Leader Of International Drug Money Laundering Organization Sentenced To 30 Years In Prison

Jesus Rodriguez-Jimenez Laundered over $250 Million for Central American Drug Trafficking Organizations

  Geoffrey S. Berman, United States Attorney for the Southern District of New York, announced that JESUS RODRIGUEZ-JIMENEZ was sentenced today to 30 years in prison by United States District Judge Katherine B. Forrest in Manhattan federal court.  RODRIGUEZ-JIMENEZ ran an international money laundering business with ties to Mexico, Italy, Hungary, Panama, and China, facilitating the movement of hundreds of millions of dollars in drug proceeds on behalf of drug cartels in Mexico and Central America.  Through a web of front companies, shell bank accounts, and money couriers throughout the United States and Europe, RODRIGUEZ-JIMENEZ successfully laundered in excess of $250 million, directly facilitating the trafficking of massive quantities of narcotics throughout the world. 

U.S. Attorney Geoffrey S. Berman said:  “Jesus Rodriguez-Jimenez led an international money laundering operation that handled the proceeds of cocaine and heroin trafficking by Mexican and Central American cartels.  The Rodriguez-Jimenez organization laundered more than a quarter of a billion dollars in illegal drug trafficking proceeds through front companies, sham bank accounts, and money drops in several U.S. cities.  Thanks to the efforts of the DEA, Rodriguez-Jimenez will now spend considerable time in prison for his crimes.”

According to the charging and other documents filed in the case, as well as statements made during RODRIGUEZ-JIMENEZ’s sentencing proceeding:

Since July 2013, the U.S. Drug Enforcement Administration (“DEA”) has been investigating JESUS RODRIGUEZ-JIMENEZ’s international money laundering organization and its cartel clients, which together have been involved in trafficking hundreds of kilograms of cocaine and heroin, among other narcotics, and laundering narcotics proceeds through a variety of methods, including through a network of shell corporations under their control.  To date, the investigation has resulted in charges against eight defendants, including the successful extradition of alleged high-level money launderer Filippo Magni from Italy earlier this summer. 

Through a network of front companies, couriers, and his own armored car company, RODRIGUEZ-JIMENEZ succeeded in repatriating millions of drug dollars from the streets of New York, Chicago, Detroit, Philadelphia, and other cities across the United States, back to cartel interests in Mexico.  By introducing these drug dollars into the banking system, RODRIGUEZ-JIMENEZ was able to move money wherever the cartel interests directed it, including repatriating this value to Mexico through trade-based money laundering:  At the direction of his cartel clients, RODRIGUEZ-JIMENEZ would wire drug dollars to companies in China, Hong Kong, and Taiwan.  These companies would, in turn, ship merchandise to Mexico or other drug producing countries.  There, merchants would accept the shipment of goods, and pay a reduced price, in local currency, to the cartels.  In this way, RODRIGUEZ-JIMENEZ turned street cash in the United States into value in Mexico.

RODRIGUEZ-JIMENEZ controlled his laundering empire through fear and intimidation.  For example, in July 2015, pursuant to the investigation, the DEA seized $100,000 in drug money in Atlanta from Organization courier Sergio Urbina (ultimately a co-defendant of RODRIGUEZ-JIMENEZ).  When he learned of the seizure, RODRIGUEZ-JIMENEZ ordered Urbina to come to Monterrey, Mexico, to explain himself.  After enduring a multiple-day interrogation by RODRIGUEZ-JIMENEZ’s underlings, complete with the administration of a false polygraph test, RODRIGUEZ-JIMENEZ coerced Urbina to execute a false promissory note that RODRIGUEZ-JIMENEZ later used to try to hold Urbina liable for the value of the seizure – even commencing a fraudulent civil action against Urbina, which RODRIGUEZ-JIMENEZ continued to pursue from jail.

In total, RODRIGUEZ-JIMENZ laundered at least $250 million on behalf of the cartels during the course of the scheme.

In addition to the prison term, RODRIGUEZ-JIMENZ, 47, of Monterrey, Mexico, was ordered to forfeit $284 million in laundered funds.

Mr. Berman praised the outstanding work of the Las Vegas Division of the DEA and the Las Vegas Office of the Internal Revenue Service, Criminal Investigation, in the investigation of this case.

