Friday, June 12, 2015

TWO BANKS SETTLE UNDER DOJ's SWISS BANK PROGRAM

FROM:  U.S. JUSTICE DEPARTMENT 
Tuesday, June 9, 2015
Two More Banks Reach Resolutions under Justice Department's Swiss Bank Program

Société Générale Private Banking Will Pay $17.807 Million Penalty and Berner Kantonalbank AG Will Pay $4.619 Million Penalty; Both Continue to Cooperate With Department of Justice

The Department of Justice announced today that two banks, Société Générale Private Banking (Suisse) SA (SGPB-Suisse) and Berner Kantonalbank AG (BEKB), have reached resolutions under the department’s Swiss Bank Program.

“As the agreements reached today confirm, Swiss banks that helped U.S. taxpayers to hide foreign accounts and evade their U.S. tax obligations are providing a detailed account of their cross-border banking activities. The banks are naming officers, employees and others who facilitated this conduct, and providing information that helps us track assets that accountholders moved to other banks and other countries,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division.  “Using information gathered from the banks in this program, we have identified and are investigating individuals, both domestic and foreign, who helped U.S. taxpayers dodge their obligations.”

The Swiss Bank Program, which was announced on Aug. 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States.  Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts.  Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.

Under the program, banks are required to:

Make a complete disclosure of their cross-border activities;

Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;

Cooperate in treaty requests for account information;

Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;

Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and

Pay appropriate penalties.

Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.

According to the terms of the non-prosecution agreements signed today, each bank agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.

SGPB-Suisse has had a presence in Switzerland since 1926, and had a U.S.-licensed representative office in Miami from the early 1990s until it closed on Aug. 26, 2013.  SGPB-Suisse opened and maintained accounts for accountholders who had U.S. tax reporting obligations, and was aware that U.S. taxpayers had a legal duty to report to the Internal Revenue Service (IRS) and pay taxes on all of their income, including income earned in SGPB-Suisse accounts.  SGPB-Suisse knew that it was likely that certain U.S. taxpayers who maintained accounts at the bank were not complying with their U.S. income tax obligations.

SGPB-Suisse’s U.S. cross-border banking business aided and assisted some U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income the clients held in their accounts from the IRS.  SGBP-Suisse used a variety of means to assist U.S. clients in hiding their assets and income, including opening and maintaining accounts for U.S. taxpayers in the name of non-U.S. entities, including sham entities, thereby assisting such U.S. taxpayers in concealing their beneficial ownership of the accounts.  Such entities included Panama and British Virgin Island corporations, as well as Liechtenstein foundations.  In two instances, an SGPB-Suisse employee acted as a director of entities that had U.S. taxpayers as beneficial owners.  In another instance, upon the death of the beneficial owner of an entity, the heirs opened accounts held by sham entities at SGPB-Suisse to receive their shares of the assets from the entity account.

SGPB-Suisse further provided numbered accounts, allowing the accountholder to replace his or her identity with a code name or number on documents sent to the client, and held statements and other mail at its offices in Switzerland, rather than sending them to the U.S. taxpayers in the United States.  In addition to these services, SGPB-Suisse:

Processed requests from U.S. taxpayers for cash or gold withdrawals so as not to trigger any transaction reporting requireents;

Processed requests from U.S. taxpayers to transfer funds from U.S.-related accounts at SGPB-Suisse to accounts at subsidiaries in Lugano, Switzerland, and the Bahamas;

Opened accounts for U.S. taxpayers who had left UBS when the department was investigating that bank;

Processed requests from U.S. taxpayers to transfer assets from accounts being closed to other SGPB-Suisse accounts held by non-U.S. relatives and/or friends; and

Followed instructions from U.S. beneficial owners to transfer assets to corprate and individual accounts at other banks in Switzerland, Hong Kong, Israel, Lebanon, Liechtenstein and Cyprus.

Throughout its participation in the Swiss Bank Program, SGPB-Suisse committed to full cooperation with the U.S. government.  For example, SGPB-Suisse described in detail the structure of its U.S. cross-border business, including providing a list of the names and functions of individuals who structured, operated or supervised the cross-border business at SGPB-Suisse; a summary of U.S.-related accounts by assets under management; written narrative summaries of 98 U.S.-related accounts; and the circumstances surrounding the closure of relevant accounts holding cash or gold.  SGPB-Suisse also provided information to make treaty requests to the Swiss competent authority for U.S. client account records.

Since Aug. 1, 2008, SGPB-Suisse held and managed approximately 375 U.S.-related accounts, which included both declared and undeclared accounts, with a peak of assets under management of approximately $660 million.  SGPB-Suisse will pay a penalty of $17.807 million.

BEKB was founded in 1834 as Kantonalbank von Bern, the first Swiss cantonal bank.  BEKB is based in the Canton of Bern and presently has 73 branches in Switzerland.  BEKB knew or had reason to know that it was likely that some U.S. taxpayers who maintained accounts at BEKB were not complying with their U.S. reporting obligations.  BEKB opened, serviced and profited from accounts for U.S. clients who were not complying with their income tax obligations.

