy discrimination a strategic enforcement priority, and last year issued updated guidance available at www.eeoc.gov/laws/types/pregnancy_guidance.cfm.

Chicago Board of Education Settlement Agreement

Department of Justice, Office of Community Oriented Policing Services (COPS) Director Ronald Davis today announced the appointment of Noble Wray, retired Madison, Wisconsin, police chief, to lead its newly created Policing Practices and Accountability Initiative.

The creation of the new initiative follows a recommendation of the President’s Task Force on 21st Century Policing.  The report also calls on the COPS Office to assist the field in implementing task force recommendations.  Specifically, recommendation 7.3 charges the COPS Office with “assisting the law enforcement field in addressing current and future challenges” and to “create a National Policing Practices and Accountability Division.”  Wray will serve as chief of this new initiative.

The new COPS Office initiative will also oversee the collaborative reform and critical response technical assistance programs and assist the law enforcement field in developing strategies to implement task force recommendations, work closely with law enforcement and elected officials to provide technical assistance, identify industry best practices and provide crisis response services.

“The recommendations from the President's Task Force on 21st Century Policing serve as a blueprint for reducing crime while building trust and legitimacy,” said Director Davis.  “Chief Wray's background and extensive experience make him the ideal candidate to lead this effort.”

Wray comes to the Department of Justice’s COPS Office after serving close to 30 years at the Madison Police Department, with nine as chief of police.  Wray is a widely respected law enforcement leader recognized for his community policing efforts and work to build trust between the police and the communities they serve.  He has worked with the Department of Justice to provide training to more than 200 law enforcement agencies on fair and impartial policing.  He has also consulted with law enforcement on topics such as “Blue Courage,” which emphasizes improving police culture and leadership; police legitimacy and procedural justice; and the “nobility of policing,” which focuses on the purpose of policing in a democratic society.

Wray has also served on a number of non-profit boards in the Madison area, including serving as interim CEO for the Urban League of Greater Madison, Wisconsin, and board president for the United Way of Dane County.

He has a Bachelor of Science in Criminal Justice from the University of Wisconsin, Milwaukee.

The COPS Office, headed by Director Ronald Davis, is a federal agency responsible for advancing community policing nationwide.  Since 1995, the COPS Office has invested more than $14 billion to advance community policing, including grants awarded to more than 13,000 state, local and tribal law enforcement agencies to fund the hiring and redeployment of more than 127,000 officers and provide a variety of knowledge resource products including publications, training and technical assistance. For additional information about the COPS Office, please visit www.cops.usdoj.gov.

Lumsden W. Quan, 47, an art dealer from San Francisco, California, was sentenced today in federal court in Las Vegas, Nevada, to one year and two days in prison for conspiracy to violate the Lacey and Endangered Species Acts and to a violation of the Lacey Act for knowingly selling black rhinoceros horns to an undercover agent from the United States Fish and Wildlife Service (USFWS).  Quan was also sentenced to three years of supervised release to follow his prison sentence, pay a $10,000 fine and a three year ban on work in the art and antique business. 

Quan, was arrested in March 2014 as part of “Operation Crash,” a nation-wide crackdown in the illegal trafficking of rhinoceros horns, for his role in a conspiracy to knowingly sell black rhinoceros horns across state lines.  In pleading guilty, Quan admitted to working with his co-defendant, Edward N. Levine, to transport two horns from California to Nevada, where they sold them to an undercover agent from Colorado for a sum of $55,000.  Levine, also charged in the indictment, remains scheduled for trial on March 7, 2016, in Las Vegas.  The charges in an indictment are merely allegations and the defendant is presumed innocent unless and until proven guilty.

“Wildlife trafficking has become an extremely profitable type of transnational organized crime and illicit transactions like this are fueling a global market and leading us closer to a day when rhinoceroses, elephants and countless other species are extinguished from the earth,” said Assistant Attorney General John C. Cruden for the Justice Department’s Environment and Natural Resources Division.  “The Justice Department is committed to working through our law enforcement and international partners to reverse this disturbing trend.”

“Prosecuting individuals who profit from the destruction of an ancient endangered species is critical to stopping the illegal ivory trade’” said U.S. Attorney Dan Bogden.  “There are no excuses for this type of crime.  Considering the devastating impact on an endangered species, the offenders should be dealt with appropriately and punished in the criminal justice system.”  

“Illegal trafficking in rhino horn threatens to reverse decades of rhino conservation work in Africa and Asia, driving rhinos to the brink of extinction in the wild,” said Director Dan Ashe of the U.S. Fish and Wildlife Service.  “Today’s sentencing demonstrates that the United States takes wildlife trafficking very seriously and we will do everything possible to identify and disrupt smuggling operations and hold perpetrators responsible.  I’m very proud of the work of the Office of Law Enforcement for their continued diligence in bringing these criminals to justice.”

Operation Crash is a continuing investigation being conducted by USFWS in coordination with other federal and local law enforcement agencies.  A “crash” is the term for a herd of rhinoceros.  Operation Crash is an ongoing effort to detect, deter and prosecute those engaged in the illegal killing of rhinoceros and the unlawful trafficking of rhinoceros horns.  As of November 2015, the coordinated efforts of Operation Crash has prosecuted and sentenced nearly 22 subjects and received forfeiture and restitution amounts totaling $5.5 million.

The black rhinoceros is an herbivore species of prehistoric origin and one of the largest remaining mega-fauna on earth.  They have no known predators other than humans.  All species of rhinoceros are protected under U.S. and international law, including the Endangered Species Act.  Since 1976, trade in rhinoceros horn has been regulated under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), a treaty signed by over 180 countries around the world to protect fish, wildlife and plants that are or may become imperiled due to the demands of international markets.

The investigation was handled by the USFWS’s Office of Law Enforcement, the U.S. Attorney’s Office for the District of Nevada and the Justice Department’s Environmental Crimes Section.  The government is represented by Trial Attorneys Jennifer Blackwell and Ryan Connors, Assistant U.S. Attorney Kathryn Newman and paralegal Amanda Backer.

The former tax preparer for television personality Michael “The Situation” Sorrentino and his brother, Marc Sorrentino, today admitted filing fraudulent tax returns on their behalf, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Paul J. Fishman of the District of New Jersey announced.

Gregg Mark, 51, of Spotswood, New Jersey, pleaded guilty before U.S. District Judge Susan D. Wigenton in Newark federal court to an information charging him with one count of conspiracy to defraud the United States.

According to documents filed in this case and statements made in court: Mark, formerly an accountant at a Staten Island, New York-based accounting firm, admitted preparing fraudulent tax returns for the Sorrentinos for tax years 2010 and 2011, during which time the Sorrentinos and their businesses – MPS Enterprises LLC and Situation Nation Inc. – received millions of dollars in income. To reduce the taxes the Sorrentinos owed, Mark caused to be prepared and filed with the Internal Revenue Service (IRS) fraudulent business and personal tax returns. Mark admitted the Sorrentinos’ false returns defrauded the IRS out of $550,000 to $1.5 million.

On Sept. 24, a grand jury in Newark returned a seven-count indictment charging the Sorrentinos with conspiracy to defraud the United States and filing false tax returns. Michael Sorrentino was also charged with failing to file a tax return. According to the indictment, the brothers received several million dollars in connection with Michael Sorrentino’s role as a cast member on the MTV television show “Jersey Shore” and other promotional activities. The brothers are charged with failing to report all of the income they received. They are also charged with claiming personal expenses as business expenses, including payments for luxury vehicles and high-end clothing, and making distributions – or direct payments – from the businesses to personal bank accounts. Both have pleaded not guilty; a trial date has not yet been set.

The conspiracy charge to which Mark pleaded guilty carries a statutory maximum sentence of five years in prison and a $250,000 fine. Sentencing is scheduled for March 24, 2016.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Fishman credited special agents of IRS-Criminal Investigation, under the direction of Special Agent in Charge Jonathan D. Larsen, with the investigation leading to today’s guilty plea.

