U.S. Man Pleads Guilty to Tax Evasion
Friday, July 31, 2009
As a federal probe of secret Swiss bank accounts made headlines in the summer of 2008, New York businessman Jeffrey P. Chernick got nervous.
A middleman in international toy sales, Chernick had hidden millions of dollars from the Internal Revenue Service at Switzerland's largest bank, according to a recent court filing. Concerned that the bank, UBS, would spill his secrets to the U.S. government, Chernick decided to disclose his UBS account to the IRS and pay the unpaid taxes, according to the court document.
Then a Swiss lawyer and a Swiss bank executive talked him out of it, according to the document.
According to the court filing, they told Chernick that a high-ranking official in the Swiss government could find out which UBS accounts would be turned over to the U.S. government, and the Swiss lawyer later told Chernick that the banker had paid the official $45,000 for word that his account was not among them. Chernick authorized a withdrawal from his UBS account to cover the payment.
That narrative was contained in a "statement of facts" by Chernick and the Justice Department entered in connection with his guilty plea this week to filing a false tax return.
The plea comes as a top Swiss official is expected to appeal to Secretary of State Hillary Rodham Clinton on Friday in a dispute over bank secrecy and as a federal court in Florida focuses on that broad government challenge to UBS.
The U.S. government has asked the court to demand that UBS identify the holders of 52,000 accounts that Americans are suspected of having used to dodge taxes.
The Swiss government has stated that such a demand would be incompatible with Swiss law, and it has vowed to prevent UBS from complying.
The United States is trying to enforce tax collections; Switzerland is trying to protect the tradition of secrecy that has helped make its banking industry a global powerhouse and an important piece of the Swiss economy.
The two sides are scheduled to brief a federal judge in Miami at 8:45 a.m. Friday on the status of negotiations. On Wednesday, they told the judge that they had yet to reach a settlement. Barring a resolution or another postponement, the two sides are due to face off Monday in a hearing that essentially amounts to a trial in the case.
Meanwhile, at 9:30 a.m. Friday, Clinton is scheduled to meet with Swiss counterpart Micheline Calmy-Rey at the State Department.
The Swiss would like any request for information about the bank accounts to be handled administratively under an existing tax treaty, according to a source informed of the negotiations who spoke on condition of anonymity because of their sensitivity. The U.S. government has expressed frustration with that process. The United States sought to obtain records through the existing channel in July 2008, and as of February, it had obtained none, an IRS official said in a February court filing.
In February, under a deal that enabled it to avoid criminal prosecution, UBS admitted that it engaged in a scheme to defraud the IRS by helping Americans set up accounts in the names of offshore companies.
According to the filing this week in the Chernick case, UBS bankers went to lengths to help him avoid exposure. They would cut his name and account number from account statements so the documents could not be linked to him. Though Chernick used a credit card to tap money from his UBS account, a UBS client advisor told him never to use the card in the United States because it could be traced, the filing said.
A lawyer for Chernick, Douglas Tween, declined to comment.