BEKB provided services that facilitated some U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets in those accounts and related income.  These services included opening and maintaining numbered accounts, allowing clients to use code names rather than full account numbers and providing hold mail services.  BEKB opened accounts for account holders who exited other Swiss banks and accepted deposits of funds from those banks.  BEKB also processed standing orders from U.S. persons to transfer amounts under $10,000 from their U.S.-related accounts.  In one instance, a relationship manager asked an accountholder, who was a dual Swiss-U.S. citizen living in the United States, about the Foreign Account Tax Compliance Act (FATCA) and voluntary disclosure.  When the accountholder failed to execute FATCA-related documents, BEKB took steps to close the account.  In connection with that closing, the accountholder withdrew $70,000 and approximately 500,000 Swiss francs in cash.

BEKB committed to full cooperation with the U.S. government throughout its participation in the Swiss Bank Program.  As part of its cooperation, BEKB provided a list of the names and functions of 16 individuals who structured, operated or supervised its cross-border business.  These individuals served as the chairman of the board of directors, members of the executive board, regional managers, heads of departments or heads of divisions.  BEKB additionally provided information concerning its relationship managers and external asset managers, and it described in detail the structure of its cross-border business with U.S. persons, including narrative descriptions of high-value U.S.-related accounts and U.S.-related accounts held by entities.

Since Aug. 1, 2008, BEKB held approximately 720 U.S.-related accounts, which included both undeclared and not undeclared accounts, with total assets of approximately $176.5 million.  BEKB will pay a penalty of $4.619 million.

In accordance with the terms of the Swiss Bank Program, each bank mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. accountholders at these banks who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

“These two resolutions with Société Générale Private Banking (Suisse) SA and Berner Kantonalbank AG represent the ongoing commitment by the IRS and the Department of Justice to ensure that U.S. taxpayers report foreign bank accounts and pay taxes on all income earned from those accounts,” said Deputy Commissioner Douglas O’Donnell of the IRS Large Business & International Division.  “We are encouraged by the Justice Department’s program success and look forward to additional information to further our investigations of those who have evaded detection and reporting as well as those who have aided them.”

Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts.  On Aug. 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement.  With today’s announcement of these non-prosecution agreements, noncompliant U.S. accountholders at these banks must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

“The bank agreements announced today continue to change the landscape in the offshore banking world,” said Chief Richard Weber of IRS-Criminal Investigation. “With each additional agreement, the world where criminals can hide their money is becoming smaller and smaller.  Those who circumvent offshore disclosure laws have little room to hide.”

Acting Assistant Attorney General Ciraolo thanked the IRS, in particular, IRS-Criminal Investigation and the IRS Large Business & International Division for their substantial assistance, as well as Karen M. Quesnel, who served as counsel on these matters, Senior Litigation Counsel Nanette L. Davis, and Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer of the Tax Division.

Wednesday, June 10, 2015

DOJ ANNOUNCES THAT ENBRIDGE MUST RESTORE ENVIRONMENT REGARDING 2010 MICHIGAN OIL SPILL

FROM:  U.S. JUSTICE DEPARTMENT
Monday, June 8, 2015
Enbridge Must Restore Environment Injured by 2010 Pipeline Rupture and Oil Spill in Michigan’s Kalamazoo River

The United States filed today a proposed consent decree that will resolve claims of federal, state and tribal resource trustees for natural resource damages (NRD) caused by the 2010 rupture of Enbridge’s Line 6B pipeline in Michigan that resulted in one of the largest inland oil spills in U.S. history.  Under the proposed settlement, several Enbridge affiliates will be responsible for completing numerous natural resource restoration projects along the Kalamazoo River and will pay an additional sum of nearly $4 million to fund additional restoration projects, reimburse natural resource damage assessment costs of federal and tribal trustees and support ongoing restoration planning activities of natural resource trustees.

“This settlement will restore natural resources affected by the 2010 spill – one of the largest inland spills in our history – and compensates the public for natural resource losses resulting from the spill,” said Assistant Attorney General John C. Cruden for the Department of Justice’s Environment and Natural Resources Division.  “By requiring restoration and monitoring, along with funding for the federal, state and tribal trustees, this settlement will go a long way toward correcting the injuries to injured natural resources along the Kalamazoo River.”

Trustees reached the NRD settlement in conjunction with a separate settlement that resolves related state law claims of the state of Michigan against Enbridge relating to the July 2010 spill.  The state settlement was filed May 12 in the circuit court for Calhoun County, Michigan.  The NRD settlement, which was filed in federal court today, provides funding to the federal, state and tribal trustees to conduct natural resource restoration, reimburses assessment costs spent by the federal and tribal trustees and incorporates requirements from the state settlement for Enbridge to conduct restoration and monitoring.  More details on the NRD settlement can be found at www.fws.gov/midwest/es/ec/nrda/MichiganEnbridge/.

