Ex UBS Banker Discloses Client Names, Avoids Prison (FBAR Post)
Last October we reported on the indictment and arrest of Martin Lack, a Swiss investment adviser and former UBS banker. This week, Lack was sentenced to probation and a $7,500 fine for his role in assisting Americans evade taxes through unreported Swiss accounts. The “story behind the story” is why Lack walked out of court after paying just a small fine.
The Justice Department and IRS say that Lack helped Americans open accounts at UBS and Basel Cantonal Bank. While opening a Swiss account is legal if properly reported, the IRS says that Lack knowingly assisted U.S. clients who were trying to conceal their income or assets from the IRS. U.S. taxpayers are required to annually report offshore accounts on a Foreign Bank Account Report or FBAR.
The government also says that Lack helped customers move their accounts accounts from UBS to Cantonal Bank. That is potentially bad for customers as UBS was under criminal investigation at the time of the account transfers. The IRS says that moving an account to avoid detection is an affirmative act of tax evasion.
On February 26th of 2014, Lack pleaded guilty to a charge of conspiracy to defraud the United States, a felony. This week he was sentenced to probation and a small fine. The court went so far as to say that Lack could return to Switzerland and simply check in once a year. For someone facing years in prison, the sentence was very light. Why?
Why Lack received a fine and was allowed to return home is a great question. Lacking from the court record is the usual plea agreement and sentencing memorandums. They simply don’t exist. Instead, there is a short reference in a March 31st motion to delay the sentencing that says, “the parties have been reviewing and arranging for the production of thousands of documents spanning over a decade.” The Justice Department says the continuance was in the “best interests of justice.”
Translation? Lack cooperated in return for a light sentence. Typical in the prosecution of foreign bankers, investment advisors and lawyers is an agreement to not seek prison in return for disclosure of client lists and future testimony if needed. By not filing any plea agreements, we will never know for sure all the details but we would be shocked if the Justice Department or court allowed Lack to walk without extensive cooperation.
What does this mean for former clients of Lack and his business, Lack & Partner Asset Management? Plenty. It is very probable that Lack has already turned over the names of all his clients. Beyond the simple client list, the IRS and Justice Department usually require a thorough debrief of each name on the list. If there are incriminating notes or emails, the IRS probably has them.
In a recent case, IRS criminal chief Richard Weber said that it wasn’t a question of “IF” people using unreported offshore accounts would be caught but “WHEN”. The IRS and Justice Department have proven very adept at finding taxpayers with unreported offshore accounts. No matter how secret the account, someone knows about it and sooner or later, the IRS will figure out a way to get the information. Prosecution of bankers and asset managers has been especially effective. Unfortunately for taxpayers, all promises of secrecy fly out the window when the person making that promise is facing jail.
Whistleblower Rewards for Offshore Tax Cheats
For over a decade, the IRS and Justice Department has been hot on the trail of offshore tax cheats. We have no idea how many of his clients Martin Lack turned in. What we do know is that his business Lack & Partner Asset Management was helping US taxpayers avoid reporting and paying taxes to the IRS. While Lack is now a convicted felon, many of his colleagues are approaching the IRS in the hopes of avoiding prosecution or collecting a whistleblower reward or both.
The IRS Whistleblower Program allows people with inside information about taxpayers who are evading taxes to collect a reward. Those rewards are up to 30% of. whatever the IRS collects from the wrongdoer including interest and penalties.
The rewards program could include information about businesses, banks or people that are helping others evade taxes. For example, had an employee of Lack & Partners stepped forward with information about their boss, they may have been eligible for a sizable reward.
For more information, visit our offshore tax fraud whistleblower page. Ready to see if you qualify for a reward? Contact us online, by email or by phone at 202-800-9791.
We accept IRS whistleblower cases worldwide. All inquiries are kept in strict confidence.