US Department of Justice
Criminal Resource Manual  923

 18 U.S.C. § 371—Conspiracy to Defraud the United States
[emphasis added by Iconoclast - 6 Feb 2012]

The general conspiracy statute, 18 U.S.C. § 371, creates an offense "[i]f two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose. (emphasis added). See Project, Tenth Annual Survey of White Collar Crime, 32 Am. Crim. L. Rev. 137, 379-406 (1995)(generally discussing § 371).

The operative language is the so-called "defraud clause," that prohibits conspiracies to defraud the United States. This clause creates a separate offense from the "offense clause" in Section 371. Both offenses require the traditional elements of Section 371 conspiracy, including an illegal agreement, criminal intent, and proof of an overt act.

Although this language is very broad, cases rely heavily on the definition of "defraud" provided by the Supreme Court in two early cases, Hass v. Henkel, 216 U.S. 462 (1910), and Hammerschmidt v. United States, 265 U.S. 182 (1924). In Hass the Court stated:

The statute is broad enough in its terms to include any conspiracy for the purpose of impairing, obstructing or defeating the lawful function of any department of government . . . (A)ny conspiracy which is calculated to obstruct or impair its efficiency and destroy the value of its operation and reports as fair, impartial and reasonably accurate, would be to defraud the United States by depriving it of its lawful right and duty of promulgating or diffusing the information so officially acquired in the way and at the time required by law or departmental regulation.
Hass, 216 U.S. at 479-480. In Hammerschmidt, Chief Justice Taft, defined "defraud" as follows:

To conspire to defraud the United States means primarily to cheat the Government out of property or money, but it also means to interfere with or obstruct one of its lawful governmental functions by deceit, craft or trickery, or at least by means that are dishonest. It is not necessary that the Government shall be subjected to property or pecuniary loss by the fraud, but only that its legitimate official action and purpose shall be defeated by misrepresentation, chicane or the overreaching of those charged with carrying out the governmental intention.
Hammerschmidt, 265 U.S. at 188.

The general purpose of this part of the statute is to protect governmental functions from frustration and distortion through deceptive practices. Section 371 reaches "any conspiracy for the purpose of impairing, obstructing or defeating the lawful function of any department of Government." Tanner v. United States, 483 U.S. 107, 128 (1987); see Dennis v. United States, 384 U.S. 855 (1966). The "defraud part of section 371 criminalizes any willful impairment of a legitimate function of government, whether or not the improper acts or objective are criminal under another statute." United States v. Tuohey, 867 F.2d 534, 537 (9th Cir. 1989).

The word "defraud" in Section 371 not only reaches financial or property loss through use of a scheme or artifice to defraud but also is designed and intended to protect the integrity of the United States and its agencies, programs and policies. United States v. Burgin, 621 F.2d 1352, 1356 (5th Cir.), cert. denied, 449 U.S. 1015 (1980); see United States v. Herron, 825 F.2d 50, 57-58 (5th Cir.); United States v. Winkle, 587 F.2d 705, 708 (5th Cir. 1979), cert. denied, 444 U.S. 827 (1979). Thus, proof that the United States has been defrauded under this statute does not require any showing of monetary or proprietary loss. United States v. Conover, 772 F.2d 765 (11th Cir. 1985), aff'd, sub. nom. Tanner v. United States, 483 U.S. 107 (1987); United States v. Del Toro, 513 F.2d 656 (2d Cir.), cert. denied, 423 U.S. 826 (1975); United States v. Jacobs, 475 F.2d 270 (2d Cir.), cert. denied, 414 U.S. 821 (1973).

Thus, if the defendant and others have engaged in dishonest practices in connection with a program administered by an agency of the Government, it constitutes a fraud on the United States under Section 371. United States v. Gallup, 812 F.2d 1271, 1276 (10th Cir. 1987); Conover, 772 F.2d at 771. In United States v. Hopkins, 916 F.2d 207 (5th Cir. 1990), the defendants' actions in disguising contributions were designed to evade the Federal Election Commission's reporting requirements and constituted fraud on the agency under Section 371.

