Everybody knows the dangers of putting incriminating information in an e-mail. All it takes is a click on the forward button for your darkest secrets to reach your worst enemies. Beda Singenberger—who lives in Zurich and ran Sinco Treuhand, a wealth management and tax advisory business—discovered that snail mail can do damage, too. Over an 11-year period, federal prosecutors charge, the Swiss financial adviser helped 60 people in the U.S. hide $184 million in secret offshore accounts bearing colorful names such as Real Cool Investments and Wanderlust Foundation. The basis for the charge? According to a prosecutor, Singenberger put a list of his U.S. clients—with incriminating details—in the mail. And now it’s in the hands of federal authorities.
It’s not clear from court records how Singenberger’s wayward mailing—which included details such as client residences, their Swiss banks, and the ways they hid accounts from the IRS—found its way to prosecutors. Regardless, U.S. authorities appear to be picking off the names on that list one by one. Singenberger’s goof has already ensnared Jacques Wajsfelner, an 83-year-old exile from Nazi Germany, and Michael Canale, a retired U.S. Army surgeon, court records show. Another Singenberger customer, cancer researcher Michael Reiss, pleaded guilty, though his court records don’t mention the list.
That prosecutors obtained the list as a result of an errant mailing was disclosed at Wajsfelner’s sentencing in New York on March 5. Singenberger “was sending mail to someone in the United States, and apparently in error he included a list of U.S. taxpayers,” Assistant U.S. Attorney Daniel Levy said in the courtroom. “The government has mined that list to great effect and prosecuted a number of people who were on that list.” Wajsfelner, who pleaded guilty to hiding $5.7 million from the Internal Revenue Service, was sentenced to three months of house arrest. “People who hide money in Switzerland are extraordinarily difficult for law enforcement to identify,” Levy told the judge. Singenberger’s mailing error was “the only reason” the U.S. was able to identify and prosecute his clients, Levy said.
Swiss bank secrecy first started to lift in February 2009, when prosecutors charged UBS (UBS) with conspiring to cheat the IRS. UBS, the largest Swiss bank, avoided prosecution by paying $780 million, admitting it fostered tax evasion, and handing over data on thousands of clients. Since 2008, U.S. prosecutors have charged at least 86 people in their crackdown on offshore tax evasion, including two dozen bankers, lawyers, and advisers such as Singenberger. An additional 38,000 Americans avoided prosecution through an IRS amnesty program that let them repatriate their accounts by paying back taxes and penalties and disclosing their offshore accounts and bankers. One possibility is that Singenberger’s list was turned over by a person who was either in the amnesty program or faced prosecution, although the government has not disclosed the exact circumstances.
Singenberger was charged in New York federal court in July 2011 with conspiracy to cheat the IRS. Like other offshore bankers charged by the U.S. Department of Justice, he is accused of managing, opening, and transferring accounts for his U.S. clients. He visited his clients in America, delivering cash from their undeclared accounts or taking cash back to deposit in Switzerland, court records allege. One of Singenberger’s clients in New York banked with UBS for a half-century and once had a $74 million account, while another, in California, held $47 million at UBS, prosecutors said. Singenberger has not made an appearance in U.S. court and didn’t respond to a phone call and an e-mail seeking comment. Switzerland does not have an extradition treaty with the U.S.
Most Swiss banks promised the IRS in 2001 that they would obtain documents on the real owners of accounts and would withhold taxes on some transactions. The Justice Department has charged advisers such as Singenberger with defeating the purpose of that agreement by hiding the identities of account owners. Singenberger created sham foundations in Liechtenstein and phony corporations in Hong Kong and the British Virgin Islands to help clients hide ownership of the accounts, prosecutors charged. They said Singenberger prepared one set of IRS forms for banks that falsely said the foundations or corporations were the owners—and another set of forms required by Swiss law that truthfully said his clients were the owners.
After the UBS investigation became public in 2008, Singenberger helped clients move accounts to other Swiss banks to keep them under wraps, prosecutors said. Those banks included Wegelin & Co., the oldest Swiss private bank. Wegelin pleaded guilty in Manhattan federal court in January to conspiring to help hide more than $1.2 billion in assets from the IRS while opening undeclared accounts for at least 70 U.S. taxpayers who were former UBS clients. The bank, which paid $74 million to resolve the investigation, pleaded guilty in January and has closed its doors after 272 years.
Canale, the retired Army surgeon, was introduced to Singenberger by an adviser who worked for UBS, according to Canale’s charging document, known as a criminal information. Canale had inherited money from a relative, and the UBS adviser told him Singenberger could help set up a structure that “would, to the greatest extent possible, obscure from the IRS” his ownership of the account containing the inheritance, according to the information. Singenberger set up a Liechtenstein foundation for Canale and helped him open an account at Wegelin, prosecutors said.
Canale pleaded guilty on Dec. 21 in New York. He awaits sentencing. He was surprised to hear of the existence of the Singenberger list, says one of his attorneys, Robert Fink. Wajsfelner learned only at his March 5 sentencing that he came to the government’s attention through the misdirected list, according to his lawyer, Jeffrey Denner. “That was definitely news to me and my client,” he says. Singenberger “certainly put a lot of people in the frying pan. I don’t think a lot of people recognized they were so close to the fire.”