A.G. Underwood Announces Guilty Plea Of Patient Recruiter Who Bribed Medicaid Recipients To Undergo Unnecessary Medical Tests

Defendant Admitted to Stealing Over $10,000 from Medicaid

 Attorney General Barbara D. Underwood today announced the guilty plea of Alex Adderly, also known as Uruhu Adderley, 45 of Manhattan, for defrauding Medicaid by soliciting and bribing Medicaid recipients in order to persuade them to undergo a battery of unnecessary and improperly administered medical tests at a Queens clinic. Adderly pleaded guilty before the Honorable Toko Serita in Queen County Criminal Court to Health Care Fraud in the Fourth Degree, Grand Larceny in the Fourth Degree, and Prohibited Practices for Persons Acting in Concert with a Medical Assistance Provider, all class E felonies.

“My office will not allow criminals to use Medicaid as personal bank accounts and disregard the wellbeing of our most vulnerable New Yorkers,” said Attorney General Underwood. “We will continue to hold fraudsters accountable.”

Following complaints, undercover agents observed Adderly recruiting Medicaid recipients outside of a soup kitchen in Manhattan on multiple dates in 2016 and 2017. On each occasion, Adderly approached the undercover agents and offered them cash if they underwent a “physical” and had active health insurance coverage through Medicaid. On each date, the undercover agents observed Adderly recruit over a dozen other “patients” in the same manner. 

Adderly arranged for each recruited patient to be transported from Manhattan to a purported medical clinic in Queens. Adderly told each recruited patient that in order to receive the promised cash bribe, they must report certain specified ailments to the clinic staff regardless of the truth of those statements. Upon entering the clinic, each patient was given a form with a list of tests they wererequired to complete before receiving the promised cash bribe. These tests, including alleged cardiologic and neurologic tests, were identical for each patient and bore no relationship to the medical history or needs of each individual patient. Upon completing the tests, Adderly paid each patient in cash. Notably, none of the patients were scheduled for follow-up appointments and none of the undercover agents were contacted regarding the results of their tests.

Adderly caused over $10,000 in fraudulent claims for reimbursement to be billed to Medicaid through patients’ visits to the purported Queens clinic.

Upon sentencing on August 29^th, Adderly will serve 1 1/2 to 3 years in state prison.

If you suspect exploitation of Medicaid beneficiaries, call the Attorney General’s Medicaid Fraud Control Unit at 800-771-7755 or file a complaint online.

Throughout the investigation, the Attorney General’s Office worked closely with various city and federal agencies. The Attorney General would like to thank the New York City Human Resources Administration and the United States Attorney for the Eastern District of New York.

Attorney General Underwood Announces Suit Against Purdue Pharma For Widespread Fraud And Deception In Marketing Of Opioid Products

Lawsuit Alleges Scheme by Purdue to Misrepresent Its Opioid Products – Including OxyContin – as Less Subject to Abuse and Addiction Than Other Opioid Products

Lawsuit Stems from Attorney General Underwood’s Ongoing Multistate Investigation into Opioid Crisis

Lawsuit Seeks Disgorgement of Profits Resulting from Violations of New York Law; Civil Penalties and Restitution; and Costs to Abate Harms Inflicted by Purdue  

  New York Attorney General Barbara D. Underwood today announced a lawsuit against Purdue Pharma L.P., Purdue Pharma Inc., and Purdue Frederick Company, Inc. (“Purdue”).  The lawsuit alleges a decades-long and continuing pattern of persistent deceptive and illegal conduct, whereby Purdue misled prescribers and patients about the risks of its opioids, including OxyContin, intentionally understating the risks and overstating the benefits of these powerful and dangerous drugs.

Specifically, the Attorney General’s complaint alleges that Purdue persistently made – directly and through third party groups – numerous misrepresentations about its products, including concealing the link between long-term use of opioids and abuse and addiction, masking the signs of addiction by referring to them as “pseudoaddiction,” falsely claiming that withdrawal from its products can be easily managed, overstating the risks of alternative pain relief therapies as compared to opioids, and misrepresenting the extent to which opioids improve body function.  These representations were part of Purdue’s concerted effort to increase sales of its opioid products and directly affected prescribing, public opinion, and consumption of those products. 