The intent required for a conspiracy to defraud the government is that the defendant possessed the intent (a) to defraud, (b) to make false statements or representations to the government or its agencies in order to obtain property of the government, or that the defendant performed acts or made statements that he/she knew to be false, fraudulent or deceitful to a government agency, which disrupted the functions of the agency or of the government. It is sufficient for the government to prove that the defendant knew the statements were false or fraudulent when made. The government is not required to prove the statements ultimately resulted in any actual loss to the government of any property or funds, only that the defendant's activities impeded or interfered with legitimate governmental functions. See United States v. Puerto, 730 F.2d 627 (11th Cir.), cert. denied, 469 U.S. 847 (1984); United States v. Tuohey, 867 F.2d 534 (9th Cir. 1989); United States v. Sprecher, 783 F. Supp. 133, 156 (S.D.N.Y. 1992)(þit is sufficient that the defendant engaged in acts that interfered with or obstructed a lawful governmental function by deceit, craft, trickery or by means that were dishonest"), modified on other grounds, 988 F.2d 318 (2d Cir. 1993).

In United States v. Madeoy, 912 F.2d 1486 (D.C. Cir. 1990), cert. denied, 498 U.S. 1105 (1991), the defendants were convicted of conspiracy to defraud the government and other offenses in connection with a scheme to fraudulently obtain loan commitments from the Federal Housing Administration (FHA) or Veterans Administration (VA). The court held that the district court had properly instructed the jury that:

the Government must prove beyond a reasonable doubt the existence of a scheme or artifice to defraud, with the objective either of defrauding the FHA or the VA of their lawful right to conduct their business and affairs free from deceit, fraud or misrepresentation, or of obtaining money and property from the FHA by means of false and fraudulent representations and promises which the defendant knew to be false.
Madeoy, 912 F.2d at 1492.

Prosecutors considering charges under the defraud prong of Section 371, and the offense prong of Section 371 should be aware of United States v. Minarik, 875 F.2d 1186 (6th Cir. 1989) holding limited, 985 F.2d 962 (1993), and related cases. See United States v. Arch Trading Company, 987 F.2d 1087 (4th Cir. 1993). In Minarik, the prosecution was found to have "used the defraud clause in a way that created great confusion about the conduct claimed to be illegal," and the conviction was reversed. 875 F.2d at 1196. After Minarik, defendants have frequently challenged indictments charging violations of both clauses, although many United States Courts of Appeals have found it permissible to invoke both clauses of Section 371. Arch Trading Company, 987 F.2d at 1092 (collecting cases); see also United States v. Licciardi, 30 F.3d 1127, 1132-33 (9th Cir. 1994)(even though the defendant may have impaired a government agency's functions, as part of a scheme to defraud another party, the government offered no evidence that the defendant intended to defraud the United States and a conspiracy to violate an agency regulatory scheme could not lie on such facts).

In summary, those activities which courts have held defraud the United States under 18 U.S.C. § 371 affect the government in at least one of three ways:

They cheat the government out of money or property;
They interfere or obstruct legitimate Government activity; or
They make wrongful use of a governmental instrumentality.
[cited in USAM 9-42.001]

The Lectric Law Library


18 U.S.C. 371 makes it a separate Federal crime or offense for anyone to conspire or agree with someone else to do something which, if actually carried out, would amount to another Federal crime or offense. So, under this law, a 'conspiracy' is an agreement or a kind of 'partnership' in criminal purposes in which each member becomes the agent or partner of every other member.

In order to establish a conspiracy offense it is not necessary for the Government to prove that all of the people named in the indictment were members of the scheme; or that those who were members had entered into any formal type of agreement; or that the members had planned together all of the details of the scheme or the 'overt acts' that the indictment charges would be carried out in an effort to commit the intended crime.

Also, because the essence of a conspiracy offense is the making of the agreement itself (followed by the commission of any overt act), it is not necessary for the Government to prove that the conspirators actually succeeded in accomplishing their unlawful plan.

What the evidence in the case must show beyond a reasonable doubt is:

First: That two or more persons, in some way or manner, came to a mutual understanding to try to accomplish a common and unlawful plan, as charged in the indictment;

Second: That the person willfully became a member of such conspiracy;

Third: That one of the conspirators during the existence of the conspiracy knowingly committed at least one of the methods (or 'overt acts') described in the indictment; and

Fourth: That such 'overt act' was knowingly committed at or about the time alleged in an effort to carry out or accomplish some object of the conspiracy.

An 'overt act' is any transaction or event, even one which may be entirely innocent when considered alone, but which is knowingly committed by a conspirator in an effort to accomplish some object of the conspiracy.

A person may become a member of a conspiracy without knowing all of the details of the unlawful scheme, and without knowing who all of the other members are. So, if a person has an understanding of the unlawful nature of a plan and knowingly and willfully joins in that plan on one occasion, that is sufficient to convict him for conspiracy even though he did not participate before, and even though he played only a minor part.