The government is represented by Assistant U.S. Attorney Jonathan W. Romankow of the U.S. Attorney’s Office Criminal Division in Newark and Assistant Chief Tino M. Lisella and Trial Attorneys Yael T. Epstein and Jeffrey B. Bender of the Tax Division.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

A federal grand jury sitting in Greensboro, North Carolina, returned a superseding indictment against a Thomasville, North Carolina, man charging him with one count of evading the payment of income taxes, three counts of filing false tax returns, one count of making false statements on aircraft maintenance records, one count of aggravated identity theft and four counts of serving as an airman without an airman’s certificate, Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Ripley Rand for the Middle District of North Carolina announced today. 

According to the superseding indictment, from 2011 through 2014, Paul Douglas Tharp aka Doug Tharp, attempted to evade payment of income taxes he owed for the tax years 2004 through 2007 by filing false documents, including false tax returns, with the Internal Revenue Service (IRS).  The superseding indictment also alleges that Tharp forged the signature of a licensed mechanic on aircraft maintenance records and served as an airman without the required certification.   

If convicted, Tharp faces a statutory maximum sentence of five years in prison for the tax evasion charge, three years in prison for each count of filing a false tax return, three years in prison for each count of serving as an airman without an airman’s certificate, five years in prison for making false statements and a two year mandatory prison sentence for aggravated identity theft.  He also faces substantial monetary penalties, supervised release and restitution.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Rand commended special agents of IRS-Criminal Investigation, who investigated the case and Assistant U.S. Attorney Anand Ramaswamy and Trial Attorney Nathan Brooks of the Tax Division, who are prosecuting this case.

An indictment merely alleges that crimes have been committed.  The defendant is presumed innocent until proven guilty beyond a reasonable doubt.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

Theater Divestitures Will Preserve Movie Theater Competition in Connecticut and New Jersey 

The Department of Justice announced today that it has reached a settlement with AMC Entertainment Holdings Inc. and SMH Theatres Inc. (Starplex Cinemas) that requires AMC to divest movie theaters in Connecticut and New Jersey, in order to proceed with its $172 million acquisition of Starplex Cinemas. 

The Antitrust Division and the State of Connecticut filed a civil antitrust lawsuit today in U.S. District Court for the District of Columbia to block the proposed acquisition.  At the same time, the department and the Connecticut Attorney General filed a proposed settlement that would resolve the competitive concerns alleged in the lawsuit.

“Consumers have benefitted from the competition on price and on quality of the viewing experience between AMC’s and Starplex Cinemas’ theatres in Berlin, Connecticut, and East Windsor, New Jersey,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.  “The divestiture of two theatres in those areas ensures that movie theater competition is preserved.”

AMC’s and Starplex Cinemas’ theaters in the Berlin, Connecticut, and East Windsor, New Jersey, areas compete to attract moviegoers on ticket prices as well as through the quality of the viewing experience, such as by offering moviegoers the most sophisticated sound systems, largest screens, best picture clarity, premium seating, and high quality food and drink.  Because AMC and Starplex Cinemas are each other’s most significant competitor in the Berlin and East Windsor areas, the proposed acquisition would likely reduce price competition as well as the overall quality of the movie viewing experience. 

Under the terms of the proposed consent decree, the Starplex Town Center Plaza 10 in East Windsor, New Jersey, and the Starplex Berlin 12 in Berlin, Connecticut, must be divested to a buyer or buyers approved by the United States.

AMC, a Delaware corporation, operates 349 theaters with a total of 4,975 screens in locations primarily throughout the United States.  Its U.S. box office revenues were approximately $1.8 billion in 2014. 

Starplex Cinemas, a Dallas-based company, owns and operates 33 movie theaters with a total of 346 screens in 12 states.  Its U.S. box office revenues were approximately $57 million in 2014. 

As required by the Tunney Act, the proposed settlement and the department’s competitive impact statement will be published in the Federal Register.  Any person may submit written comments concerning the proposed settlement during a 60-day comment period to David C. Kully, Chief, Litigation III Section, Antitrust Division, U.S. Department of Justice, 450 5th Street, N.W., Suite 4000, Washington, D.C. 20530 (telephone: 202-305-9969).  At the conclusion of the 60-day comment period, the U.S. District Court for the District of Columbia may enter the proposed consent decree upon finding that it serves the public interest.

AMC Complaint (185.57 KB)

AMC CIS (83.43 KB)

AMC Hold Separate (160.41 KB)

AMC Explanation (80.16 KB)

AMC PFJ (73.47 KB)

Attorney General Loretta E. Lynch announced today a new guidance from the Justice Department designed to help law enforcement agencies prevent gender bias in their response to sexual assault and domestic violence, highlighting the need for clear policies, robust training and responsive accountability systems.

“Gender bias, whether explicit or implicit, can severely undermine law enforcement’s ability to protect survivors of sexual and domestic violence and hold offenders accountable,” said Attorney General Lynch.  “This guidance – developed in collaboration with law enforcement leaders and advocates from across the country – is designed to help state, local, and tribal authorities more fairly and effectively address allegations of domestic violence and sexual assault.  In the days and months ahead, the Department of Justice will continue to work with our law enforcement partners nationwide to ensure that they have the tools and resources they need to prevent, investigate, and prosecute these horrendous crimes.”

Today’s guidance – which reflects input from a wide array of stakeholders, including police leaders, victim advocates and civil rights advocates – aims to enhance the Justice Department’s partnership with law enforcement officers who work tirelessly to protect their communities, advance bias-free policing and uphold the civil rights of the people they serve.  The Justice Department’s Office on Violence Against Women (OVW), the Civil Rights Division and the Office of Community Oriented Policing Services (COPS Office) collaborated to produce the guidance.

The guidance serves two key purposes.  First, it aims to examine how gender bias can undermine the response of law enforcement agencies (LEAs) to sexual assault and domestic violence.  Second, it provides a set of basic principles that – if integrated into LEAs’ policies, trainings and practices – will help ensure that gender bias, either intentionally or unintentionally, does not undermine efforts to keep victims safe and hold offenders accountable.

The guidance, through a series of detailed case examples, advises law enforcement agencies to incorporate the following principles into clear policies, comprehensive training and effective supervision protocols:

• Recognize and address biases, assumptions and stereotypes about victims.
• Treat all victims with respect and employ interviewing tactics that encourage a victim to participate and provide facts about the incident.
• Investigate sexual assault or domestic violence complaints thoroughly and effectively.
• Appropriately classify reports of sexual assault or domestic violence.
• Refer victims to appropriate services.
• Properly identify the assailant in domestic violence incidents.
• Hold officers who commit sexual assault or domestic violence accountable.
• Maintain, review and act upon data regarding sexual assault and domestic violence.

A form of discrimination, gender bias may result in LEAs providing less protection to certain victims on the basis of gender, failing to respond to crimes that disproportionately harm a particular gender or offering less robust services due to a reliance on gender stereotypes.

Gender bias can manifest in police officers misclassifying or underreporting sexual assault and domestic violence cases; inappropriately jumping to conclusions and labeling sexual assault cases unfounded; failing to test sexual assault kits; interrogating rather than interviewing victims and witnesses; treating domestic violence as a family matter rather than a crime; failing to enforce protection orders; or failing to treat same-sex domestic violence as a crime.  These failures may ultimately compromise law enforcement’s ability to ascertain the facts, determine whether the incident constitutes a crime and develop a case that holds the perpetrator accountable.  

The Department of Justice has included additional resources in an appendix to the guidance to further assist LEAs in improving their response to sexual assault and domestic violence.  

Identifying and Preventing Gender Bias Guidance

Gender Bias Policing Guidance Fact Sheet

The Department of Justice announced today that Crédit Agricole (Suisse) SA (CAS), Dreyfus Sons & Co Ltd, Banquiers (Dreyfus), and Baumann & Cie, Banquiers (Baumann), reached resolutions under the department’s Swiss Bank Program.  These banks collectively will pay penalties of more than $130 million.

