February 5, 2013

By: Swiss Bank Account a Safe Haven? Not So Much…

Notwithstanding the image perpetuated in our popular culture, it has never been ok to simply park taxable income or assets in offshore accounts in order to avoid taxes.  A California man, Christopher B. Berg, has learned that lesson in stark terms.  On January 30, 2013, Berg entered a plea of guilty in the U.S. District Court for the Northern District of California, to an information charging him with willful failure to file the required report of foreign bank account (FBAR) for an account he controlled at UBS in Switzerland in the year 2005.

According to the government, in 2000, Berg met with Beda Singenberger, a Swiss financial consultant, and a vice president of banking at UBS in San Francisco, regarding setting up a bank account at UBS in Switzerland to shelter a portion of his consulting business income from taxation. The government alleged in the information that beginning in 2001 and continuing through 2005, Berg deposited funds in the amount of $642,069, earned by Berg from consulting services, by wire transfer to UBS accounts.

While the relevance of what exactly Berg did with the money after it was deposited wasn’t clear, the government alleged that Berg used the money in these accounts at UBS in Switzerland to purchase a vehicle, to obtain cash while in Europe, and to pay the balance on a Eurocard he used while traveling in Europe.

More importantly, the government asserted that Berg did not disclose the existence of his accounts at UBS in Switzerland to his certified public accountant, and did not disclose the income earned by these accounts or the consulting income deposited to the accounts. As part of the plea, Berg acknowledged that the tax harm associated with his conduct was $270,757.

As reiterated by DOJ in its news release announcing the plea, United States citizens and residents who have an interest in, or signature or other authority over, a financial account in a foreign country with assets in excess of $10,000 are required to disclose the existence of such accounts on Schedule B, Part III, of their individual income tax returns. Additionally, U.S. citizens and residents must file an FBAR with the U.S. Treasury disclosing any financial account in a foreign country with assets in excess of $10,000 in which they have a financial interest, or over which they have signature or other authority.

Sentencing in Berg’s case has been scheduled for July 8, 2013. He faces a maximum penalty of five years in prison and a fine of up to $250,000.