Of course, mere presence at the scene of a transaction or event, or the mere fact that certain persons may have associated with each other, and may have assembled together and discussed common aims and interests, does not necessarily establish proof of a conspiracy. Also, a person who has no knowledge of a conspiracy, but who happens to act in a way which advances some purpose of one, does not thereby become a conspirator.

A combination or agreement of two or more persons to join together to attempt to accomplish some unlawful purpose. It is a kind of 'partnership in criminal purposes,' and willful participation in such a scheme or agreement, followed by the commission of an overt act by one of the conspirators is sufficient to complete the offense of 'conspiracy' itself even though the ultimate criminal object of the conspiracy is not accomplished or carried out. To establish the offense of 'conspiracy' the Government must prove:

(1) That two or more persons in some way or manner, came to a mutual understanding to try to accomplish a common and unlawful plan, as charged in the indictment; (2) That the person willfully became a member of such conspiracy; (3) That one of the conspirators during the existence of the conspiracy knowingly committed at least one of the methods (or 'overt acts') described in the indictment; and (4) That such 'overt act' was knowingly committed at or about the time alleged in an effort to effect or accomplish some object or purpose of the conspiracy.

A person may become a member of a conspiracy without full knowledge of all of the details of the unlawful scheme or the names and identities of all of the other alleged conspirators. So, if a person has an understanding of the unlawful nature of a plan and knowingly and willfully joins in that plan on one occasion, that is sufficient to convict him for conspiracy even though he had not participated before and even though he played only a minor part.

Of course, mere presence at the scene of a transaction or event, or the mere fact that certain persons may have associated with each other, and may have assembled together and discussed common aims and interests, does not necessarily establish proof of a conspiracy. Also, a person who has no knowledge of a conspiracy, but who happens to act in a way which advances some purpose of one, does not thereby become a conspirator.

An agreement between two or more persons to do an unlawful act or an act which may become by the combination injurious to others. Formerly this offence was much more circumscribed in its meaning than it is now. Lord Coke describes it as 'a consultation or agreement between two or more to appeal or indict an innocent person falsely and maliciously, whom accordingly they cause to be indicted or appealed and afterwards the party is acquitted by the verdict of twelve men.'

The crime of conspiracy, according to its modern interpretation, may be of two kinds, Damely, conspiracies against the public, or such as endanger the public health, violate public morals, insult public justice, destroy the public peace, or affect public trade or business.

To remedy these evils the guilty persons may be indicted in the name of the commonwealth. Conspiracies against individuals are such as have a tendency to injure them in their persons, reputation, or property. The remedy in these cases is either by indictment or by a civil action.

In order to render the offence complete, there is no occasion that any act should be done in pursuance of the unlawful agreement entered into between the parties, or that any one should have been defrauded or injured by it. The conspiracy is the gist of the crane.

By the former laws of the United States, a willful and corrupt conspiracy to cast away, burn or otherwise destroy any ship or vessel with intent to injure any underwriter thereon, or the goods on board thereof, or any lender of money on such vessel, on bottomry or respondentia, is made felony, and the offender punishable by fine not exceeding ten thousand dollars and by imprisonment and confinement at hard labor not exceeding ten years.

By the old Revised Statutes of New York it is enacted that if any two or more persons shall conspire either: 1. To commit any offence, or; 2. Falsely and maliciously to indict another for any offence, or; 3. Falsely to move or maintain any suit, or; 4. To cheat and defraud any person of any property, by any means which are in themselves criminal, or; 5. To cheat and defraud any person of any property, by means which, if executed, would amount to a cheat, or to obtaining property by false pretences, or; 6. To commit any act injurious to the public health, to public morals, or to trade and commerce, or for the perversion or obstruction of justice, or the due administration of the laws; they shall be deemed guilty of a misdemeanor. No other conspiracies are there punishable criminally. And no agreement, except to commit a felony upon the person of another, or to commit arson or burglary, shall be deemed a conspiracy, unless some act besides such agreement be done to effect the object thereof, by one or more of the parties to such agreement.

