Eideard

Wegelin & Co, corporate headquarters, St. Gallen, Switzerland
Daylife/AP Photo used by permission

Wegelin & Co., the 270-year-old Swiss bank facing criminal charges in a U.S. crackdown on firms suspected of aiding tax evasion, failed to appear at a court hearing as prosecutors called the bank a “fugitive.”

Prosecutors said after the hearing…in Manhattan federal court that three Wegelin client managers charged in the case also failed to appear and were considered fugitives.

When no defendants or defense attorneys showed up in court, U.S. District Judge Jed Rakoff asked prosecutors for a proposal on how to proceed. Prosecutors said they will confer with the Justice Department and advise Rakoff on their proposals. “Unlike an individual, arresting a company is somewhat difficult,” Rakoff said…

Wegelin is the first overseas bank to be indicted by the U.S. for aiding tax fraud, federal prosecutors in New York said this month. The three Wegelin client managers at the Zurich branch, Michael Berlinka, Urs Frei and Roger Keller, were also indicted.

The managers serviced “undeclared accounts” for U.S. taxpayers, meaning the income derived from them wasn’t reported to the U.S. Internal Revenue Service, according to the superseding indictment filed this month.

Nothing new about international bankers considering themselves above the law. Especially when an historic function of their services is aiding their clients in defrauding the tax departments of one or another government.

For the first time in modern history we have a Department of Justice that actively seeks to repatriate the funds hidden abroad – instead of just relying on the crooks for fundraising.

If I only had a heart…

General Electric, the nation’s largest corporation, had a very good year in 2010.

The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.

Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.

That may be hard to fathom for the millions of American business owners and households now preparing their own returns, but low taxes are nothing new for G.E. The company has been cutting the percentage of its American profits paid to the Internal Revenue Service for years, resulting in a far lower rate than at most multinational companies.

Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.

While General Electric is one of the most skilled at reducing its tax burden, many other companies have become better at this as well. Although the top corporate tax rate in the United States is 35 percent, one of the highest in the world, companies have been increasingly using a maze of shelters, tax credits and subsidies to pay far less.

In a regulatory filing just a week before the Japanese disaster put a spotlight on the company’s nuclear reactor business, G.E. reported that its tax burden was 7.4 percent of its American profits, about a third of the average reported by other American multinationals. Even those figures are overstated, because they include taxes that will be paid only if the company brings its overseas profits back to the United States. With those profits still offshore, G.E. is effectively getting money back.

RTFA. Long, detailed, persuasive.

The other half of the equation is populated with former bureaucrats, members of Congress and similarly crime-inclined citizens with the connections to help bend, break and otherwise aid our corporate barons avoid any responsibility for funding this nation. Yup. It’s still just up to us.

A former Chicago, Illinois, attorney has admitted that he helped create, push and hide fraudulent tax shelters that ended up costing the federal government billions of dollars in tax revenue…

Loopholes provided by Congress are never quite sufficient for the richest Americans. Reflect upon that while Republicans fall over each other to extend tax cuts for the richest 2% of our nation.

Erwin Mayer, 47, pleaded guilty in a New York federal court to conspiracy and tax evasion charges…

Law enforcement authorities — including investigators from the U.S. attorney’s office, the Internal Revenue Service and the U.S. Department of Justice’s tax division — said that Mayer designed, marketed, ran and defended illegal tax shelters, the clients of which wrongly claimed billions of dollars in fraudulent losses.

“These professionals, who were supposed to be the gatekeepers preventing fraud, instead helped their well-heeled clients avoid their tax obligations through deceit and trickery,” U.S. Attorney Preet Bharra said in a statement, referring to Mayer, some of his colleagues at the now defunct law firm Jenkins & Gilchrist, and others involved in the scam.

After being a partner at Altheimer and Gray in Chicago between 1994 and 1998, Mayer joined a new Chicago office of Texas-based Jenkins & Gilchrist. Up until 2006, Mayer and colleagues set up, pitched and ran high-fee tax shelters so clients could skirt taxes on significant income or gains, according to statements made during his guilty plea proceeding…

The Winnetka, Illinois, resident will be sentenced on February 10. He faces a maximum sentence of five years in federal prison on the conspiracy charge, plus another five years for tax evasion. Mayer has agreed to forfeit his two residences and various financial accounts worth more than $10 million as part of his plea deal.

