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Thread: Uber-Rich Americans appear to have found the answer to Tax Increases ...

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    Default Uber-Rich Americans appear to have found the answer to Tax Increases ...

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    (snip)"NEW YORK (AP) -- The U.S. Justice Department called Switzerland's largest private bank a fugitive from justice on Friday after it didn't send any representatives to a court hearing in New York, where it has been charged with conspired with American clients to hide $1.2 billion from the Internal Revenue Service.

    Wegelin & Co. is accused of helping at least 100 U.S. clients conceal huge sums of money from the IRS in overseas accounts. Federal prosecutors said the bank recruited American customers who were concerned about possible prosecution for tax violations at home, including some that had already pulled money out of other Swiss banks because of growing pressure from U.S. law enforcement. Three of the bank's client advisers were indicted in January. The bank was added as a defendant in the case on Feb. 2

    U.S. officials, however, have yet to find a way to move the case forward. The three Wegelin advisers charged in the case, Michael Berlinka, Urs Frei and Roger Keller, have not been arrested and the Justice Department has decided that any attempt to extradite them from Switzerland is unlikely to succeed.

    The bank was summoned to appear before a federal judge in New York on Friday at 3 p.m., but neither a bank officer nor a lawyer showed.

    In a statement issued in Switzerland after the court hearing, the bank said it had not been properly served with the criminal summons, and was therefore under no obligation to appear in court.

    As for the charges, the bank suggested that there was a conflict between US and Swiss law.

    "The circumstances create a clear dilemma for Wegelin & Co: If it were to adhere to current US legal practice aimed at Swiss banks, it would have to breach Swiss law," the statement said.

    The bank added that it would "make every effort to resolve this matter within the boundaries of respectful cooperation."

    It is unclear what prosecutors can do next. Wegelin doesn't have an office in the U.S. Federal authorities have frozen $16 million that the bank had in a correspondent account in the U.S., but that amount is tiny compared to the large sums involved.

    U.S. District Judge Jed Rakoff, who is presiding over the case, asked prosecutors to make a proposal on how to move the prosecution forward, and suggested involving the State Department, but the hearing ended without any immediate resolution."(snip)


    Take-away from this news report is that the IRS has been successful in pressuring UBS and other 'public' Swiss / International banks to dump the accounts of US citizens, both the uber-rich and those less well off ( like me LOL ! ) by imposing new IRS reporting requirements, and by threats of prosecution / seizure of US branch employees / assets. However, Swiss Bank Wegelin has decided to 'go to the mat' with the IRS over the issue of bank 'secrecy' - primarily because Wegelin has no US branches or employees for the IRS to prosecute, and also because as a 'private' bank Wegelin never accepted accounts from any Americans who were merely 'upper middle class'. As such, any American citizen with more than a million dollars to deposit, and a passport for a trip to Switzerland, can be pretty much assured that their Wegelin account's assets ( and future earnings on those assets ) will be kept completely secret from the IRS.

    So much for the concept of 'taxing the rich' !

    Unfortunately, because of the 'private banking' minimum deposit requirements, non 'uber-rich' US citizens with merely tens of thousands of dollars, or just hundreds of thousands of dollars, need not apply ! Our assets and earnings can no longer be placed in offshore accounts without full reporting to the IRS ( if any offshore bank will still allow US citizens to open accounts involving deposits under $1 million - most won't because they don't want to bear the burden of the newly required IRS reporting ), and as such will remain fully exposed to ( rising ) US taxes.
    Last edited by Melonie; 02-11-2012 at 09:18 AM.

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    Banned Eric Stoner's Avatar
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    Default Re: Uber-Rich Americans appear to have found the answer to Tax Increases ...

    What about Panama ? The Cayman Islands ? The Channel Islands ? Liechtenstein ? Luxembourg ? The Turks and Caicos ? They supposedly have even tighter bank secrecy laws than the Swiss.

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    Banned Melonie's Avatar
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    Default Re: Uber-Rich Americans appear to have found the answer to Tax Increases ...

    Indeed Liechtenstein and the Channel Islands have real secrecy for 'private banking' clients ... with the similar $1 million minimum deposit.

    As to Panama, the Caymans etc. if their banks are going to perform funds transfers across the US border then they must adhere to the new IRS reporting requirements for any US citizen accounts. This is hugely expensive, thus most of these offshore banks are simply closing the accounts of US citizens with 'small' balances and refusing to open new accounts for US citizens with 'small' balances ( and I'm talking 'small' = $100k ).

    The importance of Wegelin's move obviously goes hand in hand with today's US budget announcement, which will include a major tax increase for those earning more than $1 million, plus a significant tax increase for those earning more than $200k/$250k. The million plus crowd will be able to not only avoid this increase, but also avoid some portion of current tax rates, via secret accounts at Wegelin or other 'private banking' establishments, while the $200k/$250k Americans will have nowhere to 'hide'.

