Advisor Accidentally Mails List of Tax Cheats, Authorities Zone In

Names, other incriminating data included; one client was a Nazi-era exile

More On Legal & Compliance

from The Advisor's Professional Library
  • Nothing but the Best Execution Along with the many other fiduciary obligations owed by RIAs, firms owe a duty to seek best execution of clients’ transactions.  If they fail to do, RIAs violate Section 206 of the Investment Advisers Act.
  • Dealings With Qualified Clients and Accredited Investors Depending upon an RIAs business model and investment strategies, it may be important to identify “qualified clients” and “accredited investors.”  The Dodd-Frank Act authorized the SEC to change which clients are defined by those terms.

A word of advice—if you plan to help clients hide assets from the IRS, don’t inadvertently mail an incriminating list of names and account numbers that somehow ends up in the hands of regulators.

Sounds obvious, but it’s exactly what happened to Swiss financial advisor Beda Singenberger.

Federal prosecutors charge that over an 11-year period, Singenberger helped 60 people in the U.S. hide $184 million in secret offshore accounts, according to Bloomberg. He attached colorful names like Real Cool Investments Ltd. and Wanderlust Foundation.

Then, according to the news service, Singenberger inadvertently mailed a list of his U.S. clients, including their names and other details, which eventually wound up with federal authorities.

Bloomberg says U.S. authorities appear to be picking off the clients on that list one by one. Among those affected: Jacques Wajsfelner, an 83-year-old exile from Nazi Germany, and Michael Canale, a retired U.S. Army surgeon. Another customer, cancer researcher Michael Reiss, pleaded guilty, though his court records don’t mention the list.

“He was sending mail to someone in the United States, and apparently in error he included a list of U.S. taxpayers,” Assistant U.S. Attorney Dan Levy said on March 5 at Wajsfelner's sentencing in New York. “The government has mined that list to great effect and prosecuted a number of people who were on that list.”

Wajsfelner, who pleaded guilty to hiding $5.7 million from the Internal Revenue Service, was sentenced to three months of house arrest.

The case comes as negotiations continue between Swiss banks and U.S. authorities over the latter’s access to once secretive accounts. Long a haven for ultrawealthy individuals and families,  the United States has increased pressure in recent years to open accounts of suspected tax cheats.

Reprints Discuss this story
This is where the comments go.