First US citizen charged in UBS tax probe gets year of house arrest based on cooperation

UBS ex-client avoids prison for tax conviction

MIAMI — A wealthy accountant who provided extensive help in the tax evasion probe of Swiss bank UBS AG was sentenced to a year of house arrest Wednesday after admitting he concealed about $6 million in assets from the IRS.

Steven Michael Rubinstein, 55, was the first U.S. citizen charged in the probe. U.S. District Judge Marcia Cooke said his prosecution sent a message around the globe about the risks of hiding assets in offshore accounts — and that he deserved credit for helping U.S. investigators find more tax cheats and crooked bankers within UBS and other institutions in Switzerland and elsewhere.

“Thousands, if not millions, of taxpayers now know what the legal landscape is,” Cooke said. “Now, we will not tolerate offshore tax evasion.”

Rubinstein will be on probation for three years, including the year of house arrest with electronic monitoring and travel restrictions. He also must pay a $40,000 fine. Prosecutors had sought a year of prison time, even as they stressed Rubinstein’s ongoing importance to the broader UBS investigation.

“The defendant has provided complete and truthful information,” said Assistant U.S. Attorney Jeffrey Neiman.

Rubinstein, a Boca Raton resident who is also a citizen of South Africa, said he was “embarrassed and ashamed” by his actions. He pleaded guilty in June to filing a false tax return and has been providing evidence ever since.

“I’ve tried to make amends as best I can,” Rubinstein told Cooke. “I will continue to assist the government in any manner requested.”

Outside the courtroom, as Rubinstein hugged his wife, Pamela, his attorney Robert Panoff called it a “fair and just sentence.”

Rubinstein’s prosecution was the first after UBS in February reached a deferred prosecution agreement with the Justice Department in which the bank agreed to turn over names of more than 150 Americans suspected of dodging taxes. To date, six others have also been charged, including a New York businessman who faces sentencing Friday in Fort Lauderdale federal court.

In August, UBS reached a second settlement with the U.S. that requires disclosure of another 4,450 American clients suspected of hiding assets in secret accounts. That agreement sent shock waves through tax haven countries around the world, serving notice of a new U.S. aggressiveness toward illegal use of offshore accounts.

The IRS recently reported that a voluntary disclosure program created to offer tax evaders a chance to come clean and avoid criminal prosecution had resulted in 7,500 taxpayers coming forward. Neiman said in a normal year, only about 100 do so, and that publicity about the cases of Rubinstein and others “without a doubt contributed to the drastic increase.”

In the sentencing set for Friday, prosecutors will seek leniency for businessman Jeffrey Chernick because of his cooperation. Chernick, who is involved in Chinese toy-making, hid more than $8 million in Swiss bank accounts, but his disclosures also led to a conspiracy indictment against a Swiss banker and a Swiss lawyer and investigation of some of their clients.

Chernick told authorities he was promised protection from U.S. tax investigators because a $45,000 bribe had been paid out of his accounts to an unnamed the Swiss official, according to court documents. Chernick said he was talked out of coming forward under the IRS amnesty program.