Wednesday, November 12, 2014

The Weil Not Guilty Verdict - Road Map For Future Criminal Defense Strategies?

Where we discussed that Jurors in federal court in Fort Lauderdale, Florida, found former UBS AG executive Raoul Weil not guilty of conspiracy to defraud the United States for his alleged role in helping nearly 20,000 U.S. clients hide $20 billion in assets from the Internal Revenue Service.

The decision comes as a significant blow to federal prosecutors, who had focused their efforts on convicting Weil, formerly the third-ranked officer at the Swiss banking giant as the head of its wealth management and business banking division and the most senior individual they targeted.

According to the DBR  the acquittal now serves as a blueprint for high-level officials of financial institutions to successfully mount defenses by pointing to underlings as the culprits and washing their hands of any illegal activity.

Attorney Kevin E. Packman, a partner at Holland & Knight, said he was shocked by the verdict.
"It's telling that juries feel quite differently than the feds. Perhaps other bankers will elect to go to trial as opposed to plead out," he said.

Speculation at the time was that Weil arranged his arrest in an effort to further cooperate in the U.S. investigation of UBS, the largest Swiss bank. We also came to the same conclusion as reflected in our blog post The 2nd Ex-UBS Banker is About to Blow The Whistle on His US Clients!

But Weil had no plans to cooperate. He claimed the bank's cross-border catering to Americans was only a small part of his responsibilities and any illegal activity were the results of a "gang of low-level client advisers," said his attorney, Matthew Menchel, a partner at Miami's Kobre & Kim.
"He was the first of the Swiss bankers to stand up and say, "I didn't do anything wrong,' " Menchel said. "This was all an effort to go up the food chain."

Menchel conducted some of the critical cross-examinations of government witnesses during the trial. Also representing Weil was Adriana Riviere-Badell, also of Kobre & Kim in Miami, and Aaron R. Marcu and Kimberly Zelnick of Freshfields Bruckhaus Deringer in New York.

The defense presented documents to the jury that showed Weil informed his employees to adhere to U.S.-Swiss policy. Weil did not testify.

Many observers who watched the trial said the government was simply out-lawyered after a strong opening statement in which Assistant U.S. Attorney Mark F. Daly painted a clandestine system at UBS of hidden hard drives and ruses to keep authorities in the dark about bankers' activities in the United States.

Menchel, a former federal prosecutor, said the Justice Department overreached in the Weil case and should have dropped charges of conspiracy to defraud once it became clear the defendant didn't know what these client advisers were doing.

Instead, he said, the government "doubled down" by striking deals with the rogue financial advisers to testify against Weil. One qualified immunity deal with indicted UBS banker and witness Hansruedi Schumacher was made during the trial.

The government's chief witness was Martin Liechti, the former head of private banking for the Americas. He was given full immunity for his testimony. Menchel said he was able to show Liechti was a pathological liar who was resentful that Weil moved up the executive ladder at UBS faster than he did.

Four other UBS bankers, as well as taxpayers who hid money through UBS, also testified with immunity. All of it back-fired on the prosecutors.

The Weil trial was closely watched in Switzerland, where banking secrecy was considered a matter of national pride before the Justice Department took on UBS.

Still, the Justice Department and the IRS's crackdown on secret overseas accounts has been a resounding success despite this high-profile loss. It extracted nearly 4,500 names of American account holders from UBS and used the deferred prosecution to offer an amnesty program that has netted $20 billion from taxpayers and numerous prosecutions.

Miami tax litigator Robert Panoff said the pressure is still on foreign bankers who have assisted American taxpayers in hiding money through offshore shell companies and secret accounts.

"The acquittal of Raoul Weil is the loss of one battle in what has been an enduring, lengthy and highly successful war on U.S. tax evasion involving the use of foreign bank accounts and those who aid and abet their conduct," Panoff said.

"Those who think that this result will cause the Justice Department and the IRS to retreat in their ongoing efforts should rethink their position."

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