The state settlement provisions that will also be enforceable under the NRD settlement include commitments by Enbridge to perform work to restore or compensate for injuries to injured natural resources along the Kalamazoo River, at an estimated cost of at least $58 million.  Thus, the two settlements combined result in estimated expenditures of at least $62 million to resolve natural resource damages.  In addition, the state settlement required Enbridge to implement a number of measures pursuant to state response action authorities and to pay the state for its costs of oversight of cleanup and restoration.  The state of Michigan settlement announcement and details can be found at www.michigan.gov/oilspill.

The NRD settlement addresses Enbridge’s liability for natural resource damages under the Oil Pollution Act (OPA) and Michigan’s Natural Resources and Environmental Protection Act.  The NRD settlement provides for habitat improvement projects to address injuries to aquatic organisms, fish, reptile, mammals and birds, as well as for enhancements to public access and use of the Kalamazoo River for recreational, educational and cultural purposes.  The trustees are proposing to implement the following projects with funding from the NRD settlement:

Replace undersized culverts, remove existing obstacles to water flow and increase floodplain capacity in two tributaries to the Kalamazoo River;

Control Eurasian water milfoil and otherinvasive species, within the Fort Custer State Recreation Area to provide improved habitat for warm water fisheries;

Restore 175 acres of oak savanna uplands in Fort Custer State Recreation Area;

Track and protect turtle reproduction in the impacted area of the Kalamazoo River;

Restore wild rice beds in suitable areas along the Kalamazoo River;

Document the historic use and knowledge of natural resources by members of the Match-E-Be-Nash-She-Wish Band of the Pottawatomi Indians (Gun Lake Tribe) and the Nottawaseppi Huron Band of the Potawatomi to guide restoration and stewardship.
The NRD settlement also incorporates certain requirements from the state’s settlement with Enbridge, including requirements to:                                                    

Restore and monitor the 320 acres of wetlands affected by the spill and response activities;

Permanently restore, create or otherwise protect at least 300 additional acres of wetland habitat in compensation for wetland losses;

Evaluate stream function within the restored areas of Talmadge Creek and perform additional actions as needed;

Conduct monitoring and restoration activities related to the removal of large woody debris during the spill response;

Fund the state of Michigan to monitor fish contamination, fish populations and the health of stream bottom communities along Talmadge Creek and the Kalamazoo River.

Enbridge has already implemented additional projects that relate to losses of natural resources:

Created the Kalamazoo River Community Recreational Foundation including a $2.5 million endowment to assure perpetual care of these projects

Removed the dam at Ceresco on the Kalamazoo River and restored over 2.5 miles of river channel that was previously impounded.

“Working together, the natural resource trustees are using the settlements in tandem to develop a big-picture, comprehensive plan to restore natural resources,” said Deputy Regional Director Charlie Wooley for the Midwest Region of the U.S. Fish and Wildlife Service.  “This cooperative approach will enhance our ability to return to the public the natural resources lost due to the spill.”

The trustees are asking for public comment on a draft Damage Assessment and Restoration Plan/Environmental Assessment (DARP/EA) developed to inform the public about the harm caused by the pipeline rupture and the proposed restoration projects described above to address these injuries and losses.  This draft DARP/EA is now available for public review and comment at www.fws.gov/midwest/es/ec/nrda/MichiganEnbridge/, along with the consent decree for the NRD settlement filed in federal court at www.justice.gov/enrd/consent-decrees.

Settlement of the state law claims and the natural resource damages claims do not affect or alter Enbridge’s other liabilities or obligations under OPA or the Clean Water Act (CWA).

Enbridge’s Lakehead Line 6B pipeline ruptured near Marshall, Michigan, on July 25, 2010, discharging oil into the environment.  Enbridge discharged significant additional oil from Line 6B during two attempts to restart the ruptured pipeline on July 26, 2010.  Oil discharged from Line 6B entered Talmadge Creek and ultimately extended approximately 38 miles down the Kalamazoo River.  The oil impacted over 1,560 acres of stream and river habitat as well as floodplain and upland areas, injuring birds, mammals, reptiles and other wildlife.  The river was immediately closed to the public and sections remained closed for several years, reducing recreational and tribal uses of the river.

For more information on the cleanup of the 2010 pipeline discharges, visit www.mi.gov/oilspill and www.epa.gov/enbridgespill.

The natural resource trustees in this case include the Michigan Department of Environmental Quality, the Michigan Department of Natural Resources, the Michigan Department of the Attorney General, the U.S. Fish and Wildlife Service, the National Oceanic and Atmospheric Administration, the Nottawaseppi Huron Band of the Potawatomi Tribe and the Match-E-Be-Nash-She-Wish Band of the Pottawatomi Indians (Gun Lake Tribe).