“The department continues to receive detailed information regarding the myriad schemes used by Swiss banks, their employees and other individuals to encourage and profit from the concealment by U.S. taxpayers of foreign accounts,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. “Our offshore investigations into this conduct expand as each new entity, individual and foreign jurisdiction is disclosed.”

The Swiss Bank Program, which was announced on Aug. 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States.  Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts.  Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.

Under the program, banks are required to:

• Make a complete disclosure of their cross-border activities;

• Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;

• 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;

• Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and

• Pay appropriate penalties.

Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.

According to the terms of the non-prosecution agreements signed today, each bank agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay a penalty in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.

CAS, a corporation organized under the laws of Switzerland and headquartered in Geneva, operates a financial services business predominantly focused on offering private banking and wealth management services to high net worth clients.  In the period since Aug. 1, 2008, CAS operated Swiss branch offices in Lausanne, Lugano, Basel and Zurich.  CAS closed the Basel office in 2013.  CAS is wholly owned by Crédit Agricole Private Banking, a French holding company created in 2011 to hold private banking entities of the French Crédit Agricole Group.  CAS is the result of the 2005 merger of two Swiss banks that were originally formed by two French banks: Crédit Lyonnais (Suisse) S.A., which was formed in 1876 by the French bank Crédit Lyonnais, and Banque Indosuez (Suisse) SA, which was formed in 1956 by the French bank Banque Indosuez.

CAS opened, maintained and profited from undeclared accounts belonging to clients that it knew, or should have known, were U.S. taxpayers—including those who CAS knew, or should have known, were likely not complying with their U.S. tax obligations.  CAS provided certain of its clients, including ones with U.S. tax reporting obligations, with access to its then wholly-owned subsidiary Crédit Agricole Suisse Conseil (CASC), based in Geneva.  CASC, directly or through its subsidiaries, provided services that included international estate and tax planning, as well as the establishment and administration of non-U.S. entities.  CASC provided its services exclusively to private banking clients of the Crédit Agricole Group, including CAS.  CAS sold its interest in CASC to an unaffiliated third party on July 8, 2015.

Effective in 2001, CAS entered into a Qualified Intermediary (QI) Agreement with the Internal Revenue Service (IRS).  The QI regime provided a comprehensive framework for U.S. information reporting and tax withholding by a non-U.S. financial institution relating to U.S. securities.  Pursuant to its interpretation of the terms of its QI Agreement, CAS’s view was that the reporting and withholding obligations of its QI Agreement did not apply to accountholders who were not trading in U.S. securities or accounts that were held in the names of non-U.S. entities that, for U.S. tax purposes, were deemed to be corporations and the beneficial owners of such accounts.  As a result, from in or about 2001 and continuing past Aug. 1, 2008, CAS serviced and profited from certain U.S. taxpayers without disclosing their identities to the IRS.

In a number of instances, CAS maintained accounts for certain U.S. taxpayers in the names of corporations, foundations, trusts or other legal entities that were organized in non-U.S. jurisdictions, including the Bahamas, the British Virgin Islands, Columbia, Curaçao, Hong Kong, Mauritius and Panama.  CASC provided, directly or through its subsidiaries, corporate services to at least 25 such accounts.  Eighteen of these accounts held U.S. securities, two of which received services from CASC or subsidiaries.  In some cases, CAS knew or had reason to know that certain offshore entity accounts were operated without strict adherence to corporate formalities.  In at least seven instances, CAS accepted from the directors of these entities an IRS Form W-8BEN (or CAS’s substitute “Declaration of Non U.S. Status” form) that falsely declared or implied that the entity was the beneficial owner of the assets deposited in the account when CAS knew, or had reason to know, that the entity was being operated as a sham, conduit or nominee with respect to its U.S. taxpayer owner.  At least six such offshore entity accounts held U.S. securities and were not reported to the IRS, in violation of CAS’s QI Agreement.

Upon client instruction, CAS transferred the assets of certain U.S.-related accounts belonging to some of its U.S. taxpayer clients in ways that concealed the U.S. connection to those accounts.  CAS implemented a flawed account closing protocol that enabled certain U.S. taxpayer clients to exit their CAS accounts using ways and means that continued to conceal the accounts from the IRS.  As a result, certain U.S. taxpayer clients were able to utilize, and in some instances fully deplete, the assets of undeclared accounts held at CAS through substantial and/or successive withdrawals of cash, reloads of prepaid stored value cash cards or bank checks.  In one such instance, an employee of CAS asked a CAS relationship manager to encourage the use of a prepaid stored value cash card as a means of facilitating account closure.

In addition, in certain instances and on the client’s instruction, CAS transferred assets from U.S.-related accounts briefly through non-U.S. accounts at CAS en route to accounts at unaffiliated banks without documenting the U.S. relationship to these assets at the time of the transfers.  As a result of such transactions, the receiving banks were unable to identify the assets that they received as U.S.-related assets.  In a number of other instances, CAS followed client instructions to remove U.S. taxpayers as the holders or beneficial owners of U.S.-related accounts or to close U.S.-related accounts by transferring assets from the accounts to other accounts maintained by CAS or a CAS affiliate held in the names of other people or entities.  CAS documented such instances as donations to, or other bona fide transactions with, the transferees.  However, certain CAS relationship managers knew, or had reason to know, that the U.S. taxpayers originally named on such accounts or in control of such assets:

• Continued to maintain effective economic ownership, control and/or enjoyment of the accounts and their assets, or

• Regained ownership or control over the assets after being transferred to accounts at unaffiliated financial institutions.

Before and throughout its participation in the Swiss Bank Program, CAS committed to providing full cooperation to the U.S. government and has made timely and comprehensive disclosures regarding its U.S. cross border business.  Among other things, CAS described in detail the structure of its cross border business for U.S.-related accounts including, but not limited to:

• Its cross border policies and directives;

• Data on desks and employees with elevated concentrations of U.S.-related accounts;

• Information on key external asset managers that had significant involvement with U.S.-related accounts;

• The names and functions of individuals who were involved in the structuring, operation or supervision of CAS’s cross border business for U.S.-related accounts; and

• Written summaries on its largest U.S.-related accounts and those involving conduct disclosed herein.

Since Aug. 1, 2008, CAS maintained approximately 954 declared and undeclared U.S.-related accounts having a maximum aggregate dollar value in excess of $1.8 billion.  CAS will pay a penalty of $99.211 million.

Dreyfus is a traditional private bank founded in 1813 in Basel, Switzerland.  As one of the oldest family-owned banks in Switzerland, Dreyfus is managed today by the sixth generation of the founder’s family.  In November 2013, Dreyfus opened a representative office in Tel Aviv to serve existing and new clients in the Israeli market.  Other than the Tel Aviv representative office, Dreyfus has never operated a desk outside of Switzerland. 

Following World War II, Dreyfus created Panama corporations to hold funds for clients.  This practice had its roots in the desire of Jewish clients to protect their assets for reasons of personal safety, and the purpose and operation of the entities was to conceal ownership of the assets from all government authorities, “friendly” or otherwise.  However, the practice extended well into the 2000s.  Among the Panama entity accounts created by Dreyfus are 33 U.S.-related accounts, the oldest of which opened in 1951.  The combined high value of these accounts was approximately $90 million.  The U.S. person beneficial owners of the Panama entity accounts were properly identified as beneficial owners of the entities on Forms A pursuant to Swiss know your customer rules.  However, the entities were identified as the beneficial owner on IRS Forms W-8BEN, when, as Dreyfus well knew, the true beneficial owners were U.S. persons.  Dreyfus employees – primarily the Deputy Chairman of the Executive Management, a former member of Dreyfus’s Board of Directors and Head of the Gérance division, which provides services mainly to corporate entities, and a former deputy manager – also served as corporate directors of the entities. 