“Our investigation found a pattern of deception and reckless disregard for New Yorkers’ health and wellbeing – as Purdue lined its own pockets by deliberately exploiting our communities and fueling an opioid epidemic that’s destroyed families across the state,” said Attorney General Underwood. “We’re now holding Purdue to account for this reprehensible and illegal conduct. Our work won’t stop with this lawsuit: our office will continue to lead the multistate investigation of opioid manufacturers and distributors across the country.”

As alleged in the Attorney General’s complaint, Purdue continued to engage in deceptive marketing of its opioid products even after pleading guilty to criminal conduct in 2007 and pledging to correct its misleading marketing, and after entering into an Assurance of Discontinuance with the New York Attorney General in 2015. 

Purdue’s conduct contributed to the over-prescription and overuse of Purdue’s opioid products, including the opioid epidemic impacting communities across New York. In New York alone, there were 3,086 deaths from overdoses involving opioids in 2016; 2,399 of those deaths were the result of opioid painkillers, including those sold by Purdue. 

The lawsuit seeks an order requiring Purdue to “abate the public nuisance and pay all costs of abatement.” The lawsuit also seeks an order prohibiting Purdue from engaging in deceptive, fraudulent, and unlawful practices; requiring Purdue to disgorge money obtained as a result of the violations of the law alleged in the complaint; and directing Purdue to pay civil penalties and damages to the state.

Today’s lawsuit stems from Attorney General Underwood’s ongoing investigation into whether opioid manufacturers and distributors engaged in unlawful practices in the marketing and distribution of prescription opioids; Attorney General Underwood is joined by a bipartisan coalition of Attorneys General in that national, multistate investigation. 

Attorney General Underwood’s investigation is part of the office’s multi-levered strategy to tackle New York’s opioid epidemic, including:

• Obtaining settlements with major national and global health insurers, including Cigna and Anthem, to remove barriers to life-saving treatment for opioid use disorder. The settlement agreements prohibit the insurers from requiring prior authorization for medication-assisted treatment, which can lead to significant delays for patients seeking relief from addiction.
• Creating the Internet System for Tracking Over-Prescribing Act (“I-STOP”), a series of enhancements to New York’s prescription drug monitoring program that provide doctors with a patient’s up-to-date controlled substance prescription history, requires electronic prescriptions, and establishes a safe disposal program to allow New Yorkers a place to dispose of expired and unneeded drugs, therefore reducing the likelihood of stolen and forged prescriptions being used to obtain controlled substances from pharmacies. Since 2014, I-STOP reduced “doctor shopping,” the practice of seeking the same or similar prescriptions from a number of different physicians, by 90%.
• Launching the SURGE Initiative to root out violent drug trafficking in rural communities and upstate New York. To date, the SURGE Initiative has already taken down ten major drug trafficking rings across New York, resulting in 315 traffickers taken off the streets.
• Launching the Community Overdose Prevention (“COP”) program, which enables state and local law enforcement officers in New York to carry naloxone, an antidote that can immediately reverse the effects of an opioid overdose.  Since the program was implemented in April of 2014, more than 100 overdoses were reversed using kits provided by the program.
• Reaching an agreement with Amphastar Pharmaceuticals to cut and cap the price of naloxone for all agencies in New York State, reducing the price by nearly 20%.
• Enforcing the state’s Mental Health Parity Laws to reach agreements with six health insurance companies, requiring them to implement reforms to their administration of behavioral health benefits, particularly with respect to medical management practices, coverage of residential treatment for substance abuse, and co-pays for outpatient treatment. The agreements provided millions of dollars in penalties and over $2 million in restitution for members whose claims were improperly denied.
• Successfully prosecuting more than ten licensed prescribers including operators of “pill mills” and other unlawful practices for crimes related to improper opioid prescriptions. Most recently, the office indicted a physician for Manslaughter in the Second Degree after he recklessly caused the death of a patient who died from a fentanyl overdose.
• Urging health insurance companies to review their coverage and payment policies that contribute to the opioid epidemic. The office also sent letters to the country’s three largest pharmacy benefit managers seeking documents, data, and other information regarding how they are addressing the opioid crisis.
• Launching a new website – ClearYourCabinet.com – to help New Yorkers safely dispose of unused opioids.

