Swiss Money Missed: Prosecutors Continue Tax Evasion Probes

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The U.S. Attorney for the Southern District of New York is hoping to find answers stored away at Citigroup Inc.’s (NYSE:C) Citibank NA and the Bank of New York Mellon Corporation (NYSE:BK). According to Reuters, documents filed in Manhattan federal court Wednesday, the attorney wishes to issue “John Doe” summonses to the banks. If granted, the attorney would be able to access records and determine if there accounts have ties to the Swiss bank Zuercher Kantonalbank (ZKB).

John Does summonses, the IRS explains, can only be issued after approval by a Federal court has been granted. The summons is used in tax liability investigations and target a specific, unidentified taxpayer or group of taxpayers. It can be used for research purposes.

The filing does not accuse Citibank or BNY Mellon of malpractice, the filing only wants to determine the connections, if any, that exist between the three banks. ZKB is one of the largest banks in regional banks in Switzerland, and a leading financial services provider for the Zurich area.

According to the filing, Citibank and BNY Mellon were part of a scheme by ZKB to provide offshore bank accounts for U.S. taxpayers. It did this by using Citibank and BNY Mellon as correspondent banks, or banks that can conduct affairs on behalf of another. The U.S. taxpayers, the attorney claims “failed to report the existence of their ZKB accounts to the IRS, as well as the income earned on those accounts.”

Jeffrey Neiman, a private practice attorney in Fort Lauderdale, Florida who formerly investigated Swiss banks as a federal prosecutor, spoke to Reuters. ”[W]hat the U.S. is trying to do is figure out who accessed their undeclared Swiss bank account money, and did anyone access it in a way that flowed through U.S. banks,” Neiman said.

In December 2012, three former ZKB employees were indicted because they “and others conspired to defraud the United States, to conceal from the IRS the existence of bank accounts maintained at, and the income earned in these accounts.” They “conspired with U.S. taxpayer-clients to hide at least $423,000,000 in assets from the IRS.” ZKB is connected to another investigation, regarding tax evasion. Bloomberg reported on November 1 that Ty, Inc. owner and creator of Beanie Babies, H. Ty Warner, pled guilty to tax evasion, funneling as much as $107 million into Swiss Bank accounts. In 2002, he placed $93.6 million in a secret ZKB account.

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