With respect to at least two Panama entity accounts, the entity structure was used to conceal payments into the United States.  For example, one Panama entity account was opened in 1991 with a husband and wife, both U.S. nationals living in the United States, as beneficial owners.  The account, which had a high value of over $1 million during the period since Aug. 1, 2008, was opened with funds inherited from a relative with an account at Dreyfus.  Beginning in 2008, checks in amounts between $4,000 and $5,000 each were sent to the husband and the couple’s three sons in the United States on a regular basis.  In total, 205 checks with a combined value of approximately $925,000 were sent to the individual family members in the United States.  Dreyfus’s efforts to convince the beneficial owners to disclose the account were unsuccessful, and the account was closed in 2012 without being disclosed to U.S. authorities.

For four Panama entity accounts, Dreyfus allowed the accounts to be closed in the form of bearer shares, which assisted in the further concealment of assets in the accounts.  A bearer share is a security that is not required to be registered and which can be transferred without an endorsement of any kind.  Thus, a bearer share is negotiable by whoever possesses it.  For example, an individual can purchase shares from an issuer and exchange the shares for cash at a financial institution that redeems bearer shares or may give the shares to another individual, who may exchange the shares for cash.  The four Panama entities used assets in the accounts to purchase bearer shares at Dreyfus, with the shares then physically delivered to representatives of the Panama entities in closure of the accounts.  Because the shares could then be delivered to the U.S. persons whose assets were converted to bearer shares, or to anyone else, funds from these accounts left Dreyfus in a virtually untraceable manner.  With respect to these four accounts, over $4 million in assets left Dreyfus in the form of bearer shares.   

Dreyfus also opened and maintained at least 34 U.S.-related accounts for domiciliary entities created in foreign countries including the Bahamas, the British Virgin Islands, the Isle of Man, Liberia, Liechtenstein, Mauritius, Nevis and Switzerland.  For each account, the U.S. beneficial owner was properly identified in bank documents for purposes of Swiss know your customer rules, but the non-U.S. entity was identified as the beneficial owner of the account on IRS Forms W-8BEN.  In this manner, Dreyfus assisted U.S. persons in concealing ownership of the assets. 

Separate from its traditional private banking services, over 20 years ago, Dreyfus  management agreed to serve as a custodian for physical gold and cash for clients of a third party, a British Virgin Islands entity whose business operations are based in Switzerland (Entity #1).  Entity #1 also maintained and operated a storage facility at the Zurich airport for the storage of precious metals other than gold, independent of its relationship with Dreyfus.  Dreyfus’s relationship with Entity #1 is overseen by Dreyfus’s Head of Legal and Compliance.  For introducing customers to Dreyfus, Entity #1 receives a share of the general fees earned by Dreyfus for storing the gold and cash.

A total of 315 U.S.-related accounts with a combined high value of approximately $440 million in gold and/or cash were held through Entity #1 and custodied by Dreyfus.  Although Entity #1’s master account at Dreyfus is held in the name of a British Virgin Islands entity, each U.S. person storing gold or cash with the bank has a subaccount of Entity #1’s master account and can hold the subaccount in the name of an individual, trust, foundation, corporation or other structure.  Ninety-two of these 315 U.S.-related gold and cash accounts were held in the name of an entity.  Although some of the gold and cash client base maintained their accounts because of fears related to the collapse of the banking system, upon review by Dreyfus and the department, certain of the gold and cash storage accounts show strong indicia of the concealment of assets, such as being held in the name of nominee entities.

Since Aug. 1, 2008, Dreyfus held a total of 855 U.S.-related accounts with a combined high value of assets under management of approximately $1.76 billion.  Dreyfus will pay a penalty of $24.161 million.

Baumann is a traditional private bank founded in 1920, which is headquartered in Basel, Switzerland. In June 2009, Baumann opened a branch in Zurich dedicated purely to private banking.

The majority of Baumann’s U.S. clients structured their accounts so that they appeared as if they were held by a non-U.S. legal structure, such as an offshore corporation or trust, which aided and abetted the clients’ ability to conceal their undeclared accounts from the IRS. Baumann was not involved in setting up these entities, but those entities were generally created or serviced by a few Zurich-based lawyers with whom the relationship managers in Baumann’s Zurich branch were personally acquainted. In the period since Aug. 1, 2008, Baumann opened U.S.-related accounts for non-U.S. structures, such as offshore corporations or trusts.  These offshore entities included British Virgin Islands, British West Indies, Panama and Seychelles corporations, as well as Liechtenstein foundations, all of which were established by external law firms.

As one example, Baumann opened an account in June 2009 for a Panama corporation, established in 2000, where the beneficial owner as listed on Form A was a U.S. citizen domiciled in the United States.  This person was a retired lawyer living in Las Vegas.  The beneficial owner provided a U.S. passport upon opening the account, which was funded by $27 million from the accountholder’s account at another bank.  The accountholder signed Baumann’s compliance form indicating that the Panama corporation was in fact the beneficial owner of the assets for U.S. tax withholding purposes when Baumann knew or should have known this was untrue.

Baumann offered a variety of other traditional Swiss banking services that, although available to all its clients, it knew could assist, and did assist, its U.S. clients in concealing their undeclared assets and income.  Among other things, Baumann opened numbered accounts and held bank statements and other mail relating to some U.S.-related accounts at Baumann’s offices in Switzerland, rather than sending the statements and mail to the U.S. taxpayers in the United States. 

Regarding one numbered account, in July 2010, the clients transferred $2 million to an account at Baumann from an account at Credit Suisse.  The taxpayers were American horse breeders who had granted a power of attorney to an external asset management company based in Zurich.  That external asset manager introduced the clients to Baumann, and Baumann was instructed to retain the correspondence, to send copies to the clients’ external asset manager and not to invest in U.S. securities.  In 2010 and 2011, Baumann was instructed to make repeated payments of under $10,000 to a U.S. bank account in the name of a U.S.-based coin dealer.  From June to August 2011, the clients instructed Baumann to buy 2,279 pieces of Krugerrand gold coins, at that time worth approximately $3.7 million.  In September 2011, the clients instructed Baumann to close the account.  The remaining assets were withdrawn in cash, and the account closed in 2011.

Since Aug. 1, 2008, Baumann maintained a total of 167 U.S.-related accounts, with an aggregate peak value of $514.1 million. Baumann will pay a penalty of $7.7 million.

In accordance with the terms of the Swiss Bank Program, each bank mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. accountholders at these banks who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts.  On Aug. 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement.  With today’s announcement of these non-prosecution agreements, noncompliant U.S. accountholders at these banks must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

“Today’s resolutions reflect the tough but measured terms of the Department of Justice’s Swiss Bank Program,” said acting Deputy Commissioner International David Horton of the IRS Large Business & International (LB&I) Division. “Large and small financial institutions are accepting their responsibility and putting their non-compliance behind them. They are also providing us information that will lead us to those U.S. taxpayers who have failed to report their foreign accounts and pay their income taxes.”

“Although the end of the year is upon us, we will not slow down in our efforts to bring banks and U.S. citizens hiding money offshore into compliance,” said Chief Richard Weber of IRS-Criminal Investigation (CI).  “The agreements signed today are further evidence that the Swiss Bank Program has effectively decimated the hidden offshore banking industry. Collectively, the magnitude of data provided by these banks increases the amount of information we know exponentially about individuals hiding their money and the countries that are facilitating it.  IRS-CI will continue to use all of the information we gather from these agreements to vigorously pursue individual U.S. taxpayers who illegally conceal assets offshore and to develop innovative strategies to combat international tax evasion worldwide.”

Acting Assistant Attorney General Ciraolo thanked the IRS and in particular, IRS-CI and the IRS LB&I Division for their substantial assistance.  Acting Assistant Attorney General Ciraolo also thanked Paul G. Galindo, Kathleen E. Lyon and Carl D. Wasserman, who served as counsel on these matters, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer, Senior Litigation Counsel Nanette L. Davis and Attorney Kimberle E. Dodd of the Tax Division.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

Attorney General Loretta E. Lynch today announced seven awards totaling $2.7 million in funding through the Department of Justice’s Office on Violence Against Women’s Sexual Assault Justice Initiative (SAJI) to improve how the justice system in general, and prosecution in particular, handles sexual assault cases.  The seven pilot sites will implement performance measures that reflect promising practices for prosecuting sexual assault and promoting justice for victims, receiving technical assistance from AEquitas: The Prosecutor’s Resource on Violence Against Women and participating in the evaluation of the initiative.