MAN INDICTED FOR STABBING GRANDMOTHER’S HOME HEALTH AIDE

Defendant Allegedly Stabbed Victim Numerous Times With Kitchen Knife 

  Bronx District Attorney Darcel D. Clark today announced that a man has been indicted in the stabbing of a 62-year-old Bronx woman who was serving as his grandmother’s home health aide. 

 District Attorney Clark said, “The defendant allegedly stabbed the victim multiple times throughout the body. Fortunately, she survived the vicious attack and the elderly woman she was caring for was not harmed.” 

  District Attorney Clark said the defendant, Marcus Gomez, 45, who was residing at the Creedmoor Psychiatric Center, was arraigned today for Attempted Murder in the second degree, Attempted Assault in the first degree, first-degree Assault, two counts of second-degree Assault, third-degree Assault and fourth-degree Criminal Possession of a Weapon before Bronx Supreme Court Justice Denis Boyle. He was remanded and is due back in court on September 17, 2018.

 According to the investigation, on July 29, 2018 at 1131 West Farms Road, the defendant allegedly stabbed the victim, Maria Rios, with a kitchen knife. The victim was working as the home health aide of the defendant’s grandmother at the time of the incident. The victim was found by neighbors in the hallway outside the apartment where the attack took place and was aided by first responders. She underwent surgery for her wounds. The defendant’s grandmother was unharmed.

An indictment is an accusatory instrument and not proof of a defendant’s guilt.

34th State Senate Debate on Bronxtalk

  The above photo was taken just before the debate between incumbent State Senator Jeff Klein and challenger Alessandra Biaggi last night on BronxTalk as host Gary Axelbank is ready at the podium to begin with the questions.  The questions were made up by Mr. Axelbank and his staff from the show, and he also said there were questions from the candidates to each other which were included.

  I expected a hot and heavy exchange between these two candidates as the dialog leading up to the debate had been much of a, you are responsible for those Republicans to be able to control the State Senate. You and the Republicans have held up much needed Democratic progressive and woman's issues by challenger Ms. Biaggi. On the other hand we have heard from incumbent State Senator Jeff Klein that in cooperating with the other side of the isle much needed legislation for the city did indeed get passed through the Republican controlled State Senate. 

  In the debate answers continued to be much along those lines. Both candidates did their best to get their own highlights out, while tamely going after their opponent. The debate is going to air many more times on Bronxnet Television (channel 67 Optimum, or channel 33 FIOS cable systems) in the coming week, or can be seen online at  https://bronxnet.org/watch/videos/5534/ 

Above - After the debate both candidates incumbent Jeff Klein and challenger Alessandra Biaggi with Bronxtalk host Gary Axelbank.

Below - The debate was held at the Bronxnet studio in Lehman College. After the debate many Lehman College student interns were anxious to talk to candidate Alessandra Biaggi. 

1199SEIU Endorses Amanda Septimo for Assembly

Amanda Septimo, Democrat for Assembly in the 84th District, has been endorsed by 1199SEIU United Healthcare Workers East.

 

"The members of 1199SEIU are proud to stand with Amanda Septimo as she runs for Assembly in the South Bronx. Amanda understands the struggles faced by working families in a changing New York. We believe she will fight for the issues important to our members including well-paying jobs, affordable housing, and access to quality education for all," said Gabby Seay, 1199SEIU Political Director.

 

"I am honored to have the support of 11999SEIU. For too long, our working families have been left behind in the South Bronx, and I am ready to fight for change. With all of the attacks coming out of Washington, it is critical that New York takes the lead on providing healthcare resources, workers' rights, protections for immigrants, and equal rights for all. I am ready to get to work making a difference in the Assembly," said Septimo.

 

1199SEIU is the largest union in New York and the largest healthcare worker union in the nation. It represents over 450,000 nurses and healthcare workers in five states including New York. Its members work in hospitals, nursing homes, homecare programs, clinics, and pharmacies.

 

1199SEIU joins a growing coalition of support for Septimo. She has been endorsed by DC 37, the Working Families Party, Council of School Supervisors and Administrators (CSA), the Jim Owles Liberal Democratic Club, and Run for Something.

