Tax Evasion: Glorified, Yet Haunting
- WULR Team
- Sep 18, 2024
- 5 min read
American Actors in an International Arena
Published September 27, 2024
Opinion Written by Elena Cuille
Tax evasion has been one of the most prominent legal issues for decades, both in the United States and around the world. The common story of wealthy individuals finding any and every loophole to avoid giving their share of money to the government is not a new phenomenon, and their methods of doing so are similar. Tax havens are cesspools for the rich to undermine the law and their responsibilities as citizens, difficult to abolish, and a major oversight of today’s global economy.
Cases of tax evasion that have flooded the news in recent years often center around offshore banking in Switzerland, Monaco, and the British Virgin Islands. These territories have been pinpointed by the International Revenue Service as international tax havens, generally defined as states that levy unusually low income, wealth, or corporate taxes. These states are very appealing to individual business owners and large corporations, to avoid paying large sums in taxes on their assets, especially given the havens’ reputations and promises of secrecy. Countries referred to as “tax havens” do not associate themselves with the term or the subsequent accusations, making it very difficult for the IRS to exercise any type of authority over offshore banks or to intercept the wealthy US citizens who decide to expand their assets and business across borders. Consequently, the United States wealthy elites are never caught in their evasive practices, leaving the IRS deprived of billions of dollars in revenue.
Not all individuals did successfully cover their tracks, however. Stephen L. Schechter hit a “grand slam” by committing fraudulent acts in all three of the world’s most prominent tax havens: Switzerland, Monaco, and the British Virgin Islands. A previously licensed banker in the United States, owner of his own US-based financial advisory firm, and a corporate advisor in the UK, Schechter was eager to expand his wealth and assets across waters (1). In 2002, Schechter formed his organization of bank associates under the company name of Charles Penn Longview Associates, located on the island of Tortola in the British Virgin Islands. He then deposited the funds generated by CPL in a Swiss bank account. During this transaction, Schechter managed to conceal his US citizenship status in all Swiss banking documentation. In 2011, Schechter was residing in the Principality of Monaco, where he sold his apartments for upwards of fourteen million euros, which he also deposited in his Swiss CPL account. Schechter then used the funds from the apartment sale to buy investment securities – “tradable financial assets such as equities or fixed income instruments (2)” – for nearly nine million US dollars.These securities accumulated significant interest, dividends, and capital gains. Normally, a law-abiding United States citizen would have reported the steep increase in assets and income, with the knowledge that their tax-paying rate would increase. Yet, by reporting neither the apartment in Monaco, nor his securities on his US tax return documents, Schechter avoided all tax-paying duties. Shortly before he was flagged by the IRS, Schechter successfully moved all the money he had accumulated in Switzerland over to the Monaco banking system. He covered his tracks by fully draining, transferring, and closing his $10.2 million Swiss CPL account. The undisclosed amount of interest pocketed between the years of 2002 to 2017, when Schechter was finally stopped by
the U.S. government, is incomprehensible (3).The complete lack of surveillance and government failure to impede such a pattern of crimes is appalling. Once again, the rich get richer, right under everyone’s noses. This is worsened by the fact that American governments are limited in their capabilities to prevent these crimes from recurring because the offshore banks lie well outside of their jurisdiction. Moreover, if these criminals are often able to get away with their acts for years, the risk to reward ratio does not deter them. The fines are affordable and the sentencing is minor, as proven when Schechter was sentenced to a mere two days in jail in March of 2024. If this is the precedent for future tax fraud cases, what is there for white-collar criminals to fear?
On the other hand, not all the blame can be placed on these wealthy US citizens, since they are often not committing these acts on their own. Outside offers of opportunities to earn interest on one’s hard-earned assets without having to pay a cent in taxes is, of course, enticing. Private banks in haven-ridden states are geniuses when it comes to pinpointing US citizens who would be willing to invest in their banks, as a sort of “win-win” scenario. One of the biggest perpetrators, in this sense, was Banque Pictet et Cie, based in Switzerland. The Banque was discovered to have concealed $5.6 billion from the IRS by conspiring with affluent US taxpayers, convincing them to transfer their funds to their bank, resulting in a greater pool of high-end clientele for the Banque and more money for the high-end clientele. Nearly six billion US dollars were scattered across 1,637 different bank accounts within Banque Pictet. Pictet’s evasive and fraudulent tactics included using, ‘coded accounts, foreign trusts and entities, nominee beneficiaries, and other deceits to conceal their income (4).’Caught, Banque Pictet agreed to pay $122.9 million back to the US treasury because of a deferred prosecution agreement, about $32 million of which went towards funding the IRS in the past year.Banque Pictet is still in business and prospering today. In other words, they received a slap on the wrist and carried on. It is doubtful that such a corporation would go from scheming and secrecy to full transparency and honesty – nothing the IRS can do will dismantle the empire the Swiss banking system has built. Once again, the rich become richer, and the rest of taxpaying citizens are forced to sit and watch. Although crimes within the realm of tax law often seem to generate less concern, interest, and outrage from the public than other domains, it is one of the most common and relevant areas in legal justice today. The ease with which wealthy Americans increase their wealth by vast and inconceivable sums through capitalizing on and abusing industries in other countries feels almost hopeless. Institutions like the IRS can only do so much.
Not only is this issue dismissed and overlooked, but it has even been glorified. This rich, “under the table,” lifestyle has been portrayed in movies that have swept the nation, like Wolf of Wall Street, starring beloved American actor Leonardo DiCaprio. The movie is based on the true story of Jordan Belfort – one of society’s greatest monopolistic, fraudulent, laundering, and evasive criminals of all time. Director Martin Scorsese failed to adequately criticize Belfort’s behavior, and instead revered Belfort’s lavish, suspenseful lifestyle in a lighthearted and comical manner in the feature. It is important to dig deeper and realize that the subject it is based on, international tax evasion and fraud, is neither lighthearted nor comical and shouldn't be normalized in the media. Our society has a large, global issue at hand.
(1) Adkisson, Jay. “Offshore Tax Evasion Leads to Guilty Plea by Schechter.” Forbes, October 17, 2023. https://www.forbes.com/sites/jayadkisson/2023/10/16/offshore-tax-evasion-leads-to-guilt y-plea-by-schechter/?sh=750f98d93b50.
(2) Chen, James. “Investment Securities Definition, Different Types, How They Work.” Investopedia, October 26, 2023. https://www.investopedia.com/terms/i/investment-securities.asp.
(3) “Investment Banker Pleads Guilty to Tax Evasion.” Office of Public Affairs | Investment Banker Pleads Guilty to Tax Evasion | United States Department of Justice, October 13, 2023. https://www.justice.gov/opa/pr/investment-banker-pleads-guilty-tax-evasion.
(4) “Swiss Private Bank Banque Pictet Admits to Conspiring with U.S. Taxpayers to Hide Assets and Income in Offshore Accounts.” Office of Public Affairs | Swiss Private Bank Banque Pictet Admits to Conspiring with U.S. Taxpayers to Hide Assets and Income in Offshore Accounts | United States Department of Justice, December 4, 2023.
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