When a felony has been committed in pursuance of a conspiracy, the latter, which is only a misdemeanor, is merged in the former; but when a misdemeanor only has been committed in pursuance of such conspiracy, the two crimes being of equal degree, there can be no legal technical merger.

courtesy by: Swiss Investors Protection Association ¦ ¦ .../commercetreaties.htm ¦ .../tradeact.htm
(souligné par nos soins)

-    Friendship, Reciprocal Establishments, Commerce and Extradition Convention of 1850
-     Vertrag zwischen der Schweiz, Eidgenossenschaft und den USA, 25.Nov 1850; Botschaft 30.April 1855
-    Abrogation of most-favored-nation commerce clauses of Swiss-American Friendship Convention
-    reciprocal autonomous maintenance of most-favored-nation commerce clauses
-    Swiss-American "Reciprocal Trade" Agreement of 1936 (English version, pdf format: .../1936.pdf)
-    GATT Treaty of 1947, strengthening and generalizing most-favored-nation commerce rule
-    Doppelbesteuerungsabkommen CH/USA i.S. Erbschaftssteuern, 9.Juli 1951; Botschaft 9.Aug 1951


Convention signed at Bern November 25,1850
Senate advice and consent to ratification, with amendments, March 7, 1851 (1)
Ratified by the President of the United States, with amendments, March 12, 1851 (1)
Senate advice and consent to ratification of "new draft", with amendments, May 29,1854 (1)
Ratified by Switzerland July 30,1855
"New draft" ratified by the President of the United States, with amendments, November 6,1855 (1)
Ratifications exchanged at Washington November 8,1855
Entered into force November 8,1855
Proclaimed by the President of the United States November 9,1855
    Articles VIII to XII, inclusive, terminated March 23, 1900 (2);
    articles XIII to XVII, inclusive, superseded March 29, 1901, by treaty of May 14,1900 (3)

11 Stat. 587; Treaty Series 353
    The United States of America and the Swiss Confederation, equally animated by the desire to preserve and to draw more closely the bonds of friendship which so happily exist between the two Republics, as well as to augment, by all the means at their disposal, the commercial intercourse of their respective citizens, have mutually resolved to conclude a General Convention of Friendship, Reciprocal Establishments, Commerce, and for the Surrender of Fugitive Criminals.
    For this purpose, they have appointed as their Plenipotentiaries, to wit:
    The President of the United States, A. Dudley Mann, Special Agent of the United States on a mission to the Swiss Confederation, and
    The Swiss Federal Council, Henry Druey, President of the Swiss Confederation, Director of the Political Department, and Frederick Frey-Herosee, Member of the Federal Council, Director of the Department of Commerce and of Tolls, who, after a communication of their respective full powers, have agreed to the following articles:


    The citizens of the United States of America and the citizens of Switzerland shall be admitted and treated upon a footing of reciprocal equality in the two countries, where such admission and treatment shall not conflict with the Constitutional or legal provisions as well Federal as State and Cantonal of the contracting parties. The citizens of the United States and the citizens of Switzerland, as well as the members of their families, subject to the Constitutional and legal provisions aforesaid, and yielding obedience to the laws, regulations and usages of the country wherein they reside, shall be at liberty to come, go, sojourn temporarily, domiciliate or establish themselves permanently, the former in the Cantons of the Swiss Confederation, the Swiss in the States of the American Union, to acquire, possess and alienate therein property (as is explained in Article V); to manage their affairs, to exercise their profession, their industry and their commerce, to have establishments, to possess warehouses, to consign their products and their merchandise, and to sell them by wholesale or retail, either by themselves, or by such brokers or other agents as they may think proper; they shall have free access to the Tribunals and shall be at liberty to prosecute and defend their rights before courts of Justice, in the same manner as native citizens, either by themselves, or by such advocates, attorneys or other agents as they may think proper to select. No pecuniary or other more burdensome condition shall be imposed upon their residence or establishment, or upon the enjoyment of the above-mentioned rights than shall be imposed upon citizens of the country where they reside, nor any condition whatever, to which the latter shall not be subject.
    The foregoing privileges however shall not extend to the exercise of political rights nor to a participation in the property of communities, corporations or institutions of which the citizens of one party, established in the other, shall not have become members or co-proprietors.


    The citizens of one of the two countries, residing or established in the other, shall be free from personal military service, but they shall be liable to the pecuniary or material contributions, which may be required, by way of compensation, from citizens of the country where they reside, who are exempt from the said service.
    No higher impost, under whatever name, shall be exacted from the citizens of one of the two countries, residing or established in the other, than shall be levied upon citizens of the country in which they reside, nor any contribution whatsoever to which the latter shall not be liable.
    In case of war or of expropriation for purposes of public utility, the citizens of one of the two countries residing or established in the other shall be placed upon an equal footing with the citizens of the country in which they reside, with respect to indemnities for damages they may have sustained.