Born and raised in the South Bronx, Septimo has been involved in community activism since she was teenager as a member of A.C.T.I.O.N., THE POINT Community Development Corporation's teen activism platform. She has worked with the Legal Aid Society, with a specific focus on cases involving domestic violence and Spanish-speaking immigrants. She also worked as the District Director for Congressman José E. Serrano (D-15th Congressional District), making her one of the youngest-serving senior staffers in Congress. Most recently, Amanda worked to help working and middle-class families by fighting for stronger worker protections with the Council of School Supervisors & Administrators.

 

The Democratic Primary will be on September 13th. The 84th District includes Mott Haven, Port Morris, Melrose, The Hub, Longwood, Concourse, Highbridge, and Hunts Point.

GERRI B. LAMB FUNERAL AND CELEBRATION OF LIFE

  The Funeral and Celebration of Life Service for Gerri Lamb will be held on Saturday, August 18, 2018, at 1:00 pm at the Church of Revelation, where Gerri Lamb served in the Sick and Shut-In Ministry. The Church is located at 1154 White Plains Road, Bronx, NY 10472. The Homegoing Service will be presided over by Pastor Tim Adour and Brother George I. Lamb.

 

The Viewing will be held Thursday, August 16, 2018, from 4:00 pm – 8:00 pmon and Friday, August 17, 2018, from 4:00 pm – 8:00 pm on at Granby’s Funeral Service, located at 4201 White Plains Road, Bronx, NY 10466.

 

Gerri B. Lamb was a Castle Hill resident and a community activist for over four decades, died on July 31, 2018, at the age of 73.

 

Gerri Lamb was born on January 11, 1945, in Wilmington, North Carolina to Lewis and Sarah Thomas-Beckett. She had five sisters and four brothers.

 

Gerri Lamb, deeply cherished by her family, is survived by her four children: George, Ira, Cheryl, Samantha and Peter; her 12 grandchildren: Shaniece Elliot Lamb, Marcus A. Lamb, Sahrasia A. Guity, Sariah A. Noiis, Solomon G. Cruz, Michael Holcomb, Christian and Aaron Rosado, Angelina Rosario, Shaun Lavin, Ebon, Porrie and Monet Lamb, and her 5 great-grandchildren: Brian Melvin, Jeziah Elliot, Nyair M. Lamb, Raelyn D. Guity-Scott, and Oliver Lavin.

 

Gerri Lamb moved to New York in 1960 and worked at the United Nations as a Liaison for employment placement services.

 

In the late 1960’s, Gerri Lamb moved to Bronx County and headed the PTA in every public school her children attended. She ran the Castle Hill Tenants Association and proceeded to work in the Bronx community as a volunteer on behalf of its residents, particularly children, seniors and the poor, through such venues as Pathways for Youth and the Kips Bay Boys and Girls Club.

 

For many years, Gerri Lamb served as President of the North Bronx Council of NYCHA Tenants, and since its inception in 1991, she chaired the Citywide Council of Presidents, making her the most powerful woman in New York’s public housing.

 

For more than 20 years, Gerri Lamb served as Castle Hill Resident Association President.

 

In 1983, Gerri Lamb was able to bring the first “off-campus” site of Touro College to the Castle Hill Community, and during the next four years, more than 20 community residents received their Associates or Bachelors Degree. Gerri Lamb was the driving force behind the ongoing renovation of Castle Hill's community center and the Annual Castle Hill Community Day Celebration. She was responsible for the addition of a gym and bringing in employment, education, computer, literacy, and guidance programs.

 

Gerri Lamb’s passion for helping people resulted in her being appointed to Bronx Community Board #9, where she remained for more than 25 years, serving in Housing, Zoning and Land Use, Youth and other Committees.

 

In 2007, after becoming a senior citizen, Gerri Lamb was elected to serve as President of the Castle Hill Senior Center. 

 

Most recently, Gerri Lamb served as a Legislative Aide for Councilman Ruben Diaz, Sr., for whom she had also worked during his tenure in the New York State Senate office. Gerri Lamb also served on the staffs of former Assembly Member Aurelia Greene, and State Senators Israel Ruiz and Efrain Gonzalez, Jr.

