Feds arrest in case where only .01% chance of getting caught

At least that's what the defendant put the odds at in this UBS case (via the AP):

A former banker at Switzerland's UBS AG has been charged with tax fraud conspiracy for allegedly helping a wealthy U.S. client hide assets from the Internal Revenue Service.

Banker Renzo Gadola was named in the charging document filed Tuesday in Miami federal court. The document claims that Gadola and an unnamed second Swiss banker helped an unidentified Mississippi man hide an account at UBS and open another secret account at a second Swiss bank.

Gadola worked at UBS for 13 years, then in early 2009 began working as an independent investment adviser.

Prosecutors say Gadola and the other banker tried to prevent the client from disclosing his secret accounts to the IRS. During a November meeting at a Miami hotel, according to court documents, Gadola told the client the likelihood that his new accounts would be discovered was "practically zero percent."

"You have no link to UBS whatsoever, so 99.9 percent you have nothing to worry about," Gadola told the client, according to court documents.

Speaking of other things that happen only .01% of the time, a federal appellate court today ruled in favor of a criminal defendant in a Fourth Amendment case. And it was a biggie. Orin Kerr from Volokh has all the details of United States v. Warshak from the 6th Circuit, where the court held that email is protected by the warrant clause of the 4th Amendment. That almost deserves an !. (Hat tip: JK).

Lots going on

Thanks to all my peeps for sending lots of tips the last couple of days. There's lots going on:

1. Judge Zloch is in the news. From not letting Bradley Birkenfeld -- the UBS informant -- push off his surrender date to spanking Loring Spolter. The 60 Minutes gambit by Birkenfeld didn't pay off, I guess. As for Spolter, I'm surprised he's getting as much sympathy as he is: check out Bob Norman's blog here.

2. In the wake of a tough year for DOJ, there are new discovery guidelines for prosecutors. Here are the 3 new memos that criminal practitioners on both sides of the aisle will be reading today:

Issuance of Guidance and Summary of Actions Taken in Response to the Report of the Department of Justice Criminal Discovery and Case Management Working Group

Requirement for Office Discovery Policies in Criminal Matters

Guidance for Prosecutors Regarding Criminal Discovery

Tom Withers covers the memos here. A snippet from his summary:

The Guidance Memo then directs that the discovery review should cover the following: 1) the investigative agency’s files, 2) Confidential Informant/Witness/Source files, 3) Evidence and Information Gathered During the Investigation, 4) Documents or Evidence Gathered by Civil Attorneys and/or Regulatory Agencies in Parallel Civil Investigations, 5) Substantive Case Related Communications, 6) Potential Giglio Information Relating to Law Enforcement Witnesses, 7) Potential Giglio Information Relating to Non-Law Enforcement Witnesses and Fed.R.Evid. 806 Declarants, 8) Information Obtained in Witness Interviews, a) Witness Statement Variations and the Duty to Disclose, b) Trial Preparation Meetings With Witnesses and c) Agent Notes.
The Guidance Memo then directs that although prosecutors may delegate the process of review to others, they “should not delegate the disclosure determination itself.”

3. Lots of coverage on the shootings from Las Vegas. Just terrible stuff. Here's the video that is making the internet rounds:



And here's Brian Tannebaum's take:

Today at every federal courthouse security will be a little tighter. People will get a second look, maybe a third. There is no correlation between what happened in Las Vegas yesterday and federal court anywhere else. People get angry at the grocery store, at the post office, and at work. But it's like when someone with a shoe bomb tries to blow up a plane, well, you know the rest.We (those who go to court) all have to deal with what happened yesterday. It will happen again, we all know that. But because we cannot stop a sick, angry litigant from sneaking in with a gun, a shotgun, we have to at least pretend we can. The gunman was dressed in black. Watch "no black" be the next addition to the dress code. We can only sigh and understand that this is the world in which we live.It angers me that today I have to mourn the death of a Court Security Officer, a retired cop now one of the guys in blue jackets that waive familiar lawyers through, and say "how you doin' today counsel?". A guy who just "went to work" right after the new year, and left the courthouse dead. Five seconds before he was probably talking to a prosecutor, defense lawyer, or fellow security officer about his New Year's vacation. or the weekend's football games.Pisses me off.