That sentencing may be deferred. In the legalese of one of the web’s law blogs…”Given that Mayer will be providing ongoing cooperation with the prosecution, no date has been set for sentencing.”

I hopes he turns over every client who used his services to screw the overwhelming number of honest Americans who pay their fair share of taxes – and more. Time to pay up!

From 1986 until her retirement last year, Master Sgt. Toni Jaffe’s job with the California Army National Guard was to give away money — the federally subsidized student-loan repayments and cash bonuses — paid for by federal taxpayers nationwide — that the Guard is supposed to use to attract new recruits and encourage Guard members to reenlist.

Instead, according to a Guard auditor turned federal whistle-blower, as much as $100 million has gone to soldiers who didn’t qualify for the incentives, including some who got tens of thousands of dollars more than the program allows.

For years, the auditor and other Guard officials alleged in interviews or internal documents obtained by The Sacramento Bee, California’s incentives program was operated as a slush fund that was doled out improperly to hundreds of soldiers with fabricated paperwork, scant supervision and little regard for the law.

The Guard documents describe a high-speed assembly line for bonuses and loan repayments, in which Jaffe single-handedly processed some 8,600 payments over a 16-month period in 2007 and 2008 — about 25 per workday.

Most student loan repayments, the documents show, were drawn from money designated for combat veterans. Yet a large portion of those funds went to Guard members who hadn’t served a day at war. Captains and majors were among those whom auditors think benefited improperly…

The documents show that by recruiters and officers up the chain of command overlooked or ignored her efforts. Some recruiters appear to have benefited personally…

On July 8, the managers who replaced Jaffe briefed Capt. Ronald S. Clark, a federal auditor who oversees funds spent by state Guard organizations, about her alleged lapses. A former police investigator, FBI agent and U.S. Secret Service officer, Clark has fought white-collar crime for years.

Still, he said, the scale and audacity of the corruption he encountered in reviewing the California program shocked him: Excluding $43 million in improper payments recently halted by Jaffe’s replacements, Clark estimated that $100 million was misspent. He called it “war profiteering.”

RTFA. Beaucoup examples, threads and tales of corruption.

Clark was intimidated enough by the extent of fraud throughout the Guard bureaucracy he wasn’t just worried about his investigations being stonewalled and blocked. Fearing for his life and the safety of his family, he contacted the FBI and the IRS – who took over his work and turned it into a criminal investigation.

339 of 350,000 callers reach a live person

Fewer than one in 10 callers managed to get help during tax season when they called an Internal Revenue Service help line for people with speech or hearing impairments, a government investigator said Thursday.

Overall phone service by the IRS improved during the 2010 tax season, said a report by J. Russell George, Treasury inspector general for tax administration. But phone service for speech- or hearing-impaired callers declined.

More than 350,000 people called the IRS help line for people with speech or hearing impairments during tax season. The overwhelming majority hung up almost immediately — the IRS says many probably called the line for people with hearing or speech impairments by mistake.

Some 3,844 stayed on the line to wait for assistance. Of those, 339 — or 8.8 percent — actually reached a real person, the report said…

In a written response to George’s report, the IRS said the number of callers not getting help is inflated because many people mistakenly call the help line and hang up once they realize it is for people with hearing or speech impairments.

So… only about one in a thousand callers actually wanted to reach a live person in the first place? Uh, o.k. Keep up the great work.

Daylife/Reuters Pictures used by permission

After the collapse of Lehman Brothers in September 2008, Switzerland’s largest bank was teetering. UBS, which was more than three times bigger than Lehman in terms of assets, had to write down some $50 billion during that tumultuous period.

Investors the world over breathed a sigh of relief on October 16 when the Swiss government rescued UBS. But unbeknownst to them at the time, the bank faced a potentially devastating crisis on a very different front.

