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Offshore account case stalls after Wegelin misses court date

Florida readers may have heard that the latest chapter in the Internal Revenue Service's investigation into offshore accounts held in Swiss banks was supposed to involve Wegelin & Co.'s appearance in U.S. District Court. But Wegelin representatives failed to appear for a scheduled arraignment in the federal courthouse, leading the presiding judge to suggest that the bank's partners be arrested. But prosecutors did not prepare a bench warrant for the judge to sign, which would have given law enforcement the authority to take bank representatives into custody.

This is not the first time Wegelin has failed to appear in court. The bank did not show up in court in February after receiving an indictment earlier that month. Wegelin later argued that it did not have to appear because government prosecutors improperly served a summons upon it. In response, prosecutors issued a second summons this month, but Wegelin still mounted a challenge to the method of service.

Under offshore reporting rules, U.S. taxpayers are required to disclose to the IRS certain assets held overseas. Failure to follow proper reporting requirements can result in heavy penalties. Government prosecutors have alleged that Wegelin helped hide over $1.2 billion in assets belonging to greater than 100 U.S. taxpayers.

In particular, prosecutors have said that Wegelin actively courted account holders who left UBS when that bank became the target of a U.S. investigation into unreported offshore assets. They have also alleged that the bank had a certain designation for accounts that were to go undeclared, and that some of the clients taken from UBS were given that designation.

Because the court did not issue a bench warrant, the future of the case is now somewhat unclear. The judge reminded the court that he would dismiss the indictment if the government failed to engage in "reasonable efforts" to bring bank representatives into custody.

Source: Bloomberg, "Wegelin Bank Fails to Appear for Arraignment in U.S. Court Case," David Glovin and David Voreacos, May 23, 2012.

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