4. Random thought of the day: Why does Blogger say that internet is misspelled?

Would you do 40 months for a billion bucks?

Bradley Birkenfeld would. He's the UBS banker who helped the government makes its case against UBS and all the tax cheats. Here's the New York Times story:

Bradley C. Birkenfeld was sentenced to 40 months in prison for helping rich Americans dodge their taxes. Now he is hoping for a bit more — a few billion dollars more.
Mr. Birkenfeld, a former private banker at the Swiss bank UBS, won the enmity of his peers by violating the omerta of Swiss banking: He divulged the tax evasion secrets of UBS, the world’s largest bank by assets, and its well-heeled American clients. As part of a deal with federal prosecutors, he admitted to, among other things, helping to smuggle diamonds in a tube of toothpaste.
Now, as thousands of wealthy Americans seek amnesty for keeping illicit, offshore bank accounts, Mr. Birkenfeld and his lawyers hope to use a new federal whistle-blower law to claim a multibillion-dollar reward from the American government. If they succeed — and legal experts say the odds are pretty good — it would be the largest reward of its kind.
Mr. Birkenfeld, who is to begin his prison term as soon as January, is being represented by the executive director of the National Whistleblowers Center, Stephen M. Kohn. Mr. Kohn successfully represented Linda Tripp, who helped expose the Monica Lewinsky scandal of the Clinton years.
“We are seeking at least several billion dollars,” Mr. Kohn said.



So, how much would it take you to do 40 months in a federal pen:

I would do 40 months in federal prison for:
	$100,000
	$500,000
	$1 million
	$5 million
	no amount of money
pollcode.com free polls

Happy Halloween

So, Judge Cooke sentenced a cooperting UBS guy to probation the other day, and today Judge Cohn sentenced a similarly situated co-defendant to 3 months in prison. Curt Anderson has the details:

A federal judge Friday rejected a plea for probation from a New York businessman who admitted concealing $8 million in secret Swiss bank accounts, imposing instead a three-month prison term in the high-profile tax evasion case.
U.S. District Judge James I. Cohn said toy salesman Jeffrey Chernick deserves credit for his cooperation in the broad U.S. probe of Swiss bank UBS AG. But he said allowing Chernick to avoid prison for filing a false tax return "sends the wrong message" in a case that has made international headlines.
"If the court issues a slap on the wrist, to me the notoriety becomes negative," Cohn said. "It essentially informs the public that you can cheat on your income taxes and get away with probation."
Chernick, 70, had faced between 18 months and two years under federal sentencing guidelines. Prosecutors asked Cohn for a nine-month prison term, noting that Chernick's disclosures led directly to the indictments of a Swiss banker and Swiss lawyer on conspiracy charges as well as charges against other UBS clients in the U.S.

Interesting to see the differences in the judges' comments and the ultimate sentence.

Anyway, I'll leave you all with this video, wishing you all a Happy Halloween:

First UBS sentencing

Judge Cooke sentenced Steven Michael Rubinstein to probation based on his extensive cooperation with the feds. From the AP's Curt Anderson:

Rubinstein will be on probation for three years, including the year of house arrest with electronic monitoring and travel restrictions. He also must pay a $40,000 fine. Prosecutors had sought a year of prison time, even as they stressed Rubinstein's ongoing importance to the broader UBS investigation.
"The defendant has provided complete and truthful information," said Assistant U.S. Attorney Jeffrey Neiman.
Rubinstein, a Boca Raton resident who is also a citizen of South Africa, said he was "embarrassed and ashamed" by his actions. He pleaded guilty in June to filing a false tax return and has been providing evidence ever since.
"I've tried to make amends as best I can," Rubinstein told Cooke. "I will continue to assist the government in any manner requested."
Outside the courtroom, as Rubinstein hugged his wife, Pamela, his attorney Robert Panoff called it a "fair and just sentence."

Judge Zloch slaps UBS cooperator

We covered earlier the UBS defendant who was asking for probation for his extensive cooperation. The government was asking for 2 1/2 years (or a 50% reduction). Judge Zloch today sentenced Bradley Birkenfeld to 40 months, or 10 months more than the government asked for. (Here's the AP story). What say you, readers? When, if ever, is it appropriate for a judge to sentence above the parties' recommendations? (I think the answer is probably never, but I'm happy to hear arguments to the contrary).