One day after the bailout, top executives from UBS and Swiss regulators were summoned to a closed-door meeting in New York by U.S. officials who were conducting a wide-ranging tax fraud investigation that centered on the bank.

The UBS delegation, led by newly-appointed Group General Counsel Markus Diethelm, arrived armed with the results of an internal report highlighting instances of tax fraud within the bank, insiders told Reuters. The plan was simple: admit guilt, settle the case quickly and move on.

But Kevin Downing, the U.S. Department of Justice Tax Division Attorney who had been investigating UBS since the middle of 2008, chose that meeting to drop a bombshell: he wanted the bank to disclose names of U.S. tax evaders as a condition for a settlement.

That put UBS in the nightmarish position of either breaching nearly a century of Swiss bank secrecy or risking indictment in the United States…

Interviews with insiders and a review of documents reveal previously undisclosed details about how the sprawling tax case was resolved — at several points in the process, for example, Secretary of State Hillary Clinton was involved.

The confrontation also pushed UBS closer to the brink than is commonly realized. And while the bank ultimately defused the situation by coughing up $780 million and agreeing to hand over some client names, the damage to its huge and increasingly important wealth management operation still weighs heavily on the Swiss banking flagship.

RTFA. It might not make a great movie; but, it’s a hell of a tale for anyone who knows anything about international banking. Serious changes just beginning to be forced onto the old boys network – especially by the reinforcements brought into play by Obama.

Kudos to Kevin Downing getting it past the Cheney/Bush mafia.

The widow of an Internal Revenue Service employee killed when a disgruntled taxpayer flew his plane into a seven-story building in Austin, Texas, last week is suing the pilot’s wife, according to court documents.

Valerie Hunter, the wife of Vernon Hunter, is accusing Sheryl Stack, wife of Andrew Joseph “Joe” Stack III, of negligence, alleging she knew or should have known that her husband was a threat to others and, thus, could have prevented the attack, according to the lawsuit filed Monday in Travis County District Court.

“Stack was threatened enough by Joseph Stack that she took her daughter and stayed at a hotel the night before the plane crash. [She] owed a duty to exercise reasonable care to avoid a foreseeable risk of injury to others including [Vernon Hunter],” the suit says…

Hunter was killed February 18 when, authorities say, Stack flew his Piper Cherokee PA-28 into a northwest Austin building that housed nearly 200 IRS employees.

Authorities say Stack set fire to his $230,000 home in Austin before embarking on his fatal flight.

Sheryl Stack issued a statement after the attack expressing “sincere sympathy to the victims and their families.”

So, Sheryl Stack lost her husband and her home. Valerie Hunter lost her husband. Neither is getting her husband back.

Anyone out there know of an insurance company making good on a policy when the insured kills himself in the act of committing a crime?

Daylife/AP Photo used by permission

The long, rambling rant posted on a website eerily reflected the angry populist sentiments that have swept the country in the past year. In it, a Joe Stack inveighed against intrusive Big Brother government, corrupt corporate giants, irrational taxes, as well as the “puppet” George Bush. “I choose not to pretend that business as usual won’t continue,” he wrote. “I have just had enough. I can only hope that the numbers quickly get too big to be white washed and ignored that the American zombies wake up and revolt.” And then Stack apparently got in a Piper Cherokee PA-28 at about 9:40 a.m. at an airport in suburban Austin, Texas, and flew the plane into a commercial building housing an IRS office, killing himself, seriously injuring two people on the ground and starting a conflagration that lasted several hours…

“It sure was hauling. It was a really speedy dive,” Jerry Cullin, a pilot, told KXAN, the local NBC affiliate. “It shot across the road going really fast.” Cullin had stopped to get his midmorning coffee at the local Marie Callender’s when he saw the plane swoop down. It was so low, Cullin said, he could see the plane’s belly and thought he might get hit. The plane almost clipped one of the tall light poles lining the freeway before crashing into the building.