“Sexual and domestic violence is a heinous crime, inflicting physical and emotional trauma that can linger for years, with grave consequences for survivors and their loved ones; for neighborhoods and communities and for our country as a whole,” said Attorney General Lynch.  “The Department of Justice is committed to doing everything it can to help prevent, investigate and prosecute these horrendous crimes – including working to ensure that our greatest partners in this effort, the state and local law enforcement officers on whom we all rely, have the tools, training and resources they need to fairly and effectively address allegations of sexual assault and domestic violence.”

The seven pilot sites that will receive funding through the OVW’s Sexual Assault Justice Initiative are: Jefferson County Commission, Birmingham, Alabama; city of Los Angeles, Los Angeles; Cobb County Board of Commissioners, Marietta, Georgia; city and county of Honolulu, Honolulu; New Hampshire Department of Justice, Concord, New Hampshire; Cherokee Nation, Tahlequah, Oklahoma; and county of Sauk, Baraboo, Wisconsin.  The awards for each site range from $390,000 – $400,000.

Attorney General Lynch made the announcement at an event announcing the release of a Justice Department guidance on “Identifying and Preventing Gender Bias in Law Enforcement Response to Sexual Assault and Domestic Violence,” in Washington, D.C.  The grants are part of the Justice Department’s ongoing commitment to protecting women from violence and strengthening the capacity of communities to respond to domestic and sexual violence.

The demonstration initiative is designed to strengthen the justice system’s response to sexual violence and enhance collaborations among sexual assault victim services providers, law enforcement agencies and sexual assault medical forensic services providers.  With funding from the Grants to Encourage Arrest Policies and Enforcement of Protection Orders Program, the Rural Sexual Assault, Domestic Violence, Dating Violence and Stalking Grant Program and the Tribal Governments Grant Program, SAJI sites will be able to use the funds to strengthen services in their communities that support sexual assault victims.

For more information on OVW and its programs, please visit: www.justice.gov/ovw. 

An Alabama resident was arrested today after being indicted on Dec. 9 by a federal grand jury sitting in Montgomery, Alabama, on 15 counts of wire fraud, 15 counts of aggravated identity theft and two counts of passing U.S. Treasury checks with a false endorsement, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney George L. Beck, Jr. of the Middle District of Alabama.

According to the allegations in the indictment, James Vernon Battle, a resident of Montgomery County, used stolen personal identification information to prepare and file false federal income tax returns for tax years 2013 and 2014 for the purpose of obtaining fraudulent tax refunds.  Battle directed the Internal Revenue Service (IRS) to issue the requested refunds by depositing the funds onto prepaid debit cards and by issuing U.S. Treasury checks. 

If convicted, Battle faces a statutory maximum sentence of 20 years in prison for each count of wire fraud, a mandatory minimum sentence of two years in prison for aggravated identity theft and a statutory maximum sentence of 10 years in prison for each count of passing a U.S. Treasury check with a false endorsement.  He also faces substantial monetary penalties and restitution.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Beck commended special agents of IRS-Criminal Investigation and the U.S. Secret Service, who investigated the case, and Trial Attorneys Michael C. Boteler and Robert J. Boudreau of the Tax Division and Assistant U. S. Attorney Jonathan Ross of the Middle District of Alabama, who are prosecuting this case.

An indictment merely alleges that crimes have been committed.  The defendant is presumed innocent until proven guilty beyond a reasonable doubt.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website. 

The Department of Justice’s Civil Rights Division and the Department of Homeland Security’s U.S. Immigration and Customs Enforcement (ICE) announced today the issuance of a joint Guidance for Employers Conducting Internal Employment Eligibility Verification Form I-9 Audits.

Under the Immigration and Nationality Act (INA), employers are required to verify the work-authorization of their employees using the Form I-9 and are prohibited from knowingly hiring unauthorized workers.  Employers seeking to ensure their Form I-9 practices comply with federal law are increasingly conducting internal audits of their Forms I-9.  To ensure that these audits are conducted properly and do not discriminate against employees, ICE and OSC have collaborated to issue formal guidance on the topic.

“Employers have a responsibility to ensure their Form I-9 practices are in compliance with the Immigration and Nationality Act,” said Director Sarah Saldaña of ICE.  “If used properly, audits can be an effective tool to achieve this end.”

“Today’s guidance provides critical information for employers to ensure that their internal audits of I-9 forms are conducted fairly and accurately, without discrimination or retaliation against their employees,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division.  “Without clear and effective guidelines, internal audits can create barriers to employment for work-authorized individuals.”

The joint guidance was developed by the two agencies with significant input from the Department of Homeland Security’s Office of Civil Rights and Civil Liberties, the U.S. Citizenship and Immigration Services, the Department of Labor, the National Labor Relations Board, the Equal Employment Opportunity Commission and stakeholders around the country. 

This guidance is part of the six-month action plan of the Interagency Working Group for the Consistent Enforcement of Federal Labor, Employment and Immigration Laws (interagency working group).  The interagency working group’s goals are to enhance coordination in those cases where federal responsibilities to enforce labor, employment and immigration laws may overlap; to ensure that workers who cooperate with labor and employment enforcement may continue to do so without fear of retaliation; to ensure that unscrupulous parties do not attempt to misuse immigration enforcement or labor laws to thwart or manipulate worker protections or labor and immigration enforcement; and to ensure the effective enforcement of these laws.

Among other things, the guidance provides employers with information regarding the scope and purpose of audits; considerations before conducting internal audits; details regarding how to correct errors, omissions or other deficiencies found on Forms I-9 and how to cure deficiencies related to E-Verify queries; and guidance regarding the anti-discrimination mandate.  The joint guidance can be found on DHS’s website https://www.ice.gov/sites/default/files/documents/Document/2015/i9-guidance.pdf and on the Civil Rights Division’s Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC) website /media/807576/dl?inline. 

ICE is responsible for enforcing the employer sanctions provision of the INA, and OSC enforces the anti-discrimination provision of the statute.  For more information about protections against employment discrimination under immigration laws, call OSC’s worker hotline at 1-800-255-7688 (1-800-237-2515, TTY for hearing impaired), call OSC’s employer hotline at 1-800-255-8155 (1-800-237-2515, TTY for hearing impaired), sign up for a free webinar at www.justice.gov/crt/about/osc/webinars.php, email osccrt@usdoj.gov or visit the website at www.justice.gov/crt/about/osc.   

A Middle Island, New York resident pleaded guilty today in the U.S. District Court for the Eastern District of New York to one count of conspiracy to defraud the United States, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

Rodney Chestnut, a retired corrections officer for the New York City Department of Corrections, pleaded guilty to count one of the pending indictment, which alleged that between 2008 and 2012, he participated in a scheme to submit false tax returns seeking fraudulent income tax refunds in excess of $3.4 million to the Internal Revenue Service (IRS).  According to the indictment, Chestnut worked with Clive Henry, a former IRS employee in the business of preparing tax returns, and another individual, to recruit clients to this scheme, which involved using fraudulent IRS Forms 1099-OID to falsely claim refunds of taxes that never paid over to the IRS.  The indictment alleged that Chestnut, Henry and the other individual collected fees from clients based on a percentage of the refunds received, and supplied the clients with correspondence containing false and frivolous claims to send to the IRS in response to IRS warning letters regarding the false tax returns.

In 2013, a federal court permanently enjoined Chestnut from promoting a tax fraud scheme involving fraudulent Forms 1099-OID and from preparing tax returns for anyone other than himself.