    The citizens of one of the two Republics, residing or established in the other, who shall desire to return to their country, or who shall be sent thither by a judicial decision, by an act of police, or in conformity with the laws and regulations on morals and mendicity, shall be received at all times and under all circumstances, they, their wives and their legitimate issue, in the country to which they belong, and in which they shall have preserved their rights, in conformity with the laws thereof.


    In order to establish their character as citizens of the United States of America or as citizens of Switzerland, persons belonging to the two contracting countries shall be bearers of passports, or of other papers in due form, certifying their nationality as well as that of the members of their family, furnished or authenticated by a diplomatic or consular Agent of their nation, residing in the one of the two countries which they wish to inhabit.


    The citizens of each one of the contracting parties shall have power to dispose of their personal property, within the jurisdiction of the other, by sale, testament, donation or in any other manner, and their heirs, whether by testament or ab intestato, or their successors, being citizens of the other party, shall succeed to the said property or inherit it, and they may take possession thereof, either by themselves or by others acting for them; they may dispose of the same as they may think proper, paying no other charges than those to which the inhabitants of the country wherein the said property is situated shall be liable to pay in a similar case. In the absence of such heir, heirs, or other successors, the same care shall be taken by the authorities, for the preservation of the property, that would be taken for the preservation of the property of a native of the same country, until the lawful proprietor shall have had time to take measures for possessing himself of the same.
    The foregoing provisions shall be applicable to real estate, situated within the States of the American Union or within the Cantons of the Swiss Confederation in which foreigners shall be entitled to hold or inherit real estate. But in case real estate, situated within the territories of one of the contracting parties, should fall to a citizen of the other party, who, on account of his being an alien, could not be permitted to hold such property, in the State or in the Canton in which it may be situated, there shall be accorded to the said heir or other successor such term as the laws of the State or Canton will permit to sell such property; he shall be at liberty at all times to withdraw and export the proceeds thereof without difficulty and without paying to the Government any other charges than those which, in a similar case would be paid by an inhabitant of the country in which the real estate may be situated.


    Any controversy that may arise among the claimants to the same succession, as to whom the property shall belong, shall be decided according to the laws and by the Judges of the country in which the property is situated.


    The contracting parties give to each other the privilege of having, each, in the large cities and important commercial places of their respective States, Consuls and Vice-Consuls of their own appointment, who shall enjoy the same privileges and powers, in the discharge of their duties, as those of the most favored nations. But before any Consul or Vice-Consul shall act as such, he shall, in the ordinary form, be approved of by the Government to which he is commissioned.
    In their private and business transactions, Consuls and Vice-Consuls shall be submitted to the same laws and usages as private individuals, citizens of the place in which they reside.
    It is hereby understood that in case of offense against the laws, by a Consul or a Vice-Consul, the government to which he is commissioned, may, according to circumstances, withdraw his exequatur, send him away from the country, or have him punished in conformity with the laws, assigning to the other government its reasons for so doing.
    The archives and papers belonging to the Consulates shall be respected inviolably, and under no pretext whatever shall any magistrate, or other functionary, visit, seize, or in any way interfere with them.
   In all that relates to the importation, exportation and transit of their respective products, the United States of America and the Swiss Confederation shall treat each other, reciprocally, as the most favored Nation, Union of Nations, State or Society, as is explained in the following articles.


    Neither of the contracting parties shall impose any higher or other duties upon the importation, exportation or transit of the natural or industrial products of the other, than are or shall be payable upon the like articles, being the produce of any other country, not embraced within its present limits.


    In order the more effectually to attain the object contemplated in article VIII, each of the contracting parties hereby engages not to grant any favor in commerce to any Nation, Union of Nations, State, or Society, which shall not immediately be enjoyed by the other party.


    Should one of the contracting parties impose differential duties upon the products of any nation, the other party shall be at liberty to determine the manner of establishing the origin of its own products, destined to enter the country by which the differential duties are imposed.


