HSBC helped client hide accounts in India

Source :28 JAN, 2011, 03.21AM IST,BLOOMBERG 


HSBC Holdings bankers conspired with a New Jersey businessman to help him hide his bank accounts in India from the US Internal Revenue Service, according to an indictment and people familiar with the matter. 

Vaibhav Dahake conspired with five bankers of "one of the largest international banks in the world", which has headquarters in England, according to his indictment on Wednesday in federal court in Newark, New Jersey. London-based HSBC, Europe's largest bank by market value, is the bank, according to people familiar with the probe. They requested anonymity because the US Justice Department hasn't identified the conspirators. 

Dahake, of Somerset, New Jersey, is the first taxpayer charged in a crackdown focusing on whether HSBC helped clients with Indian accounts hide assets from the IRS. He's accused of conspiring with two bankers in New York, one in Fremont, California, and two in Thane, India. He faces as long as five years in prison. 

"Bankers should encourage their clients to comply with the law, not advise them on how to break it," Paul Fishman , the US attorney in New Jersey, said in a statement. 

Juanita Gutierrez, a bank spokeswoman, said in an e-mailed statement: "HSBC does not condone tax evasion and fully supports the US efforts to promote appropriate payments of taxes by US taxpayers." 

'Appropriate Action' 

"We investigate all allegations of employee misconduct vigorously and take appropriate action if breaches to HSBC policies are found," she said. 

Dahake's attorney, Lawrence Horn of Sills Cummis & Gross in Newark, New Jersey, said in a statement: "It is most regrettable that the United States attorney and the Department of Justice decided to indict my client, Mr Dahake. It is most important for everyone to recognise that an indictment is merely a charge." He said his client "is cloaked with the presumption of innocence" until proven guilty. 

A widening tax crackdown has led to criminal charges against UBS, the largest Swiss bank, two dozen former clients, four former bankers and two advisers. In December, a former UBS banker pleaded guilty to conspiring with a Swiss banker to encourage US clients to hide their assets from the IRS at Basler Kantonalbank, a smaller Swiss bank. A Virginia surgeon with an HSBC account also pleaded guilty as part of the crackdown. 

NRI Services 

According to Wednesday's indictment, the unidentified bank operated a US division called NRI Services, which marketed offshore banking services to US citizens of Indian descent. 

Through NRI, the bank "encouraged US citizens to open undeclared bank accounts in India," according to the indictment. 

Dahake, a native of India who became a US citizen in 2006, filed false tax returns that hid ownership of and income from undeclared accounts in India, as well as the British Virgin Islands, according to the indictment. 

His British Virgin Islands accounts didn't pay interest, and the bank solicited him to open accounts in India that paid "high interest rates," according to the indictment. 

In 2001, he met with a banker in New York who touted the advantages of an Indian account, "including that no US forms were required, he did not have to provide a social security number, the account was not taxable in India" and no Form 1099 reporting the interest income would be filed with the IRS, according to the indictment. 

'Below the Radar' 

In transferring funds, the banker advised, Dahake should send multiple checks in the amount of $10,000 rather than one large one so that he could "stay below the radar", according to the indictment. 

Two other US bankers also told him that the bank would not file 1099 forms with the IRS, the indictment said. Last April, Dahake was talking with a banker in Fremont and asked if the bank would issue 1099 forms, according to the document. The banker stopped speaking in English and said in Hindi that Dahake shouldn't discuss the forms on the phone, it said. 

HSBC closed its NRI offices in New York and Fremont last June, according to Gutierrez. She declined to say whether any employees had been terminated or disciplined. Last February, Andrew Silva , a Virginia surgeon, pleaded guilty to conspiring with an HSBC banker and a Zurich attorney to hide a $250,000 account from the IRS by smuggling 26 cash payments to the US.