Swiss bank Julius Baer’s tactics for US tax evasion: Obfuscate (‘never lie’) and carry a tennis racket

Swiss Bank Julius Baer agreed to pay a $547 million fine for helping U.S. taxpayers hide billions of dollars in offshore accounts, the Department of Justice announced Thursday.

At the peak of the scheme in 2007, the Justice Department said Julius Baer had “approximately $4.7 billion in assets under management relating to approximately 2,589 undeclared accounts held by US taxpayer-clients.”

The tax evasion efforts, which began in the 1990s, netted the bank roughly $219 million gross revenues and $87 million in profit from 2001 to 2011 alone.

The Justice Department’s account of Julius Baer’s scheme details a laundry list of sordid behavior, including using secret accounts, devising complex rules to deflect suspicion by federal agents and even using code words to describe the undeclared accounts in official documents.

One particular document revealed just how deep the attempts to cover the bank’s tracks went.

A memo Julius Baer circulated in 2006 to its bankers traveling to the U.S., titled “U.S. Client’s Do’s & Don’ts,” explained exactly how the “client advisers” should operate in the country to conceal the illicit nature of their visit.

Here’s a sampling of what the memo suggested (emphasis ours):

1. When arriving in the country and dealing with customs, if asked about the nature of their visit bankers were advised to “say [b]usiness and of course some leisure, trying to take some time to enjoy your beautiful country. Proud government employees usually love this type of statement. One can throw in skydiving or another fun sport/activity. This tends to shift the questioning away from the business purpose to the ‘fun time’ part of the trip (carrying a tennis racket also puts the emphasis on “fun and games,” and not on business).”
2. To communicate with clients, the bankers were told to “Only use mobile phone[s] registered in and operating from Switzerland. Avoid phone calls from hotel to clients. It is recommended to purchase a telephone calling card from the post office, grocery stores, or electronic shops. This allows you to use practically any phone with no specific link left behind.” They were also advised to purchase all calling cards in cash.
3. At customs they were also instructed “…when asked by Officer about the object of your visit, say that you are in Banking (never lie) but if and when asked about which field, respond “EDP Dept.” “Investment Banking” or “Lending,” but certainly not Private Banking.
4. Bankers were instructed not to have anything on them with Baer’s logo, or any electronics with Baer client information on it. “One travels more like in the old days…”

Two Julius Baer bankers, Daniela Casadei and Fabio Frazzetto, also pleaded guilty to conspiracy to defraud the IRS, evade federal income taxes and file false federal income tax returns.