U.S. District Judge Kiyo A. Matsumoto scheduled sentencing for May 12, 2016.  Chestnut faces a statutory maximum sentence of five years in prison and a fine of up to $250,000, or twice the loss from the offense.  Henry pleaded guilty to conspiracy to defraud the United States on Nov. 17.  His sentencing is set for March 23, 2016. 

Acting Assistant Attorney General Ciraolo commended special agents of IRS-Criminal Investigation, who investigated the case and Trial Attorneys Erin Pulice, Mark Kotila and Jeffrey A. McLellan of the Tax Division, who are prosecuting the case.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website. 

A federal grand jury in Greenville, North Carolina, has returned a nine-count indictment charging two engineering officers employed by Oceanfleet Shipping Limited with crimes relating to the illegal discharge of oily wastes directly into the sea, announced Assistant Attorney General John C. Cruden for the Department of Justice’s Environment and Natural Resources Division and U.S. Attorney Thomas G. Walker for the Eastern District of North Carolina. 

Oceanfleet Shipping Limited is a Greek shipping company that operates the cargo carrier M/V Ocean Hope.  The two engineering officers indicted are the vessel’s Chief Engineer, Rustico Yabut Ignacio, 65, of the Philippines; and the Second Engineer, Cassius Flores Samson, 51, of the Philippines.

According to the indictment, in 2015 Samson bypassed pollution prevention equipment with an unauthorized hose connection, or “magic pipe,” to discharge oil sludge generated by the M/V Ocean Hope directly into the sea.  Samson also ordered crewmembers on numerous other occasions to pump oily mixtures from the vessel’s bilges into the sea using the ship’s General Service Pump rather than processing these mixtures through the vessel’s pollution prevention equipment.

The operation of marine vessels like the M/V Ocean Hope generates large quantities of waste oil and oil-contaminated waste water.  International and U.S. law requires that these vessels use pollution prevention equipment to preclude the discharge of these materials.  Should any overboard discharges occur, they must be documented in an oil record book, a log that is regularly inspected by the U.S. Coast Guard.  To hide the illegal discharges, Ignacio and Samson allegedly maintained a fictitious oil record book that failed to record the disposal, transfer, or overboard discharge of oil from the vessel.  The oil record book also contained false entries stating that pollution prevention equipment had been used when it had not.

The indictment further alleges Ignacio and Samson ordered subordinate crewmembers to lie to the U.S. Coast Guard during an inspection in Wilmington, North Carolina.  The crewmembers were allegedly instructed to deny knowledge of the connection of the pipe used discharge sludge and to tell the Coast Guard that Oily Water Separator had been used as required under international law to process oily mixtures before discharge when they knew it had not.

Both engineering officers were charged with violating the federal Act to Prevent Pollution from Ships for failing to record overboard discharges in the vessel’s oil record book, conspiracy for their agreement to violate federal law, obstruction of justice for presenting false documents intended to deceive the Coast Guard and witness tampering for ordering subordinate crewmembers to mislead and lie to the Coast Guard.  Samson was also charged with false statements and obstruction of justice for lying to Coast Guard inspectors about the discharges.  An indictment is merely a formal charge that a defendant has committed a violation of criminal laws and every defendant is presumed innocent until and unless proven guilty.

The U.S. Coast Guard, Sector North Carolina, investigated the case.  Assistant U.S. Attorney Banumathi Rangarajan with the U.S. Attorney's Office for the Eastern District of North Carolina and Trial Attorneys Shane N. Waller and Brendan Selby with the Department of Justice’s Environmental Crimes Section are prosecuting the case.

A Portland, Oregon, resident was sentenced today to more than two years in prison for her role in a fraudulent income tax refund scheme, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

Jasmine Mason, 33, was sentenced to 32 months in prison followed by three years of supervised release.  According to the indictment and information disclosed in related court proceedings, Mason conspired with Tataneisha White, Shawntina Ware, Brandon Leath and another individual to file more than 227 false income tax returns falsely claiming more than $1 million in refunds.  The indictment charged all five individuals with conspiracy to file false claims and multiple counts of filing false claims, wire fraud and theft of government funds.

Mason pleaded guilty in June, to one count of conspiracy to file false claims, one count of filing a false claim and one count of theft of government funds.  In her plea agreement, Mason admitted that she and her co-conspirators prepared and filed false income tax returns that included fictitious W-2 wages and inflated amounts of income tax withheld to generate refunds ranging from $1,000 to $12,000.  Mason also admitted that she and her co-conspirators shared personal identifying information with each other to file the false tax returns and used multiple bank accounts controlled by the co-conspirators or their family and friends to split the fraudulent refunds.

In addition to the prison term, U.S. District Judge Robert E. Jones for the District of Oregon ordered Mason to pay $336,937.61 in restitution to the Internal Revenue Service (IRS).  On Nov. 3, co-conspirator Leath was sentenced to 24 months in prison and ordered to pay $55,635.61 in restitution to the IRS.   White and Ware are awaiting sentencing on their guilty pleas to similar charges.

Acting Assistant Attorney General Ciraolo commended special agents of IRS-Criminal Investigation, who investigated the case and Trial Attorneys Lori A. Hendrickson and Ryan R. Raybould of the Tax Division, who are prosecuting the case with valuable assistance from the U.S. Attorney’s Office in Portland.

The Department of Justice announced today that Cornèr Banca SA (Cornèr) and Bank Coop AG (Bank Coop) reached resolutions under the department’s Swiss Bank Program. 

The Swiss Bank Program, which was announced on Aug. 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States.  Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts.  Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.

Under the program, banks are required to:

• Make a complete disclosure of their cross-border activities;

• Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;

• 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;

• Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and

• Pay appropriate penalties.

Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.

According to the terms of the non-prosecution agreements signed today, each bank agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay a penalty in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.

Cornèr is headquartered in Lugano, Switzerland, with branch offices in Chiasso, Geneva, Locarno and Zurich, Switzerland.  Cornèr has two wholly owned affiliates: Cornèr Banque (Luxembourg) SA, based in Luxembourg, and Cornèr Bank (Overseas) Ltd., based in the Bahamas.  Cornèr offers a full range of traditional banking services, but it specializes in private banking, payment cards and securities trading. 

For 40 years, Cornèr has offered both credit cards and prepaid debit cards under its CornèrCard brand name to its clients and clients of other financial institutions.  Since Aug. 1, 2008, U.S. persons held 1,312 CornèrCard accounts at Cornèr. Use of CornèrCards by U.S. persons facilitated their access to and use of any undeclared funds on deposit at Cornèr and at other Swiss banks.

Cornèr assisted certain of its U.S. clients to evade their U.S. tax obligations, file false federal tax returns with the Internal Revenue Service (IRS) and hide overseas assets from the IRS.  Cornèr opened, maintained and serviced accounts for U.S. persons that it knew were likely not declared to the IRS or the U.S. Department of the Treasury as required by U.S. law. Cornèr also maintained correspondent accounts at a U.S. bank to facilitate certain transactions for its clients – namely, conducting wire transfers in U.S. dollars and collecting checks issued in U.S. dollars.  Such transfers included transactions involving U.S.-related accounts.

Between 2001 and 2008, Cornèr relationship managers traveled to the United States on at least 10 occasions to visit existing Cornèr clients.  All of the U.S. client visits were approved by Cornèr management.  Cornèr executives accompanied relationship managers on several of the trips to the United States and also visited with U.S. clients.  Matters discussed during these client visits included account performance, account fees, account investment positions, alternative investments, increasing client deposits at Cornèr, client satisfaction with Cornèr, how to send account funds to the United States to purchase assets and referrals of new clients to Cornèr by existing clients.  Cornèr relationship managers also met with holders of U.S.-related accounts in countries other than the United States and Switzerland, such as Italy.

