Kevin Downing, the Justice Department prosecutor who directed the U.S. crackdown on offshore tax evasion, resigned effective June 4, according to a person familiar with the matter.
Downing, 46, was the lead prosecutor in the U.S. probe of UBS AG, Switzerland’s largest bank. In February 2009, UBS avoided prosecution by paying $780 million, admitting it helped thousands of Americans evade taxes and turning over the names of 250 American clients to U.S. authorities. UBS later revealed another 4,450 accounts.
The U.S. has since charged about 50 U.S. taxpayers with tax crimes and about two dozen offshore bankers, lawyers and advisers. Those indicted include seven current and former bankers from Credit Suisse AG, the second-largest Swiss bank. More than 33,000 Americans avoided prosecution by voluntarily disclosing offshore accounts to the Internal Revenue Service.
“Kevin did quite a good job,” said tax attorney William M. Sharp of Sharp Kemm PA of Zurich and Tampa, Florida. “He certainly led the charge in the offshore crackdown.”
Charles Miller, a spokesman for the Justice Department, declined to comment on the resignation. The person familiar with the matter declined to be identified and wasn’t authorized to talk about the resignation.
Downing, who spent 16 years at the Justice Department, is a senior trial attorney in the tax division. He also helped to lead the tax-shelter prosecution of ex-KPMG executives. The case began as the largest tax-shelter prosecution in U.S. history. In 2005, the government initially accused 17 former KPMG executives, including former Deputy Chairman Jeffrey Stein, of selling shelters that cost the Treasury $2 billion.
U.S. District Judge Lewis Kaplan, who presided over the case, dismissed charges against many of the former executives saying prosecutors violated their right to counsel. Stein was among them.
A trial resulted in the acquittal of a former KPMG tax partner, David Greenberg. Charges against New York-based KPMG, one of the Big Four U.S. accounting firms, were dismissed in January 2007 after it paid a $456 million fine.
Downing’s resignation comes with negotiations stalled between the U.S. and Swiss governments over a civil settlement and criminal probes of 11 financial institutions, including Credit Suisse, suspected of helping American clients hide money from the IRS.
Stalled Treaty Change
Senator Rand Paul, a Kentucky Republican, is blocking an amendment to a U.S.-Swiss tax treaty, slowing Switzerland’s handover of data on thousands of Americans with bank accounts hidden from the IRS.
The protocol, negotiated in September 2009, would amend a 1996 treaty and make it more difficult for Switzerland to refuse requests from the IRS for tax information about U.S. customers of Swiss banks.
“There’s been a real stalemate in the U.S.-Swiss negotiations,” Sharp said. “The Swiss banks are rapidly exiting U.S. customers. That’s happening every day.”
Downing’s boss, Kathryn Keneally, was confirmed March 29 as assistant attorney general in the tax division after the position had long gone unfulfilled. She leads more than 300 civil and criminal lawyers who handle a wide range of investigations and litigation.
Bloomberg News reported March 27 that the division lost almost 30 percent of its 95 prosecutors in the previous month, slowing a U.S. crackdown on offshore banks that enabled tax evasion, according to four people familiar with the matter.