 

Gerri Lamb was the recipient of many awards, including the New York State Minorities in Criminal Justice, Inc.; 2012 IS 131 Parents Association Award; 2007 New York State Housing Authority Queens Community Operations Women’s History Month; 2007 Bronx Christian Charismatic Prayer Fellowship Award; 2010 Women of Distinction Award; the Top 25 Bronx Most Influential Women.

 

Gerri Lamb was honored to be among the 3.5 million visitors to the National Museum of African American History in Washington, DC. She visited the Museum just weeks before her death.

 

The following Bronx Elected officials used their social media to express their heartfelt condolences about the passing of Gerri Lamb:

 

NYC Councilman Reverend Ruben Diaz: said. “My heart is heavy as I am saddened to announce the passing of a friend, staffer, and incredible advocate for the people of Castle Hill – Ms. Gerri Lamb. Gerri Lamb and I have been friends for over 30 years and she has been nothing but kind & loving to myself and others. This is a woman who simply cannot be replaced. She was one of a kind in many regards and I will miss her dearly.”

 

Bronx Borough President Ruben Diaz, Jr.:said, “I'm saddened to learn of the passing of a Bronx institution, Gerri Lamb. Ms. Lamb was a dedicated community leader and political activist and was also someone my office worked closely with as both a member of the Assembly and as Borough President. Rest in peace. #bronx #nyc”

 

US Congressman Jose Serrano: “I’m saddened to hear of the passing of Ms. Gerri Lamb. Gerri was a long time community leader in the #Bronx. She was involved in all aspects of community service and was helpful to so many of us. She will be missed. My condolences to her family R.I.P.”

Manhattan U.S. Attorney Announces Criminal Charges Against Zürcher Kantonalbank Of Switzerland

With Deferred Prosecution Agreement Requiring Payment Of $98.5 Million, As Well As Guilty Pleas Of Two Zürcher Kantonalbank Bankers

Bank Admits to Helping U.S. Taxpayer-Clients Hide Hundreds of Millions of Dollars in Offshore Accounts

  Geoffrey S. Berman, the United States Attorney for the Southern District of New York, Richard E. Zuckerman, the Principal Deputy Assistant Attorney General for the Tax Division of the Department of Justice, and Don Fort, Chief, Internal Revenue Service-Criminal Investigation (“IRS-CI”), announced the filing of criminal charges against ZÜRCHER KANTONALBANK (“ZKB”), a financial institution headquartered in Zurich, Switzerland.  ZKB is charged with conspiring to help U.S. taxpayer-clients evade their U.S. tax obligations, file false federal tax returns, and otherwise hide hundreds of millions of dollars in offshore bank accounts held at ZKB.

Mr. Berman also announced a deferred prosecution agreement with ZKB (the “Agreement”), under which ZKB admitted to its unlawful conduct in assisting U.S. taxpayer-clients in violating their legal duties.  The admissions are contained in a detailed Statement of Facts attached to the Agreement.  The Agreement requires ZKB to pay a total of $98.5 million.  The $98.5 million figure reflects, in part, a credit given to ZKB because of its cooperation in this case.  However, the amount of ZKB’s cooperation credit was reduced by the Government due to ZKB’s actions, as described in the Statement of Facts, in dissuading two indicted ZKB bankers from cooperating with U.S. authorities for years after their indictment.  Those indicted bankers, STEPHAN FELLMANN and CHRISTOF REIST, also pled guilty today. 

The criminal charge against ZKB is contained in an Information (the “Information”) alleging one count of conspiracy to willfully and knowingly (1) defraud the IRS, (2) file false federal income tax returns, and (3) evade federal income taxes.  If ZKB abides by all of the terms of the Agreement, the Government will defer prosecution on the Information for three years and then seek to dismiss the charges. 

