A wealthy investor in Virginia pleaded guilty on Tuesday to criminal tax evasion involving an international bank, said by a person briefed on the case to be HSBC, one of the world’s largest private banks.
The case is significant because it shows that the authorities are expanding beyond UBS , the giant Swiss financial company, in their scrutiny of banks suspected of helping wealthy Americans evade taxes. It also offers an example of a bank that apparently took steps to hide its operations in the wake of the UBS case, even as many banks said they were shutting undeclared offshore services for American clients.
The investor, Dr. Andrew B. Silva, of Sterling, Va., pleaded guilty to failing to disclose to the American tax authorities more than $250,000 that he had kept at a bank using a sham Liechtenstein trust, according to court papers filed in United States District Court for the Eastern District of Virginia. While the papers do not identify the bank, the person briefed on the case said it was HSBC , which is based in London but has a large Swiss operation. Christopher S. Rizek, a lawyer for Dr. Silva, declined to comment.
Juanita Gutiérrez, a spokeswoman for HSBC, declined to comment.
In December, the person briefed on the matter said the Justice Department expanded its investigation of foreign banks with offshore private banking services to include HSBC and Credit Suisse. HSBC’s private bank, one of the world’s largest, managed assets of $352 billion as of the end of 2008, according to the company.
According to court papers, Dr. Silva, a head and neck surgeon, inherited $250,000 from his mother in 1997 and deposited it in a Swiss bank. His mother told him to write a “coded letter” to a Swiss lawyer in Zurich who was managing the account, held in the name of a Liechtenstein trust.
In 1999, Dr. Silva met the lawyer, who told him the account was “hush hush” and that “it would be best if he did not talk to others about it.” The lawyer declined to give Dr. Silva documents pertaining to the account, saying that he should keep them for safety. Court papers did not identify the lawyer.
In August 2009, the bank told him it was closing his account, which had grown to $268,000, because it was closing offshore undeclared accounts of wealthy Americans. The Swiss lawyer told Dr. Silva that the bank would not transfer the funds by wire because it “would create a trail for U.S. authorities,” according to the court papers.
The Swiss lawyer advised Dr. Silva to send the money home from four separate post offices in Zurich by regular and priority mail, staggering the deliveries over weeks so that the “envelopes did not look suspicious.”
The Swiss lawyer took Dr. Silva to meet his banker on Oct. 12, 2009. The Swiss banker handed Dr. Silva “$115,000 in U.S. currency consisting of an individually wrapped brick of $100,000 in sequentially numbered, new $100 bills.” A second bundle contained $15,000. The banker told Dr. Silva the bank “could not provide him with more cash at the time.”
Throughout October, Dr. Silva mailed the money to his Virginia home in amounts of less than $10,000 — below the limit at which money being brought into the United States must be declared. Dr. Silva mailed more money in November after meeting again with his Swiss banker and lawyer in Zurich. The bank told him not to carry any statements because it could lead to discovery of his accounts.
In all, he mailed dozens of envelopes and hand-carried others into Dulles International Airport near Washington. Dr. Silva, who is scheduled to be sentenced on May 7, faces a $500,000 fine and 10 years in prison.
In the last year, seven American clients of UBS have pleaded guilty to using offshore accounts to avoid taxes.
As part of its deferred prosecution deal with the Justice Department in February 2009, UBS was not allowed to distribute cash when it closed its undeclared offshore banking services for wealthy Americans. UBS averted indictment by admitting to criminal wrongdoing with its private banking services and agreeing to pay $780 million.