In August 2008, Cornèr’s executive board decided that:

• There would be no changes to Cornèr’s existing U.S.-related accounts at that time, based on the board’s assessment that Cornèr had not engaged in the same type of conduct as had UBS;

• Cornèr would continue accepting new U.S. clients, but only after review by Cornèr’s compliance department and approval by an executive board member; and

• Cornèr would not accept any new U.S. clients coming from UBS.

However, after August 2008, Cornèr accepted new U.S.-related accounts from UBS, and Cornèr had reason to know that some of these accounts were undeclared. Also, after August 2008, Cornèr accepted new U.S.-related accounts, including one of the above-mentioned UBS accounts, without approval by an executive board member.

Cornèr provided its U.S. clients with the option to enter into hold-mail agreements, which allowed U.S. persons to keep evidence of their accounts outside of the United States in order to conceal assets and income from the IRS.  Cornèr also provided its U.S. clients with the option to request numbered accounts, including code-name accounts.  Holders of these accounts were permitted to use code names in all of their correspondence addressed to Cornèr and agreed that correspondence from Cornèr addressed to the code names would be considered as addressed to the clients.  Examples of code names used by U.S. persons for their numbered accounts at Cornèr include “Dumbledor,” “Windstopper,” “Rocking” and “Anticipation.”  Cornèr understood that providing numbered accounts and permitting code-name correspondence allowed U.S. persons to keep their identities secret from U.S. authorities in order to conceal assets and income from the IRS. 

Cornèr had U.S.-related accounts that were beneficially owned by U.S. persons but held in the names of structures, including entities such as corporations, foundations or trusts.  Cornèr knew, or had reason to know, that many of these structures were used by U.S. clients to help conceal their identities from the IRS. The structures were organized under the laws of various jurisdictions, including the Bahamas, Belize, the British Virgin Islands, Jersey, Liberia, Liechtenstein, the Marshall Islands, the Netherlands Antilles, Panama, St. Kitts and Nevis, St. Vincent and the Grenadines and Uruguay.  Cornèr Bank (Overseas), Cornèr’s Bahamian affiliate, created international business corporations organized under the laws of the Bahamas, and several such corporations opened accounts at Cornèr that were beneficially owned by U.S. persons.

Since Aug. 1, 2008, Cornèr held 383 U.S.-related accounts with over $351 million in assets.  Cornèr will pay a penalty of $5.068 million.

Bank Coop is a Swiss retail bank headquartered in Basel, Switzerland.  Bank Coop was founded in 1927, when the Swiss Confederation of Trade Unions and the Federation of Swiss Consumer Associations established it as a cooperative society under the name Cooperative Central Bank.  Today, Bank Coop is a publicly traded company listed on the SIX Swiss Exchange.  Basler Kantonalbank has been Bank Coop’s majority shareholder since December 1999.  Bank Coop has 32 branches throughout Switzerland.  It has never had offices, branches or subsidiaries outside the country. 

Bank Coop offered a variety of traditional Swiss banking services that it knew could assist, and did assist, U.S. clients in concealing their undeclared assets and income.  These services included hold mail, numbered accounts and travel cash cards.  Bank Coop accepted regular instructions from one client who is a U.S. citizen and resident to transfer approximately $9,500 to his account in the United States each month.  After Aug. 1, 2008, Bank Coop opened accounts for U.S. residents who transferred assets from other Swiss financial institutions, including UBS and Credit Suisse AG, knowing that it was likely that the assets were undeclared.

Bank Coop also processed substantial cash withdrawals in connection with the closure of some U.S.-related accounts.  For example, in February 2012, a client visited Bank Coop three times and withdrew $30,000, 30,000 in euros and 25,000 in euros, respectively, on those visits.  At that time, the client informed Bank Coop that he decided to close the account, expressing concern about recent developments regarding Swiss bank secrecy and disclosure requests by U.S. and EU authorities.  In March 2012, the client withdrew approximately 30,000 in Swiss francs and, upon closing the account in June 2012, withdrew the remaining balance of approximately 5,000 euros.

In April 2010, one client visited Bank Coop and requested that the bank purchase one kilogram of gold, which the client stored in his safety deposit box at Bank Coop.  In August 2010, the client instructed Bank Coop to purchase another kilogram of gold, which was collected by the client’s daughter.  In March 2011, the client instructed Bank Coop to purchase another kilogram of gold, which the client stored in his safety deposit box.  In September 2012, after being advised by Bank Coop that his account would be closed on account of his U.S. residence, the client instructed Bank Coop to sell the gold in his safety deposit box and credit the proceeds to his account at Bank Coop.  In October 2012, the client instructed Bank Coop to close the account and send a “crossed” check of approximately $335,000 to a Swiss law firm.

Bank Coop opened and maintained accounts held in the name of non-U.S. entities, including a Panama corporation and a Hong Kong corporation, while knowing that U.S. taxpayers were the true beneficial owners of the accounts held by these non-U.S. entities.  In at least one instance, Bank Coop was aware that a U.S. person was the true beneficial owner of an account held by a Panama entity but accepted a false IRS Form W-8BEN from the entities’ directors.  The false Form W-8BEN falsely declared that the beneficial owner was not a U.S. taxpayer and was signed by a director of the entity, who also was the director of the external asset manager that introduced the client to Bank Coop. 

In 2001, Bank Coop entered into a Qualified Intermediary (QI) Agreement with the IRS.  The QI regime provided a comprehensive framework for U.S. securities-related information reporting and tax withholding by a non-U.S. financial institution.  In general, if an accountholder wanted to trade in U.S. securities and avoid mandatory U.S. tax withholding, the QI Agreement required Bank Coop to obtain the consent of the accountholder to disclose the client’s identity to the IRS.  Bank Coop continued to service certain U.S. customers without disclosing their identity to the IRS and without considering the impact of U.S. criminal law on that decision.  In 2001, a relationship manager, after winning a contest sponsored by Bank Coop, visited the United States.  During the visit he secured from an accountholder a “Declaration of U.S. Taxable Persons,” in which the accountholder declared that she did not authorize Bank Coop to disclose her name to the U.S. tax authorities and instructed Bank Coop to sell her U.S. securities. 

Since Aug. 1, 2008, Bank Coop maintained 385 U.S.-related accounts, with an aggregate maximum balance of approximately $71.4 million.  Bank Coop will pay a penalty of $3.223 million.        

In accordance with the terms of the Swiss Bank Program, each bank mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. accountholders at these banks who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts.  On Aug. 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement.  With today’s announcement of these non-prosecution agreements, noncompliant U.S. accountholders at these banks must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division thanked the IRS and in particular, IRS-Criminal Investigation and the IRS Large Business & International Division for their substantial assistance.  Acting Assistant Attorney General Ciraolo also thanked Gregory E. Van Hoey, Michael R. Pahl and Michael N. Wilcove, who served as counsel on these matters, as well as Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer, Senior Litigation Counsel Nanette L. Davis and Attorney Kimberle E. Dodd of the Tax Division.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

Attorney General Loretta E. Lynch released a joint statement with U.K. Home Secretary Theresa May, the Interior Ministers of the U.K., France, Germany, Italy and Spain, U.S. Secretary for Homeland Security Jeh Johnson and European Commissioner for Migration, Home Affairs and Citizenship Dimitris Avramopoulos following a G6 meeting in London on Dec. 9 and 10, 2015:

“Condemning recent terrorist attacks worldwide, including in Sousse, Paris, Bamako, Beirut and San Bernardino, we are united in our determination to combat terrorism through a strong yet proportionate national and international response.

“We reaffirm our commitment to tackling the threat posed by Daesh/ISIL and to countering violent extremism and radicalization with the values that we all share: respect, tolerance and democracy. At the heart of this work is a partnership with wider society: at the same time as we work with them to root out radicalization to violence, we reject any attempts to create division and marginalization amongst those we endeavor to protect.

