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Lawyers Help U.S. Millionaires In Swiss Bank Probe

Tribune photo by MICHAEL SPOONEYBARGER

William M. Sharp, left, and law partner Larry Kemm regularly travel to Switzerland to review secret bank records.

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By MICHAEL SASSO | The Tampa Tribune

Published: December 4, 2008

TAMPA - The practice of tax law conjures images of bookish lawyers holed up in an office poring over tax codes – not the stuff of international intrigue.

But Tampa tax lawyer William Sharp Sr. finds himself wrapped up lately in a fight between the IRS and the Swiss banking system, legendary for its secrecy.

Through some recent indictments of Swiss banking officials in U.S. courts, the IRS has gotten a glimpse behind the veil of UBS AG, one of Switzerland's biggest banks. Among those indicted was Raoul Weil, head of UBS' global wealth management business.

With court testimony that Americans are sheltering millions, perhaps billions, from taxes, the U.S. government wants UBS to turn over lists of U.S. taxpayers holding UBS accounts. Some testimony suggests they number 20,000, Sharp said.

So far, UBS has provided the names of some U.S. taxpayers to the Swiss government, but it's now up to the Swiss government to turn over those names to the U.S. government. UBS has promised to stop providing American clients with secretive accounts in offshore locations.

Sharp, from the offices of Sharp & Associates in Tampa's West Shore business district, finds himself in the middle of the conflict – and in great demand.

Some wealthy American taxpayers want to come clean with the IRS. They've hired his firm to help them voluntarily report assets they have in UBS accounts. He and his partners are traveling to Switzerland twice a month to review secret bank records.

The Tampa Tribune sat down to discuss the issue this week with Sharp, 55, and one of his law partners, Larry Kemm.

The talk turned to Bradley Birkenfeld, an American and UBS executive who was indicted on tax-related charges in April by a federal grand jury in Miami. Birkenfeld has been cooperating with the government and is said to have recorded names on what's being called the "Birkenfeld list."

Here are highlights:

Q. What's driving this probe of Swiss banks?

Sharp: There was a gentleman out in California that you might have read about, Igor Olenicoff, this billionaire that was indicted by the U.S. government for tax evasion with respect to concealing assets in a Swiss bank account, and that led them to his private banker at UBS, who the U.S. government then detained on a trip here and indicted. That was kind of the watershed that led to all these people coming out in the open.

Kemm: As [Sharp] said, the watershed event here was really Mr. Olenicoff. He, in turn, brought to the table Bradley Birkenfeld. Birkenfeld was indicted in May of this year, and then on June 19 he entered a plea agreement.

Sharp: We don't know exactly the number of people on the so-called Birkenfeld list, but we speculate that it's less than 100, probably less than 60.

American citizens who had UBS financial accounts typically go through foreign trusts and/or foreign corporations, with the view of not reporting those foreign financial accounts — or foreign trusts or foreign corporations — all of which are required by U.S. law. If a U.S. citizen has a foreign financial account with more than $10,000, they have to report that to the U.S. government.

If you don't fill that out and file it, you are subject to a $10,000 negligence penalty, and if it's a willful violation, you can be penalized by about half the account balance.

Q. Why UBS?

Kemm: Many Swiss banks to this day still have no physical presence in the Untied States, so the U.S. government has no leverage to go after these banks because they really don't have the jurisdiction to attack them, whereas UBS has a vast U.S. presence.

So what the Department of Justice did was they were able to secure the information that they needed through the prosecution of Olenicoff and Birkenfeld to go to a federal district judge in Miami and secure this IRS summons. Before that point in time, the U.S. government didn't really have enough information that a judge would've issued a summons to a major Swiss bank like UBS ordering them to turn over clients' information.

Sharp: What the summons said was, "We want you to produce the names and identifying information of every American citizen maintaining a financial account with UBS in Zurich, Geneva and Zug [Switzerland] for the years 2002 to 2007."

Q. Is UBS cooperating?

Sharp: UBS has said it would exit its U.S. business, thereby no longer have U.S. account holders. That lessens the intensity of the U.S.'s interest. UBS is sending form letters to all of its account holders giving them 45 to 90 days to move their money elsewhere.

Q. So they're going to try to get around the summons by terminating their clients that might be subject to this IRS summons?

Kemm: The U.S. government knows that by UBS terminating these accounts they will essentially smoke out a lot of these U.S. account holders, in ways that will put those U.S. account holders on the radar screen of the U.S. government.

Sharp: There are two choices that a U.S. account holder has because in 45 or 90 days the account is going to be closed and a check is going to be mailed somewhere.

Choice one is to move the money into another foreign banking destination, preferably a tax haven with bank secrecy – within Switzerland, to possibly Liechtenstein, to Malta, Isle of Man, all the usual jurisdictions. But the movement of that money constitutes another violation of U.S. law.

Kemm: And a lot of other Swiss banks have already said they won't touch this money.

Sharp: The other main choice is for voluntary disclosure. If the client notifies UBS and says, "Look, I may have some compliance issues, I've engaged [legal] counsel, we're going to pursue a voluntary disclosure. That becomes kind of a win-win for UBS and the client because the client becomes compliant, the bank no longer has the pressure of being associated with a noncompliant account and, actually, the IRS is pretty happy.

You need properly computed back taxes, an automatic 20 percent negligence penalty with respect to the amount of those taxes, and, in addition to that, any information reporting penalties as negotiated on a case-by-case basis.

Q. Does the government have evidence that all these American account holders have done something wrong?

Sharp: Based on the evidence of Birkenfeld and other evidence that the Department of Justice and IRS have mined, they are of the view that a substantial portion of that category of American financial account holders at UBS have not fully complied with U.S. tax law.

This is a very delicate balance: UBS on the one hand, with the entire history of Swiss banking secrecy behind it and arguably the credibility and integrity of the Swiss banking system at stake, versus the U.S. government.

Reporter Michael Sasso can be reached at (813) 259-7865.

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