ZKB has also agreed to provide ongoing assistance to the Department of Justice, including providing detailed information about accounts in which U.S. taxpayers have a direct or indirect interest, including detailed information as to other banks that transferred funds into those accounts or that accepted funds when the ZKB accounts were closed.  In addition, ZKB has agreed to cooperate with prosecutors in making treaty requests to Switzerland or other countries for account information.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “ZKB and two of its bankers have admitted to conspiring to assist U.S. taxpayers in evading their tax obligations.  The bank enabled taxpayers to hide accounts from the IRS and actively sought to win the business of Americans looking to evade taxes.  After doing so, ZKB dissuaded the two bankers from cooperating with U.S. authorities, which has today resulted in a reduction in the bank’s cooperation credit.  The substantial financial penalties imposed on the bank, and the two bankers’ pleas, should make clear that helping U.S. taxpayers to be tax evaders will not be tolerated.”

Principal Deputy Assistant Attorney General Richard E. Zuckerman said:  “ZKB and the other defendants in this case knew that U.S. taxpayers were maintaining undisclosed ‘black money’ accounts at ZKB in order to avoid their tax obligations and did nothing to prevent it.  Today’s agreement and guilty pleas send a clear message that this type of conduct will not be tolerated.  The Department will continue to work with our partners at IRS-CI to prosecute financial institutions and individuals that conspire to defraud the United States.”

IRS-CI Chief Don Fort said:  “Today’s resolution with ZKB and the guilty pleas of two bank employees send a strong message of enforcement and commitment to the international banking community as well as U.S. taxpayers.  When individuals and entities hide behind shell corporations and anonymous bank accounts, they are not only cheating the U.S. government, they are cheating the honest taxpaying citizens who are obeying the law and doing the right thing.”        

According to the Information, statements made during the proceedings today, and other documents filed in Manhattan federal court, including the Statement of Facts to the Agreement:

The Offense Conduct

From at least in or about 2002 through in or about 2009, ZKB helped certain U.S. taxpayers with accounts at ZKB evade their U.S. tax obligations, file false federal tax returns with the IRS, and otherwise hide accounts held at ZKB from the IRS (hereinafter, “undeclared accounts”).  ZKB did so by opening and maintaining undeclared accounts for U.S. taxpayers at ZKB, and by allowing third-party asset managers to open undeclared accounts for U.S. taxpayers at ZKB.  ZKB held approximately 2,000 undeclared accounts on behalf of U.S. taxpayer-clients, who collectively evaded over $39 million in U.S. taxes, between 2002 and 2013.

In furtherance of a scheme to help U.S. taxpayers hide assets from the IRS and evade taxes, ZKB undertook, among other actions, the following:

• ZKB entered into approximately 349 “code word agreements” with U.S. taxpayer-clients under which the bank agreed not to identify the U.S. taxpayers by name on bank documents, but rather to identify the U.S. taxpayers by code name, in order to reduce the risk that U.S. tax authorities would learn the identities of the U.S. taxpayers.  ZKB understood that a primary reason why U.S. taxpayers sought these “code word” accounts was to evade detection by U.S. tax authorities.
   
• ZKB opened and maintained accounts for many U.S. taxpayer-clients held in the name of non-U.S. corporations, foundations, trusts, or other legal entities (collectively, “structures”), thereby helping those U.S. taxpayers conceal their beneficial ownership of the accounts.  Some of the structures had no business purpose (“sham structures”), but rather, existed solely for the purpose of helping ZKB’s U.S. taxpayer-clients hide their offshore assets.
   
• ZKB agreed to hold bank statements and other mail relating to approximately 750 accounts of U.S. domiciled taxpayer-clients at ZKB’s offices in Switzerland, rather than send them to U.S. taxpayer-clients in the United States, which helped ensure that documents reflecting the existence of the accounts remained outside the United States and beyond the reach of U.S. tax authorities.
   
• ZKB solicited new business through the website www.swiss-bank-accounts.com, which was operated by a third party, and which resulted in the opening of accounts at ZKB for U.S. taxpayer-clients whose accounts were undeclared.

ZKB knew that certain U.S. taxpayer-clients were maintaining undeclared accounts at ZKB in order to evade their U.S. tax obligations, in violation of U.S. law.  ZKB understood the legal prohibitions regarding tax evasion to be distinct from ZKB’s obligations under its Qualified Intermediary Agreement.  Certain ZKB bankers commonly used the term “Schwarzgeld” – German for “black money” – internally to refer to undeclared accounts, including those held by U.S. citizens.  Until the middle of 2008, ZKB did not prevent any U.S. persons from opening an account if they refused to fill out a Form W-9, even though ZKB knew that such accounts were, or were highly likely to be, undeclared.  Indeed, in May 2006, internal ZKB documents explicitly discussed the profitability of “[n]on-disclosed U.S. persons.”