Friday's notes

School's back Monday. To get you in the mood, here's a clip from Back to School:



The DBR reports that the mold lawsuit filed by Ted Klein's family has been dismissed by Judge Story. Apparently, you can only get $1,000 under the Federal Employees Compensation Act when death results from on-duty injuries of a federal employee. Readers, can this law be constitutional? That seems insane to me.

The UBS case keeps going and going and going. This time a banker and a lawyer have been indicted. Via Curt Anderson:

A banker and a lawyer from Switzerland were indicted Thursday on fraud charges for allegedly helping rich Americans evade taxes by hiding assets in Swiss banks, including UBS AG and a smaller Zurich-based institution.

Among the allegations in court documents against banker Hansruedi Schumacher, 51, and 42-year-old attorney Matthias Rickenbach is that they told a New York businessman they paid an unnamed Swiss government official a $45,000 bribe for information on whether the businessman's account would be revealed to U.S. investigators.

Schumacher and Rickenbach each face a single charge of conspiring to defraud the U.S., which carries a potential five-year prison sentence. Prosecutors said both men remain in Switzerland, and it wasn't immediately clear if they had U.S. lawyers to represent them.

The indictment comes one day after the Swiss and U.S. governments unveiled an agreement in which UBS will divulge names of some 4,450 wealthy Americans suspected of dodging taxes through secret bank accounts. Many of those people, and the bankers and attorneys who advised them, could also face criminal charges.

And from the last post, we're debating Plaxico Burress' two year sentence in the comments. Go post your thoughts.

UBS snitches

Oh, there are going to be a bunch of these. Here's one where the government is recommending a 50% reduction (via Curt Anderson):

A former Swiss banker should get a sharply reduced prison term for helping the U.S. government as a star witness in a wide-ranging tax evasion investigation of banking giant UBS AG, federal prosecutors said Tuesday.
The motion filed in federal court comes a week after U.S. and Swiss governments settled out of court to end an IRS lawsuit against UBS. Under that deal, the Swiss agreed to let UBS name at least some wealthy U.S. clients behind 52,000 accounts, information that had been protected by the country's vaunted bank secrecy laws.
Assistant U.S. Attorney Jeffrey A. Neiman said in the motion that Bradley Birkenfeld, 43, had provided extensive cooperation. Because of that, he deserved no more than 2 1/2 years in federal prison, or half the five-year maximum for his guilty plea on a charge of conspiring to defraud the U.S.
Birkenfeld provided key information not only to U.S. prosecutors but also to foreign authorities investigating UBS, the Securities and Exchange Commission, the Internal Revenue Service and a U.S. Senate panel.
"This substantial assistance has been timely, significant, useful, truthful, complete and reliable," Neiman said in the motion.

Totally off topic, check out this picture of Hurricane Bill. Pretty cool. (HT: A. Spellman)

UBS settles with US

Indictments to follow.

Friday news and notes

1. UBS got pushed one more week, till August 10. Looks like it might settle. From the WSJ blog:

In a major break in a massive tax-evasion investigation, UBS AG and the governments of Switzerland and the U.S. have reached a settlement that could force UBS to turn over identities of thousands of account holders, a Justice Department attorney told a U.S. District Court judge Friday morning. ...
Stuart Gibson, a Justice Department tax division attorney, didn’t detail the settlement in a conference call with Judge Alan Gold that included lawyers for UBS and the Swiss government.
A hearing scheduled for Monday in Miami was postponed until Aug. 10, at which point more details are expected to be released. The judge scheduled another conference call with parties in the case for next Friday.
The Internal Revenue Service has demanded the identities of 52,000 U.S. account holders at UBS. UBS and the Swiss government have claimed that turning over those names would violate Swiss bank secrecy provisions.

