For Wealthy Tax Cheats, The Moment of Reckoning is Coming

In some of the great houses in Palm Beach and the penthouses of Manhattan's East Side, wealthy Americans are sleeping fitfully, their nights haunted by fear of exposure. In the Bush years, the IRS became so lax in its enforcement that cheating became routine and hidden Swiss bank accounts almost as much a status symbol as private jets.

Why not do it? Everyone else was doing it? You knew you would never be caught, and you were protected by accountants and lawyers to hide your tracks. Your deceit and betrayal of American laws was shrewd strategy. It's grossly unfair that after all these years you might have to take the perp walk. And doing it, you're not going to look as nonplussed as Bernie Madoff did either.

It was so simple. Say you had a women's clothing company importing dresses from China and you were purchasing $1 million in dresses. You had the Chinese manufacturer send you a bill for $2 million. You wired him the money and he immediately wired half into your Swiss account. And say you've got a half billion dollar company and you keep doing this for ten years. Figure it out. Nobody could ever catch you as long as the Swiss kept their accounts secret.

This is big business. A person I know decided to check out her account in Switzerland. She walked into a tiny bank that looked like a 19th century cuckoo clock and took the old elevator upstairs. It opened up to a modern trading floor as big as a city block.

And now in the early days of the Obama administration, the gig may be up and there is stark terror among the knowledgeable. The sheer amounts of money waiting to be discovered are staggering, billions upon billions of dollars. There is so much money out there that once the taxes and penalties are paid, it could have a significant impact on the budget. And it couldn't be happening to a greedier, more selfish lot, most of them faux patriots to the core.

The first moment of truth arrives Monday when Attorney General Eric Holder meets with Eveline Widmer-Schlumpf, Swiss councilor in charge of police and justice. In the wake of the UBS debacle, the American government is seeking information on 52,000 American customers. The Swiss are willing to give up 250 customers whose tax fraud is most obvious, but not the others.

The Swiss have a special gift in masking their hypocrisy and narrow self-interest in a veneer of morality and principle. The bankers of Zurich are not happy at this seeming attempt to abrogate treaties that allow thieves to hide their funds with impunity.

Faith Whittlesey, a former ambassador to Switzerland, is a brilliant woman and a dear friend of mine from whom I learn even when I disagree. And I've rarely disagreed more with her than I do on this one. I find her stern warnings in The Financial Times Monday hardly enough reason for the American government to back off. She writes that "one of the largest Swiss political parties is agitating for retaliation that would include discontinuing Swiss representation of US interests in countries such as Cuba and Iran, where the US does not have embassies" and warns of "more virulent anti-Americanism."

I don't know about you, but I'm not sitting here quaking. If it comes to it, I'm willing to give up Swiss chocolate. But as an American who pays his taxes, I want these wealthy tax cheats to be found and punished severely including serious prison time for the worst of them.

Comments

[Atcha]

"The Swiss have a special gift in masking their hypocrisy and narrow self-interest in a veneer of morality and principle"
< cough> I can think of another nationality that fits the bill quite nicely < cough> ....how's the liberation of the oppressed populations in oil producing countries working these days?

[pachel]

I agree with the article and many of the points of Switzerland not living up to standards of honest and excellence.

If not Switzerland then Cayman Islands, etc.

Let's not give up the fight though at least this will counteract some of the frauds.

:) :(

[Charles Alexander - Huffpost Blogger]

I couldn't agree more. Thanks for a great post.

[Oldchef]

I say go after them. Maybe we will recover some of the money generated by the smart boys' new "financial instruments" scams.

[Lochmon]

So let's put up a couple more embassies.

[Peterandreae]

I suggest that the IRS and other world countries tax revenue departments get together and offer an amnesty for those poor folks with millions (or much more) in offshore tax havens who feel that their stash will be exposed. The tax man would take a flat tax if the person came forth with their account number(s). No investigation would be needed.

If enough people took advantage of this, vast amounts of money would return to the country of origin and out of the tax havens. I do not believe that these banks are any more solvent that banks in general are these days. This would be a run on the bank. It means the if one had money in these banks one would want to get it out quickly before the offshore tax haven ran out of money.

I also believe that the offshore tax havens would not be qualify for a bailout package.

[jahfreeka]

Every generation of democratic leaders these days seems to assume that subsequent generations will be as wise as they are and thus show the same restraint in the application of the new powers they are gaining. This ignores a lot of hard-won historically derived knowledge.