At its high-water mark in 2008, ZKB had approximately $794 million in assets under management relating to undeclared accounts held by U.S. taxpayer-clients.  From 2002 through 2013, ZKB earned approximately $21 million in profits on approximately $24 million gross revenues from its undeclared U.S. taxpayer accounts, including accounts held through structures.   

In early 2008, U.S. enforcement actions against the Swiss banking institution UBS became public.  In or about July 2008, UBS announced that it would cease providing cross-border private banking services to U.S.-domiciled clients.  Rather than immediately closing down its own U.S. taxpayer undeclared accounts as a result of the UBS investigation, ZKB, through its external asset manager (“EAM”) desk, instead treated UBS’s decision to stop accepting U.S. taxpayer-clients as a business opportunity, and actively sought to increase its U.S. taxpayer-client base.  ZKB gained many U.S. taxpayer-clients through EAMs working with the bank.

However, in 2008 and 2009, at the same time as ZKB’s EAM Desk proactively sought to increase its U.S. taxpayer-client base, ZKB also began implementing a number of measures that gradually limited securities accounts held by U.S. taxpayer-clients.  At first the restrictions applied only to former UBS clients, but ZKB expanded its restrictions over time.  By June of 2009, ZKB decided to close its business with all U.S. domiciled clients holding securities accounts, and in 2011, ZKB decided to exit its business with all remaining U.S.-domiciled customers.  By 2012, ZKB had closed virtually all accounts held by U.S. domiciled taxpayers, and for those U.S. clients domiciled outside of the U.S., ZKB sought a Form W-9 and proof of U.S. tax compliance.  ZKB has now terminated all U.S. cross-border business.

Indictment of ZKB Employees and ZKB’s Response to the Indictment

Despite ZKB’s cooperation with the Government in this case, the Government views the actions of ZKB with respect to indicted bankers FELLMANN and REIST, described in the Statement of Facts, as inconsistent with a policy of full cooperation.  Those actions, accordingly, have reduced the amount of cooperation credit afforded by the Government to ZKB.

In December 2012, three ZKB bankers – FELLMANN, REIST, and Otto Hüppi – were charged in the Southern District of New York with conspiracy to defraud the United States and the IRS for their role in ZKB’s offense.  Although ZKB retained independent U.S. counsel for the bankers, beginning in 2013 and continuing through 2015, ZKB’s in-house counsel and, at times, ZKB employees from the Human Resources department and other departments, regularly met with FELLMANN and REIST.  At those meetings, which were not attended by FELLMANN and REIST’s independent U.S. counsel, ZKB, among other things, made statements that caused FELLMANN and REIST to feel dissuaded from reaching out to the U.S. Attorney’s Office in order to explore the possibility of cooperating.  In addition, ZKB’s in-house counsel suggested to FELLMANN that he did not have any information of value to contribute to the U.S. Attorney’s Office’s ongoing investigation.  Furthermore, based on conversations with ZKB, FELLMANN and REIST felt that their continued employment at ZKB and ZKB’s ongoing payment of their legal fees would be threatened should they take steps that were viewed by ZKB as inconsistent with the bank’s own interests.  Due in part to these discussions with ZKB, FELLMANN and REIST did not seek to cooperate with the investigation until the summer of 2015, approximately two and a half years after being indicted.

FELLMANN, 53, a Swiss citizen, and REIST, 60, a Swiss citizen, each pled guilty to one count of conspiracy to willfully fail to file returns, supply information, or pay tax.  FELLMANN and REIST each face a maximum sentence of one year in prison.  The statutory maximum sentence is prescribed by Congress and is provided here for information purposes only, as any sentences imposed on the defendants will be determined by the judge.

FELLMANN and REIST are each scheduled to be sentenced before U.S. District Judge J. Paul Oetken on November 30, 2018.

Hüppi remains a fugitive.

Mr. Berman praised the outstanding investigative work of IRS-CI, and thanked the Justice Department’s Tax Division for its assistance in the investigation.