After the fireball, Cullin said, the black-glass windows blew out and the venetian blinds starting flapping in the wind. The building houses regional offices of the IRS and other federal agencies. As one unidentified office worker from the building said, “If you have problems with the IRS, this is where you come in person to work them out.” According to news reports, 199 IRS employees work in the building, and all are accounted for. Toward the end of what appears to be his final note, Stack wrote, “Well, Mr. Big Brother IRS man, let’s try something different; take my pound of flesh and sleep well.”

RTFA. No doubt, the next Tea Party rally in Austin will eulogize this man and his suicide bombing.

For decades, this high-desert site eight miles east of Reno was best known as the home of the Mustang Ranch, the first licensed brothel in the United States. From thin to plump, dwarflike to Amazonian, women hired to suit a range of tastes would line up for inspection by clients in pink stucco buildings tucked into a cottonwood grove 300 yards from the river’s bank…

The old property…is undergoing a transformation. Workers are restoring it to floodplain, undoing the damage wrought when federal engineers straightened the Truckee River a half century ago…

The Army Corps of Engineers moved to control flooding by straightening and widening the river. The unintended result was that the Truckee deepened in its own channel, and the entire water table dropped along its banks.

Within years, the lower Truckee lost a majority of its native plants as well as dependent birds and wildlife. Only ancient cottonwoods with deep roots survived. Invasive weeds took over, and the river became an eyesore.

More threatening to local residents, water quality declined…

As city officials grew worried, the Nature Conservancy began peddling an ambitious plan that included moving the river back to its old beds, exterminating invasive weeds and replanting forest and other native plants along the Truckee’s banks.

In 2000, the $20 million effort to restore an 8 ½-mile stretch of the river began. The old Mustang Ranch is the final piece; bulldozers arrived at the site this month to begin forcing this stretch of the river back into a path constructed to mimic its old curving pattern…

“We joke that in Nevada that we only work on properties near brothels,” said Mr. Hazelwood of the conservancy. “They like their privacy — they stay concentrated instead of developing out so they can keep an eye on things. It works for us…”

“People were skeptical at first,” Allen Biaggi, director of the Nevada Department of Conservation and Natural Resources, said of the project. “But we needed to deal with water quality. And now this provides a vision of what it can be. It can be about beauty and peace and recreation.”

RTFA. Just gangsters and sleaze. Nothing romantic about hookers with a heart of gold. Just a cruddy business with the money smuggled out of the country in a paper bag to the original pimp hiding from extradition in Brazil.

But, a pretty good tale of private and public funds used to ameliorate screw-ups by the Army Corps of Engineers, restore some beauty to a place of nature.

Marvin Berkowitz in a Tel Aviv courtroom – between Israeli coppers in casual dress
Daylife/AP Photo used by permission

An American-Israeli crime ring conspired to defraud United States tax authorities of tens of millions of dollars for at least five years, according to Israeli and American court documents.

The suspects filed thousands of fraudulent requests for tax refunds in the names of prisoners in federal penitentiaries, without the prisoners’ knowledge, according to an indictment filed in Chicago. They then laundered the money through Israeli bank accounts, the authorities said.

Two Americans and seven Israelis went to a Tel Aviv court for a hearing on Monday in connection with the case. Other Americans have been arrested in Chicago and other parts of the United States.

The man accused of leading the ring, Marvin Berkowitz, 62, fled the United States for Israel in 2003, according to the Israeli authorities, and has been living in Jerusalem…

The American indictment states that the suspects sought to get more than $35 million in federal and state income tax refunds. Israeli investigators say they have found $12 million worth of tax refunds in Israeli bank accounts controlled by Mr. Berkowitz and his accomplices…

Federal officials said the men had sought tax refunds using the identities of about 3,300 federal prisoners. Mr. Berkowitz, who was charged with six counts of identity theft, is suspected of recruiting and paying others to travel to federal courthouses to collect personal information about federal inmates, including Social Security numbers.

I know our government has been inept for years when it comes to communicating between departments; but, I think folks are starting to talk to each other – and especially to the IRS.

Mayhap we’re reaching the point where the only thugs who escape detection for tax fraud are those who own the right Congressman.