    The Swiss territory shall remain open to the admission of articles arriving from the United States of America; in like manner, no port of the said States shall be closed to articles arriving from Switzerland, provided they are conveyed in vessels of the United States or in vessels of any country having free access to the ports of said States. Swiss merchandise arriving under the flag of the United States or under that of one of the nations most favored by them, shall pay the same duties as the merchandise of such nation; under any other flag, it shall be treated as the merchandise of the country to which the vessel belongs.
    In case of ship-wreck and of salvage on the coasts of the United States, Swiss merchandise shall be respected and treated as that belonging to citizens of the said States.
    The United States consent to extend to Swiss products, arriving or shipped under their flag, the advantages which are or shall be enjoyed by the products of the most favored nation, arriving or shipped under the same flag.
    It is hereby understood that no stipulation of the present article shall in any manner interfere with those of the four aforegoing articles, nor with the measures which have been or shall be adopted by either of the contracting countries in the interest of public morality, security or order.]
    The United States of America and the Swiss Confederation, on requisitions made in their name through the medium of their respective diplomatic or consular Agents, shall deliver up to justice persons who, being charged with the crimes enumerated in the following article, committed within the jurisdiction of the requiring party, shall seek asylum or shall be found within the territories of the other: Provided, That this shall be done only when the fact of the commission of the crime shall be so established as to justify their apprehension and commitment for trial, if the crime had been committed in the country where the persons, so accused, shall be found.


    Persons shall be delivered up, according to the provisions of this Convention, who shall be charged with any of the following crimes, to wit:
    Murder, (including assassination, parricide, infanticide and poisoning);
    Attempt to commit murder;
    Forgery, or the emission of forged papers;
    Robbery with violence, intimidation, or forcible entry of an inhabited house;
    Embezzlement by public officers, or by persons hired or salaried, to the detriment of their employers, when these crimes are subject to infamous punishment.


    On the part of the United States the surrender shall be made only by the authority of the Executive thereof, and on the part of the Swiss Confederation, by that of the Federal Council.


    The expenses of detention and delivery, effected in virtue of the preceding articles, shall be at the cost of the party making the demand.


    The provisions of the aforegoing articles, relating to the Surrender of Fugitive Criminals, shall not apply to offenses committed before the date hereof, nor to those of a political character.]
    The present Convention is concluded for the period of ten years, counting from the day of the exchange of the ratifications; and if one year before the expiration of that period, neither of the contracting parties shall have announced, by an official notification, its intention, to the other, to arrest the operations of said Convention, it shall continue binding for twelve months longer, and so on, from year to year, until the expiration of the twelve months which will follow a similar declaration, whatever the time at which it may take place.


    This Convention shall be submitted, on both sides, to the approval and ratification of the respective competent authorities of each of the contracting parties, and the ratifications shall be exchanged at the City of Washington, as soon as circumstances shall admit.
    In faith whereof the respective Plenipotentiaries have signed the above articles, under reserve of the abovementioned ratifications, both in the English and French languages, and they have thereunto affixed their seals.

Done, in quadruplicate, at the City of Berne, this twenty-fifth day of November, in the year of our Lord one thousand eight hundred and fifty.
A. DUDLEY MANN                    H. DRUEY                    F. FREY-HEROSEE
1     For texts of U.S. and Swiss amendments and for a detailed study of this convention, see 5 Miller 845. The text printed here is the amended text as proclaimed by the President.
2     Pursuant to notice of termination given by the United States Mar. 23, 1899 [see related observations, contained in message of Swiss Federal Council of 1936 on the Swiss-US "Reciprocal Trade" Agreement of 9 January 1936: "Our exports haven't particularly suffered from this [formal lifting of the most-favored-nation clause, which essentially followed the growing US isolationist tendencies and its high-tariff commerce policies], as the two countries accorded each other autonomously the same most-favored-nation treatment for their exportations." FEUILLE  FEDERALE, vol. I 1936, p. 489]
3     TS 354, post, p. 904.    894-900