“We are committed to stepping up cooperation in tackling this threat to our democracies. In particular, consistent with national law, we agree to:

• work with civil society and religious and faith groups to  deliver positive counter-narratives which promote the values underpinning peace, freedom and democracy;
• counter violent extremism, including by disrupting those who support terrorist activity, prosecuting all those who break the law and supporting those vulnerable to radicalisation;
• maximise cooperation and information-sharing between our respective law enforcement and other agencies including through European, US and international mechanisms;
• encourage communications service providers to  consider taking further steps to remove from the internet content which encourages, promotes or inspires the violent extremism associated with Daesh/ISIL and other such terrorist groups;
• enhance further the security of air travel by ensuring that airports worldwide meet the highest international standards both for passengers and cargo;
• continue and enhance cooperation within Europe and with the US on important initiatives, including passenger name records - welcoming political agreement on an EU Passenger Name Records Directive and the EU/US “Umbrella” agreement on data protection and privacy - as well as terrorist finance and further agreements to ensure effective data sharing in the interests of public security and protection; and
• enhance the security of the external border of the EU.

“We undertake to work together resolutely at an EU and international level to deliver the outcomes agreed at our meeting in London.” 

A federal grand jury in Detroit returned an indictment against Frank Haeusler, Volker Hohensee and Harald Sailer for their alleged participation in a conspiracy to fix the prices of parking heaters. 

The indictment charges the three German executives – one current and two former – with conspiring to fix the prices of parking heaters used in commercial vehicles and sold in the aftermarket in the United States and elsewhere.  Parking heaters are devices that heat the interior compartment of a motor vehicle independent of the operation of the vehicle’s engine.

“These senior company officials conspired to fix the aftermarket prices of parking heaters sold to hundreds of businesses throughout the United States and North America,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.  “Today’s indictment reinforces the Department of Justice’s commitment to prosecute those who scheme to thwart competition.”

“Today’s charges outline a deceptive scheme to subvert competition in the marketplace,” said Assistant Director in Charge Diego G. Rodriguez.  “Those who engage in this type of criminal activity not only stand to defraud consumers, but erode the public’s trust in the competitive bidding process.  The FBI will continue to work with the Antitrust Division to ensure the integrity of competition across all industries.”

The indictment, filed today in the U.S. District Court for the Eastern District of Michigan, alleges that Hohensee, Haeusler and Sailer worked together with other conspirators to artificially set aftermarket prices for parking heaters used in commercial vehicles in the United States and beyond.  The charged executives and their co-conspirators met to discuss parking heater prices, agreed to set a price floor for parking heater kits and also agreed to coordinate the timing and amount of price increases for parking heaters. 

According to the charge, the conspiracy existed from as early as October 2007 and lasted until at least Nov. 19, 2012.  Hohensee is the former president of Espar Inc. and a resident of Canada; Haeusler is a former vice president of Espar Inc.’s German affiliate, Eberspaecher Climate Control Systems; and Sailer held the same position at Eberspaecher and remains an executive with the company.

On March 12, 2015, Espar Inc. admitted its role in the price-fixing conspiracy and pleaded guilty in the U.S. District Court for the Eastern District of New York.  The company was sentenced on June 25, 2015 and has paid a $14.9 million criminal fine.

Today’s charge is the result of an ongoing federal antitrust investigation handled by the Antitrust Division’s New York Office with assistance from the FBI’s New York Field Office.  Anyone with information concerning price fixing or other anticompetitive conduct in the parking heater industry should contact the Antitrust Division’s Citizen Complaint Center at 1-888-647-3258 or visit  www.justice.gov/atr/contact/newcase.html.

Haeusler et al Indictment (464.22 KB)

A federal grand jury sitting in Portland, Oregon, returned an indictment yesterday charging a Hillsboro, Oregon, resident with six counts of willfully failing to file an income tax return, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

According to the indictment, Winston Shrout received gross income for the years 2009 through 2014 in amounts that required him to file a federal income tax return.  However, for each of those years, Shrout willfully failed to file any income tax returns.  Shrout’s income included payments for services as a presenter at seminars; licensing fees associated with the sale of products in his name and the name of his business, Winston Shrout Solutions in Commerce; and annual pension payments.

If convicted, Shrout faces a statutory maximum sentence of six years in prison and a maximum fine of $150,000.

Acting Assistant Attorney General Ciraolo thanked special agents of Internal Revenue Service-Criminal Investigation, who investigated the case and Trial Attorneys Stuart A. Wexler and Ryan R. Raybould of the Tax Division who are prosecuting the case. 

An indictment is not a finding of guilt.  Individuals charged in indictments are presumed innocent until proven guilty beyond a reasonable doubt. 

Today, the Department of Justice filed a motion to dismiss a forfeiture action against approximately $115 million alleged to be proceeds of foreign official corruption and involved in money laundering in accordance with a 2007 settlement that directed the funds to be used for the benefit of poor youth and families in Kazakhstan, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division. 

The filing marked the formal completion of the settlement terms through which the governments of the United States, Switzerland and Kazakhstan agreed to release the alleged corruption proceeds in installments to a Kazakh foundation established under the guidance and supervision of the World Bank Group and administered by international development organizations IREX and Save the Children, which managed the foundation’s programs.

In 2007, the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS) and the U.S. Attorney’s Office of the Southern District of New York filed a forfeiture action against approximately $84 million plus interest that had been restrained in Switzerland in 1999 in connection with the prosecution of James H. Giffen and his company, Mercator, by the U.S. Attorney’s Office and the Criminal Division’s Fraud Section.  The funds were allegedly the proceeds of illegal bribe payments to senior Kazakh officials in exchange for oil transactions and property involved in money laundering.  In an apparent attempt to evade criminal investigation, the funds had been transferred into an account in the name of the government of Kazakhstan where they were later restrained and grew to $115,228,671.  Contemporaneous with the forfeiture action, the United States and Kazakhstan filed the settlement agreement, which incorporates a series of international agreements authorizing the release of the funds to the BOTA Foundation, a new Kazakh foundation required to be independent of the government of Kazakhstan, managed by a respected international non-governmental organization and established with the assistance of the World Bank.  In addition, the government of Kazakhstan entered into technical assistance agreements with the World Bank regarding its participation in the Extractive Industries Transparency Initiative and a Public Finance Management Review.

“Transparent, responsible repatriation of corruption proceeds can make a real difference for communities harmed by the abuse of public office,” said Assistant Attorney General Caldwell.  “In just five years of operations, the BOTA Foundation helped more than 208,000 people in need in Kazakhstan, turning more than $115 million in alleged bribe money into assistance to parents, families with disabled children and youth seeking higher education.  Through our Kleptocracy Asset Recovery Initiative, the Department of Justice is committed to fighting back against impunity and seeking creative ways to reduce the harms caused by corruption.”

Under the 2007 agreements, the parties released more than $115 million to the BOTA Foundation for programs running from 2009 through 2014.  The BOTA Foundation utilized the funds in three primary programs, each targeting needs of poor youth in Kazakhstan: a conditional cash transfer program providing financial resources and incentives for health and other needs, a social services program providing grants to local communities and a tuition assistance grant program.

Partnership with the governments of Switzerland and Kazakhstan and close collaboration with the World Bank, program managers IREX and Save the Children, the BOTA Foundation’s Board of Directors, the State Department and USAID were essential to the success of the settlement.  Deputy Assistant Attorney General Bruce Swartz of the Criminal Division, Principal Assistant Deputy Chief Daniel Claman of AFMLS and Assistant U.S. Attorney Barbara Ward of the District of New Jersey negotiated and implemented the agreement on behalf of the United States.  The Criminal Division’s Office of International Assistance provided assistance in this case.  The FBI investigated the matter.

Under the Kleptocracy Asset Recovery Initiative, dedicated prosecutors in AFMLS work in partnership with U.S. Attorneys’ Offices and federal law enforcement agencies to forfeit the proceeds of foreign official corruption and, where possible and appropriate, put forfeited corruption proceeds to use for the benefit of the people of the country harmed by the abuse of public office.  Individuals with information about possible proceeds of foreign corruption located in or laundered through the United States should contact federal law enforcement or send an email to kleptocracy@usdoj.gov.