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Graft and corruption minimized in 2011


Let me first wish our readers the best for the New Year. Hopefully it’d be the year graft and corruption is minimized in the Philippines. An example of punitive action can be achieved against a former government “big fish” and private co-conspirators for others to follow.

I believe the stage is ready for the above to happen in 2011 whether or not the Supreme Court reverses its decision in striking down the Philippine Truth Commission. If not, any idea to revise EO No. 1 to conform to the Court’s decision is not politically advisable and would be considered confrontational to exacerbate the “rift” between the executive branch and the Court fanned by the media.

The President is well advised to let the Presidential Commission on Good Government do the PTC’s intended purposes and functions and let his legal advisers swallow their pride why they didn’t think the PCGG would do the same as PTC without causing animosity.

The President can show the Court’s mistake in its PTC decision as classic example how cruel the law of unintended consequences can be. Prosecutors on their own may focus more on current and former members of the Court and the entire judiciary who are actionable for G&C. Of course, evidence can be dug up locally and abroad, say, for tax evasion of illicit earnings not declared in income tax returns (ITRs) and statement of assets, liabilities and net worth (SALNs) and money laundering for keeping foreign bank accounts beyond legitimate income that in turn could lead to violation of U.S. laws against racketeering; foreign corrupt practices when bribery or case-fixing was consummated in America and conspiracy, among other U.S. crimes.

An affidavit by a losing litigant and counsel, or a winning party and counsel expecting a windfall if the court fell short of the “deal” agreed upon and the pay-off resulted in unusual bank deposit with U.S. based relatives showing sudden wealth would suffice for the FBI to conduct investigation. Should indictment be decided, even if settled by plea bargain, the fines and other legal cost as well as attorney’s fee would be prohibitive. Moreover, Pamusa as PCGG’s attorney-in-fact can sue civilly in the U.S. to freeze, seize and recover for the Philippine Government the offender’s other illicit assets that emerge during the legal discovery process.

The main point is no Filipino in his right mind will fight and defend a criminal indictment in a U.S. court. The enormous legal expenses and prospect to lose all including legally earned assets leave no option for the offender but negotiate settlement in the Philippines, return the illicit assets to the government and perhaps be allowed to keep a part to avoid the PCGG and Pamusa bringing the case to the U.S. or another UNCAC signatory.

What I am saying is God has given the President a “Sword of Damocles” to hang over the heads of corrupt members of the Court and the judiciary that after their retirement the PCGG would let the sword fall when ordered by President Aquino or his successors.

There’re now several transnational options under the UNCAC and international cooperation actions, the latest of which is “StAR” (Stolen Assets Recovery), a joint initiative of the World Bank and the UN Office of Drugs and Crime (UNODC) in the search and recovery of stolen assets based on money laundering experience that has made it very difficult to cover the tracks of ill-gotten assets especially for those acting alone and aren’t part of organized crime equipped with mechanisms to hide the proceeds of corruption and criminal conspiracy.

At this juncture, Filipinos and ex-Filipinos (naturalized Americans) are well advised the U.S Justice Department and Internal Revenue Service are actively pursuing American taxpayers’ unreported income hidden in foreign bank accounts such as in Switzerland. It’s just a matter of time surely within Aquino’s presidential term that Filipinos such as Imelda Marcos and brother, Kokoy Romualdez, Gloria Macapagal Arroyo with husband and children Mikey and Datu, and the other Philippine society’s crème de la crème involved in G&C will be taken to account after the PCGG has established the legal framework, consolidate evidence against them, and elicited international cooperation in what surely would be President Aquino’s greatest legacies.

As explained by Sideman & Bancroft LLP, a San Francisco law office Pamusa might retain, Americans including FilAms with custody of relatives’ ill-gotten income from the proceeds of corruption must report it, and those having foreign accounts holding an aggregate value of over $10,000 in any given year, are required to file with the IRS a Report of Foreign Bank and Financial Accounts (“FBAR”). In just the beginning of what’s sure to be a wave of prosecutions since last April, the USDOJ announced that seven former clients of Swiss banking giant UBS AG, were charged by the U.S. Attorney’s Office for the Southern District of New York for failing to report their various foreign accounts on FBARs and collectively hiding from the IRS over $100 million in secret Swiss bank accounts.

Two of the seven charged, Jules Robbins and Federico Hernandez, pled guilty agreeing to pay federal civil penalties of $20.8 million and $4.4 million, respectively. Robbins, a watch salesman, who had been hiding money at UBS since 1967, had accumulated nearly $42 million in his Swiss accounts, while Hernandez, who masked his ownership of the accounts under British Virgin Islands and Panama corporations, had accumulated nearly $8.8 million. Charges remain pending against the other five charged, Kenneth Heller, a disbarred maritime attorney who allegedly deposited $26.4 million in a UBS account in 2006 using an offshore corporation and later moved the funds to another smaller private Swiss bank when he learned that UBS might disclose account information, Sybil Nancy Opham, who allegedly held a UBS account with $11.3 million under a Liechtenstein foundation that she moved to a smaller Liechtenstein bank when she learned of the U.S. government’s criminal investigation of UBS, Richard Werdiger, who allegedly held three separate UBS accounts with $7 million using Liechtenstein and Panama foundations, Ernest Vogliano, who allegedly held UBS accounts with $4.9 million in the names of Liechtenstein and Hong Kong corporations that he moved to a Liechtenstein bank upon learning of the criminal investigation of UBS’s cross-border banking business, and Shmuel Sternfeld, who allegedly held a UBS account with $2.9 million in the name of a Hong Kong corporation.

In a news release about the charges, IRS Criminal Investigation Chief Victor S.O. Song, formerly the Special Agent in Charge of IRS Criminal Investigation in the San Francisco Bay Area, indicated that the IRS will continue to vigorously pursue those Americans who are “still hiding in this shadowy world of secret offshore accounts,” in order that “America’s taxpayers who play by the rules … can be assured that the Government will hold accountable those who don’t.”

These charges came close on the heels of earlier successful prosecutions of eight other former UBS clients, the two most recent of which resulted in the sentencing on March 22, 2010 of California businessman John McCarthy who hid in his Swiss account set up in the name of a Hong Kong entity more than $1 million from his U.S. business operations between 2003 and 2008, and the entry of a plea agreement on April 12, 2010 by Harry Abrahamsen who hid in two UBS accounts some $1.3 million of unreported income. McCarthy was sentenced to six months of home detention, three years of probation, and ordered to pay the taxes on all unreported income and a 50% penalty; Abrahamsen was scheduled to be sentenced on July 27, 2010.

McCarthy’s sentence was far more lenient than the 40-month prison sentence handed down in August, 2009, to Bradley Birkenfeld, a former UBS banker who, in April, 2007, voluntarily exposed UBS AG’s efforts to aid U.S. taxpayers in evading their U.S. tax obligations. The provision of information by Birkenfeld led to an extensive IRS criminal investigation of UBS AG and ultimately a deferred prosecution agreement with the U.S. in February, 2009, whereby the Swiss bank admitted to helping U.S. taxpayers hide accounts from the IRS and agreed to pay a $780 million fine and provide the U.S. with the identities of, and account information for, some 250 U.S. taxpayers/customers of UBS’s cross-border banking business.

By Frank Wenceslao

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