extracts from Suppose: I'm a kingpin with $100 mio to wash

C) Accounts Opened on or After January 1, 2001. QI agrees to the following procedures for accounts opened by U.S. non-exempt recipients on or after January 1, 2001 (post-2000 accounts):
(1) If QI is prohibited by law, including by contract, from disclosing to a withholding agent or to the IRS on Form 1099 the account holder’s name, address, and TIN, for reportable payments paid to the account holder, then QI must–
(i) Request from the account holder the authority to make such a disclosure;
(ii) Request from the account holder, prior to opening the account, the authority to exclude from the account holder’s account any assets that generate, or could generate, reportable payments; or
(iii) Request that the account holder disclose himself by mandating QI to transfer a Form W-9 completed by the account holder.
(2) If QI is authorized to disclose the account holder’s name, address, TIN (if available) and reportable amounts (and designated broker proceeds, if section 3.05(C) of this Agreement applies), QI must obtain a valid Form W-9 from the account holder and, to the extent QI does not have primary Form 1099 and backup withholding responsibility, provide the Form W-9 to the appropriate withholding agent promptly after obtaining the Form W-9. If a Form W-9 is not obtained, then QI must provide the account holder’s name, address, and TIN, if any, to the withholding agents from whom QI receives reportable amounts (and, if applicable, designated broker proceeds) on behalf of the account holder together with appropriate withholding rate pool information relating to the account holder. To the extent QI has assumed primary Form 1099 reporting and backup withholding, it must backup withhold on all reportable payments until it receives a valid Form W-9.
(3) If QI is not authorized to disclose an account holder’s name and other required information but is authorized to exclude from the account holder’s account any assets that generate, or could generate, reportable payments, QI must follow procedures designed to ensure that it will not hold any assets that generate, or could generate, reportable payments in the account holder’s account.
(4) If QI is authorized to exclude from the account holder’s account any assets that generate, or could generate, reportable payments and QI discovers that the account contains such assets, QI must sell such assets within 60 days of discovering such assets and apply backup withholding and Form 1099 reporting in accordance with sections 3 and 8 of this Agreement.
(5) QI agrees that if any account holder in a post-2000 account is discovered, after the opening of the account, to be a U.S. non-exempt recipient then QI will–
(i) Immediately correct the withholding statement information provided to the withholding agent, if necessary, and
(ii) Either obtain a Form W-9 within 60 days of discovering that the account holder is a U.S. non-exempt recipient, and, if QI has not assumed primary Form 1099 reporting and backup withholding responsibility, provide the Form W-9 to the appropriate withholding agents together with appropriate withholding pool information promptly after obtaining the Form W-9 or, if QI is not authorized to disclose account holder information, sell all of the account holder’s assets that generate or could generate reportable payments within 60 calendar days from the day that QI discovers the account holder is a U.S. non-exempt recipient. QI must backup withhold, or instruct a withholding agent to backup withhold on any reportable payments made after the time QI discovers the account holder’s U.S. nonexempt recipient status and before obtaining a valid Form W-9 from the account holder.

By now it has become apparent that in the course of finalising the IRS' model QIA, ill-advised - and perhaps purposely mislead, but by all means myopic, ROI-fixed, profit-hungry and blue-eyed - UBS and CS representatives let themselves be drawn over the table with insufficiently secured concessions for their current and future US tax-dodging clients. What was to be called the "Swiss solution" IRS negotiators reportedly agreed to - whether within or beyond their mandate is neither clear nor relevant - found in the following way expression in the internal UBS memorandum dated July 4, 2000:
"... Certain other structures are not caught by these [QIA] rules, and there is no need for the settlor/beneficiaries/individual owner to disclose themselves to the IRS, even though they are US persons. These structures are:
-    Offshore companies, with limited liability, which have not elected to be 'flow.through' entities;
-    Grantor: simple and complex trusts with underlying companies, holding the assets;    -    Complex trusts;
-    Foundations treated as complex trusts;    -    Certain insurance products in which a non-US insurance company holds the assets underlying a deferred variable annuity policy or a life insurance policy.
We recommend the following FPWM policies for US persons in categories 1-6 above.
I    Change of Investments    Where the client agrees, direct investments in US securities should be sold and replaced with investments on the approved list shown on the Private Web. These include UBS investment funds and certain derivative products.
I     Change of structure Where the client/settlor/beneficiaries wish to retain direct investments in US securities, this can be achieved by placing an underlying company beneath the trust/foundation. This is a relatively minor structural change, which could be made without upsetting the IRS, if done prior to 2001. The conversion of a simple or grantor trust/foundation into a complex trust by changing the trust/foundation deeds is not recommended by Baker & McKenzie, as the advantages of the original structures can be destroyed. ..."
Memo addressed to the Business Committee, Private Banking, by René Sonneveld and Jonathan Bourne (Financial Planning & Wealth Management) (Reeves Exh. 8)