2. Julie Kay special for the Herald on law firms cutting pay:

As law firms continue to lose money in a tough economy, their cost-cutting has moved from layoffs to a new strategy -- slashing lawyers' salaries.
Several firms in South Florida have instituted across-the-board salary cuts for lawyers in recent weeks -- the latest being Holland & Knight, one of South Florida's largest firms, which announced cuts of up to 10 percent Wednesday.
``Law firms have been forced to manage more carefully all of their expenses,'' Holland & Knight Managing Partner Steve Sonberg said in a statement. ``Like many other firms, Holland & Knight is reducing the base salaries of its associates, with limited exceptions.''
The reductions, Sonberg said, would range up to 10 percent. The firm is also chopping salaries of some non-lawyer ``senior counsel and other professionals,'' with an average overall reduction of 7 percent, he said.
Other firms to reduce lawyer salaries in recent weeks include Akerman Senterfitt, Squire Sanders and Ruden McClosky. Carl Schuster, managing partner at Ruden McClosky, said the across-the-board measure was in place until the end of the year when the firm hopes
to reinstate the original salaries.
He wouldn't disclose percentage cuts at the Fort Lauderdale firm.
Becker & Poliakoff cut lawyers' salaries 12 percent in 2008, but reinstated the original salaries three months later and repaid lawyers the difference, according to managing partner Alan Becker.

3. Next week I won't be able to blog, so we will be very very lucky to have the wonderful Vanessa Blum as our guest blogger. If anyone else wants to pitch in, let me know.

We're second...

... to Rhode Island?!!

I demand a recount.

Well, we're trying to be first, with 41 arrests today. Here's the Herald coverage of all the mortgage fraud stuff going on.

So, will UBS settle? Trial is "looming" Monday. Judge Gold will have one last status conference this Friday.

BLT has a number of interesting posts, including this one on 11th Circuit nominee Beverly Martin. Looks like she will be confirmed...

Effective closing or a lemon in the Representative Jefferson case? We'll find out shortly. Here's the BLT coverage:

Lemons have an odd way of sprouting in the legal lexicon. Lemon laws protect car buyers. The Lemon test helps govern the separation of church and state. And today, lawyers for ex-Rep. William Jefferson (D-La.) introduced what might be called "the lemon defense."
In closing arguments this afternoon in the U.S. District Court for the Eastern District of Virginia, Washington defense attorney Robert Trout told the jury that the FBI had targeted Jefferson in a sting operation, in which the bureau tried to catch him paying bribe money to the vice president of Nigeria. But when the money turned up in Jefferson’s freezer instead of the vice president’s house, Trout said, investigators realized they had "a lemon of a case."
"They decided they wanted to make lemonade out of lemons," the Trout Cacheris name partner continued on. “And before you can do that, you’ve got to squeeze a lot of lemons. And so they squeezed some lemons."
The "lemons" squeezed by the FBI, Trout said, were the witnesses who would eventually testify that they bribed Jefferson to use his congressional connections to set up business deals in Africa.

UBS trial continued till August 3

Prior coverage here. Judge Gold agreed to the parties' request to let them try and work it out.

Maybe not on the UBS trial

According to the New York Times, the parties filed a joint motion to continue the case over the weekend in the hopes they can settle:

The Swiss bank UBS and United States federal prosecutors sought Sunday to delay a hearing scheduled for Monday so the two sides could try to settle their closely watched dispute over the release of names of wealthy American clients of the bank who are suspected of offshore tax evasion.

But the postponement request, made in a joint legal filing in a federal court in Florida, came amid fresh threats by the Justice Department that it might impose financial sanctions on UBS and possibly indict the bank should it ultimately refuse to disclose the names if required to do so by a judge.

Judge Gold will hear the motion to continue first thing Monday morning.

UBS trial to start Monday

Lots of press coverage on the case to start Monday here.

I liked this Reuters piece on Judge Alan Gold, who is presiding over the case:

The judge presiding over a high-stakes legal showdown between the U.S. government and Swiss bank UBS AG is seen as a straight-shooter who has not shied away from taking aim at big corporate interests.
Some see Judge Alan Gold of U.S. District Court for the Southern District of Florida emerging as an international mediator as he deals with issues loaded with important foreign policy and financial ramifications, led by U.S. demands for a lifting of Switzerland's treasured bank secrecy laws.
But U.S. attorneys and prosecutors who know him say Gold, a 65-year-old native New Yorker, will studiously avoid doing anything inconsistent with his role as a judge as he handles his biggest and most publicized case since he came to the federal bench in Miami nearly 13 years ago.
"He's about as straight-shooter as they come," said Charles Intriago, a former U.S. federal prosecutor and money laundering expert, who publishes a website for law enforcement officials about asset forfeiture.
"He's the perfect judge for this," he added, referring to the hearing Gold is set to preside over Monday in a suit in which the Justice Department is seeking to force UBS to disclose information on 52,000 secret accounts suspected of being used by wealthy Americans to avoid paying their taxes.
There is little in Gold's record to indicate how he might rule in the case, which experts say could set an important legal precedent since it marks the biggest test ever of Swiss bank secrecy.
Gold grabbed the media spotlight in a business law case once before, when he presided over a class-action lawsuit against Exxon Corp that resulted in a settlement costing more than $1 billion.