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    Default Re: Uber-Rich Americans appear to have found the answer to Tax Increases ...

    I'm going to ask an admittedly stupid question : For the IRS to care, the money has to be INCOME i.e. an accretion to wealth from whatever source derived (to use the old Tax Code definition.) Thus it has to be made somehow, somewhere. Who gets their salary deposited into a secret account ? How ? If it's a capital gain then there is a record from at least the Buyer. So how exactly does the money get into these secret accounts in the first place without anyone knowing ? I can understand if it is made off-shore and kept off-shore but what if the origin of the money is in the U.S. ? Just curious.

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    Banned Melonie's Avatar
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    Default Re: Uber-Rich Americans appear to have found the answer to Tax Increases ...

    If it's a capital gain then there is a record from at least the Buyer. So how exactly does the money get into these secret accounts in the first place without anyone knowing ? I can understand if it is made off-shore and kept off-shore but what if the origin of the money is in the U.S. ? Just curious.
    This is pure hearsay pieced together from various vacationing businessmen, but it goes something like this.

    American businessman transfers company funds to a fully disclosed bank account in say Taiwan, for the ostensible purpose of paying his Chinese component suppliers. In point of fact, 80% of the money actually goes to the company's various Chinese suppliers as payment, with the remaining 20% actually being immediately transferred from Chinese supplier's Chinese bank accounts to the businessman's Wegelin account as a 'kickback'. So US business tax reduction A happens as a result of 'skimming' money that would otherwise be considered as additional US business profits ( or put another way the 20% in 'skimmed' money is accounted for as an additional business expense ).

    While the IRS can easily track the transfer of funds from the US business to the Taiwan bank to the Chinese component suppliers, once that money hits the Chinese component suppliers' Chinese bank accounts it falls off IRS radar. Thus there is no record whatsoever of the transfer of the 20% 'kickback' from those Chinese supplier bank accounts to the US businessman's 'secret' account at Wegelin.

    From within that 'secret' Wegelin account, the American businessman can then 'anonymously' purchase stocks and bonds on european exchanges via Wegelin's Prop Desk. Interest, dividends, and proceeds from future sales of those stocks and bonds return to the US businessman's 'secret' Wegelin account. Thus tax reduction B happens as a result of 'secret' unreported interest, dividend, and capital gains earnings on the invested 'skimmed' money'.

    Since the IRS has been 'stiffed' by Wegelin, and the IRS has no real additional legal recourse against Wegelin, the existance of the 'secret' account in the name of the US businessman, and the transaction records of 'skimmed' money deposits, interest earnings, dividend earnings, and capital gains, are all beyond the 'reach' of the IRS.
    Last edited by Melonie; 02-14-2012 at 09:51 AM.

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    Default Re: Uber-Rich Americans appear to have found the answer to Tax Increases ...

    Got it. Thanks. I knew YOU would know lol.

    I assume this involves private, closely held businesses and not anything publicly traded ?

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    Default Re: Uber-Rich Americans appear to have found the answer to Tax Increases ...

    I knew YOU would know lol.
    I don't KNOW anything ! Strictly hearsay !


    Correct re private business to escape SarbOx !

    However, where highly paid execs at public companies are concerned, the 'skimming' angle obviously can't be used. So instead they have to 'transfer' money to Wegelin the 'old fashioned' way. Load a bunch of cash into a suitcase and fire up the corporate jet !

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    Default Re: Uber-Rich Americans appear to have found the answer to Tax Increases ...

    Quote Originally Posted by Melonie View Post
    I don't KNOW anything ! Strictly hearsay !


    Correct re private business to escape SarbOx !

    However, where highly paid execs at public companies are concerned, the 'skimming' angle obviously can't be used. So instead they have to 'transfer' money to Wegelin the 'old fashioned' way. Load a bunch of cash into a suitcase and fire up the corporate jet !
    Of course ! Just like Tommy Crown lol.

    Gotcha on the hearsay thing but I'm sure they are using something along those lines.

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    Default Re: Uber-Rich Americans appear to have found the answer to Tax Increases ...

    Quote Originally Posted by Melonie View Post

    Correct re private business to escape SarbOx !

    However, where highly paid execs at public companies are concerned, the 'skimming' angle obviously can't be used. So instead they have to 'transfer' money to Wegelin the 'old fashioned' way. Load a bunch of cash into a suitcase and fire up the corporate jet !
    Thanks for the explanation. I'm just missing why it wouldn't work for a public company. How would the 'kick-back' from a Chinese supplier show up?

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    Default Re: Uber-Rich Americans appear to have found the answer to Tax Increases ...

    ^^^ auditors may question price levels paid versus 'market' prices.

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