Every expansion of government power is done to get the 'bad' guys of the current era. It is always done for the right reasons.

Yet, the truth remains. The continual expansion of government power - under all administrations - is the opposite of what the architects of our government envisioned. As government's reach extends further into our private lives, there is no guarantee that this power will not be misused by future leaders.

I am not advocating for tax cheats with money in Swiss Bank accounts. Rather, I am pointing out that while today they are going after the people you consider to be the bad guys, in the future they'll also be able to go after the people you regard as the good guys. It is precisely the same argument that liberals correctly use to question the wisdom of suspending habeas corpus under any circumstances.

Besides, wouldn't it be much harder to cheat on taxes if they were much easier to calculate?

But that's how it goes. It's easier to expand government power to 'punish the bad guys' than it is to reform government to make it more fair, efficient and sensible.

[rhubardpi]

I'm age 62 and I have to say this is one of the most absurd statements I;ve ever read......­....

[publiuscato1787]

At first, I thought your comment was an absurd authoritarian dogma, but your twist was quite impressive and carried my sentiments exactly, I think it was said best in A Man for All Seasons:

"And when the last law was down, and the Devil turned 'round on you, where would you hide, Roper, the laws all being flat? This country is planted thick with laws, from coast to coast, Man's laws, not God's! And if you cut them down, and you're just the man to do it, do you really think you could stand upright in the winds that would blow then? Yes, I'd give the Devil benefit of law, for my own safety's sake!"

[warren57]

Here we go! Stand by for the claims of "Socialism" from the conservatives. Never mind that those stashing the cash have been un-patriotically not paying their taxes.

[drkazmd65]

A real patriot does pay their taxes,... and within reason smiles happily at their ability to do so, to support their Government, and at their ability to do so and still amass reasonable wealth in a growing economy.

[stewpro]

This is truly wonderful news, if it does go through. I hope that the Mr. Hopper can prevail upon the Swiss to capitulate. The very wealthy of the world have always had the advantage of hiding their assets. It is beyond me why this has been tolerated. It is an unfair advantage for the wealthy and if truly understood and studied, has done more to bring instability to the world order. If tyrants and terrorist were unable to hide their money, how different would the world be? If countries like Switzerland and Luxemburg, are no longer allowed to perform this service: drug cartels, dictators, Russian mobsters, Bernie Madoff, and maybe a host of tax evading Americans would be forced out into the light.

I am so happy to have Barak Obama as my president. This is a wonderful time to be an American. Redemption for progressives is at hand.

Stewart S.
Gainesville, FL

[wallyone]

Also look in the Bahamas and other havens.

[wallyone]

I would like to bring back the IRS program that identified people who were purchasing $100,000 vehicles and yachts and million dollar homes, yet were not declaring any significant income. The Republicans killed it as an invasion of privacy (as if they were actually worried about it), but it identified those in the underground economy, including the drug millionaires.

[Christian]

Swiss banks are a criminal enterprise, it is just that simple. They are willing to screw the world for their own little interest in profits. they should be cut out of the international business till they join the rest of the honest banking concerns.

[iblogleft]

Now for the minor task of actually accomplishing it...

That will be the day..

[azdirk]

it goes farther down than just the real rich. Look at the television adds that practically promise a sweetheart deal if you owe the IRS more than ten thousand dollars. The moral of the story is: Cheat Big!

[rhubardpi]

You have a very valid point.....­.......I worked for the IRS Collection Division for 28 years and I can tell you that upper management, including former IRS Commissioner Rosotti could care less that many who owed tax debts got off with paying nothing. So sue me Rosotti, you know who I am.

[cam]

"The Swiss have a special gift in masking their hypocrisy and narrow self-interest in a veneer of morality and principle. "

Extremely well put - I would imagine most of the world believes that statement is just as true of America as it is of the Swiss.

The only time one makes any headway with self-interest and hypocrisy is when they have compromised themselves materially. If the amount at stake is large enough and its origins obvious enough then the Swiss are thoroughly compromised and therefore conflicted: their position is indefensible but they cannot afford to come clean.

They must know to the dollar how much narrow self-interest and hypocrisy there is in the US. I doubt they are particularly worried.

[PengieP]

We are not as good at masking our overweening selfinterest as are the Swiss. We Americans are also capable of and have done much more damage than have the Swiss.

[Atcha]

Yes, but as the Americans don't count the (foreign) deads...Le­t Freedom Reign!