Gene Stearns won that case against Exxon. This time around, he's representing UBS.

Quick Hits

Sorry about the slow blogging this week. It's summer and I'm swamped... What up with that?

Okay, to the news:

1. General Noriega has filed a cert petition.
2. Paris Hilton starts trial tomorrow in front of Judge Moreno. Steven Binhak and Michael Weinstein represent her.
3. UBS trial next week.
4. Federal JNC interviews for judge and U.S. atty coming up.
5. Palm Beach is moving firearms cases to federal court. (The State Attorney there says it's because the min-mans in federal court are higher than in state court. But there is no min-man for being a felon in possession of a firearm in the federal system.)
6. More on SexyLexus and White & Case.
7. There's lots of mortgage fraud.
8. Boeis tops Wells.
9. AUSA Scott Ray is leaving the office. Going away party next Thurday at Tobacco Road. Good luck to Scott.
10. The Marshals are busy.

Bern backs UBS

The government of Switzerland filed an elegantly understated amicus brief for Judge Gold's consideration on Thursday (according to PACER) or yesterday (according to the media). The upshot of it is that enforcement of the United States' summons—which it implies (but refrains from outright saying) is just a "fishing expedition"—circumvents the applicable treaty and violates Swiss law. Here is the very abridged version:

The Government of Switzerland has a strong interest in the preservation of the integrity of Swiss law and sovereignty and in promoting respect by the United States of its international treaty obligations to Switzerland.

If the Court were to order UBS to produce evidence from Switzerland, and backed that order with coercive powers, the Court would be substituting its own authority for that of the competent Swiss authorities, and therefore would violate Swiss sovereignty and international law.

The Wall Street Journal reports that an IRS agent speaking at a financial conference in Miami confirms that more "John Doe" summonses are in the works.

Baker & McKenzie UBS Memo Takes Center Stage

SFL here.

Come on folks -- David needs to focus on his trial, and a bunch of nudnick commenters force him to change his comment policy. Oy.

Meanwhile, the UBS saga unfolds on multiple fronts, in addition to Judge Gold's courtroom. In Senate testimony yesterday, a Baker & McKenzie tax memo took center stage:

According to a 180-page list of exhibits released by the Permanent Subcommittee on Investigations, a UBS memo dated July 4, 2000, shows that the Swiss bank relied on outside legal counsel from Baker & McKenzie when setting up offshore asset vehicles and insurance plans to aid U.S. clients. (The UBS memo citing legal advice obtained from Baker & McKenzie can be seen on PDF pages 178 and 179.)

The memo, which was signed by UBS financial planning and wealth management employees Jonathan Bourne and René Sonneveld, explicitly states that the firm was consulted when setting up such schemes.

It also appears that UBS is arguing some sort of abstention doctrine before Judge Gold:

Branson said that UBS views the John Doe summons filed by the IRS in federal court in Miami as a dispute between the IRS and the Swiss government, which can best be resolved through diplomacy rather than litigation that is neither "proper nor productive."

UBS is being advised by Wachtell, Lipton, Rosen & Katz litigation partners John Savarese, Ralph Levene, and Martin Arms. Eugene Stearns, chairman of Florida firm Stearns Weaver Miller Weissler Alhadeff & Sitterson, is serving as local counsel to UBS along with litigation partners Ana Barnett and Gordon Mead, Jr. (Stuart Gibson, senior litigation counsel with the Justice Department's tax division, is the lead lawyer for the government.)

What is with the Swiss and diplomacy? Also, when is litigation ever "proper or productive"?

Welcome to America!

More Complications in the UBS Case

SFL here, still filling in while David does his "trial lawyer" thing.

More on UBS --

Now Judge Gold has a Swiss federal court to possibly contend with:

UBS was sued on Tuesday in a Swiss federal court by wealthy American clients seeking to prevent the disclosure of their identities as part of a tax-evasion investigation by the United States Justice Department.

The lawsuit accuses UBS and Switzerland’s financial regulator, the Swiss Financial Market Supervisory Authority, or Finma, of violating Swiss bank secrecy laws and of conducting what Swiss law considers illegal activities with foreign authorities. It also named Peter Kurer, the chairman of UBS, and Eugen Haltiner, the chairman of Finma, as defendants.

The suit, filed by a lawyer in Zurich, Andreas Rued, on behalf of nearly a dozen American clients, underscores the growing clash between Swiss banking secrecy laws and those of the United States. Tax evasion is not considered a crime in Switzerland. Disclosing client names under Swiss law is a criminal offense and can expose bank executives and officers to fines, prison terms and other penalties.

Oh no -- foreign law possibly impacting our legal process again? Remember that whole Supreme Court controversy a few years back?

Me neither, but Judge Scalia probably does.

Ho Hum -- The Princess, A Sex Sting, and UBS

Hey, can you tell it's SFL here?

Yep, still foolin' around while David tries another big case.

So I told you all this UBS thing was big. Here's an update on what went down in Judge Gold's courtroom yesterday:

U.S. District Judge Alan S. Gold set a July 13 hearing on the IRS lawsuit, unless an agreement is reached first. UBS claims that turning over the account names would violate Swiss privacy law and jeopardize the bank's license to stay in business.

"Such violations would expose these (UBS) employees to substantial prison terms, as well as fines, penalties and other sanctions," the UBS lawyers said in a court filing last week. "There is simply no reason to have, nor equity in having, such an expedited process here."

The IRS had sought an accelerated timetable, but Justice Department tax attorney Stuart Gibson and UBS lawyers told Gold at a brief telephone hearing Monday they had agreed on a lengthier process. Gold also set a series of deadlines for court filings.

"I would appreciate the continued efforts to discuss this matter, to narrow down what the legal issues are and the factual issues are," Gold said.

Most judges probably would appreciate that.

What do you know -- the feds bust a Miami Beach sex ring:

Bernabe-Caballero, 34, remained without bond in Miami's Federal Detention Center Monday night and was scheduled for a 10 a.m. hearing Tuesday about extradition to Michigan, where the grand jury in the case had convened.

Bernabe-Caballero's attorney, Rene A. Sotorrio, declined to comment.

Smart move, I wouldn't say anything either if my client was facing these kind of allegations.

And -- can you believe it -- a story about a cocaine princess and federal court.

Sometimes these things write themselves.

More on Kuehne R&R

SFL here, hope you had a nice weekend.

Here's a nice quote from John Pacenti's article on Judge Bandstra's R&R on Ben Kuehne:

If Bandstra’s decision stands, the case would be down to five substantive money laundering counts. Kuehne and Saldarriaga are accused of using a money broker to hide the movement of drug profits into the defense fund. The money broker was an informant working with the government and exchanging pesos for dollars used in U.S. drug stings.

Miami litigator Jane Moscowitz, one of Kuehne’s attorneys, said she was thrilled with the Bandstra ruling.

“It took my breath away that the motion had been granted,” she said.

And us too, Jane.

And here's some more background on the IRS/UBS suit, which is being closely watched in financial and legal circles:

While the deferred prosecution agreement reached between Swiss banking giant UBS and federal prosecutors on Wednesday might have initially looked like a great deal for the government, in reality the Zurich-based bank isn't disclosing nearly as many client names as law enforcement officials are suggesting, says Miller & Chevalier tax partner George Clarke III.

Clarke says that the decision by the Justice Department to file suit against UBS on Thursday in Miami is evidence of this.

Despite forking over $780 million in penalties as part of its deferred prosecution agreement, UBS, represented by Wachtell, Lipton, Rosen & Katz litigation partner John Savarese, managed to secure a pretty good deal for itself, Clarke says.

Sure, not bad for a bunch of carpetbaggers from New York. But what are we, chopped liver?