    Under the chairmanship of Carl Levin, the US Senate Permanent Subcommittee on Investigations held hearings on July 17, 2008 to receive testimony also from senior UBS managers Martin Liechti and Mark Branson.In its staff report "TAX HAVEN BANKS AND U.S. TAX COMPLIANCE" of the same date, the "Swiss solution" QI loophole is recognised. Some QIs - whether by design, collusion or neglect - were left in a position to advise "clients on how to structure their investments to avoid disclosure to the IRS under the QI Program" (p.4/5). The report thus acknowledges that UBS' "actions, while not per se violations of the QI Program, were aimed at circumventing its intended purpose of increasing disclosure of U.S. client accounts, and led to the formation of offshore structures and undeclared accounts that could facilitate, and have resulted in, tax evasion by U.S. clients" (p.11). Its recommendations include: "The IRS should also close the “QI-KYC Gap” by expressly requiring QI participants to apply to their QI reporting obligations all information obtained through their know-your-customer procedures to identify the beneficial owners of accounts" (p.16).
    Contrary appearances and even guilty pleas not withstanding, additional information, indications and research confirm the overall impression that successive generations of US-oriented managers and false flag carriers at UBS and CS have gone to great length in respecting what they understood to be US laws. With their own background and sense for proportionality, they have never really grasped the true and full meaning of the 31% backup withholding tax on sales proceeds - always confounding it with the 30% witholding on dividend payments, etc. Only the Swiss banking surveillance authority FINMA, in its report of January 18, 2009, made the distinction between ordinary income and the new confiscatory backup withholding tax - mechanically and very much low key, so much in fact that the subsequent parliamentary surveillance commissions fell also victim to this by completely overlooking this key difference when they referred to said FINMA report for describing the QIA. In fact the at least ill-advised Swiss parliamentary watchdog commissions built their case on the UBS misadventure essentially on the manifestly false, myopic and one-eyed tell-tale assumption that the QIA obliges QIs to withhold and pay to the IRS "31 percent on US securities' dividend and interest payments." They thus also completely missed out on the QI system's hidden but - revenue-wise - main purpose of confiscating rather then merely taxing assets. For the 31% concerns - importantly but exclusively - the backup withholding tax on the proceed of sales of US and other taxable securities (GPK report on UBS, 10.054, of May 30, 2010, p. 3243, 3249; see below: E). True, UBS has formally admitted to have "failed to withhold the appropriate tax when required to do so" (Raoul Weil indictment of 11/6/08, Reeves Exh.28 at 33). But was it also not "backup withholding" - was it even aware of the illegality of that tax? And how much did the IRS in fact rake in under this heading since the QI system went operational? Nobody at either UBS or the IRS is willing to talk about that, the latter being rather nervous about the issue, with even the US congressional watchdog, the Government Accounting Office, being reluctant if not unwilling to do its due diligence and get the IRS to caugh up the figures (see below: F).
Thus knowing no better because, under pressure from IRS and Baker & McKenzie, the soon-to-be Swiss QI handymen had early on discarded all alarm signs. As interested parties, they at least wanted to believe in the validity, even superiority of the special QI norms when in conflict with other general US norms, like SEC registration rules for bank advisers. Moreover, their IRS handlers had made them aware of their priviledged QI situation. And their original IRS QI partners could hardly have been unaware of the various built-in loopholes which called for imaginative interpretations and applications, including ways to circumvent border controls and surveillance by competing law enforcement authorities. For, after all, the QIA itself imposes on QIs communication obligations with existing and prospective account holders on how best, under the given circumstances, he may respect what was "sold" to him as valid US law. Or, evidence suggests that the QI model agreement - entailing with the backup withholding tax a new tax - never passed muster in the US Congress as the US Constitution provides for, and as the Administrative Procedure Act ("APA": 5 U.S.C. § 702) never was applied, as required by law. This sheds a new light not only on the past and current IRS administrative assistance requests - and how not to answer them -, but also on actors involved and their professionalism.
    But all that has had an almost exclusive focus on taxpayers. The essentially hidden but revenue-wise more important QI mechanisms for bringing parallel-market funds back into the open circuit has thus not received its due attention. Being for decades now under a general onslaught from foreign competing forces, Swiss bankers - for the reasons outlined above - have decided to best concentrate on tax matters but failed to grasp that sitting on their reputation, and in the event bending aver backwards is no longer - if it has ever been - a sucess formula. To their endless regret, they have, of course, saved a few stamps on lobbying fees, while in fact miserably failing their core mission, e.g. by not fighting the anti-freedom, anti-sovereignty and anti-market mandate for "combating tax avoidance" which the OECD Fiscal Committee surreptitiously arrogated in 1977(Res.C(77)149(Final)). Kingpins and other people with highly developed sensors for proportionality, vision and opportunism have not felt comfortable with such small-minded casino chip movers. As the saying goes: Small fish swimming in big waters doesn't make them bigger.

6.Feb 12   Hannes Germann: Wider die Gruppenanfragen - Mehr Selbstbewusstsein ist gefragt, Tages-Anzeiger.

Tages-Anzeiger    6. Februar 2012

Mehr Selbstbewusstsein ist gefragt
Hannes Germann.

Die USA sind daran, den Finanzplatz Schweiz systematisch zu demontieren. Fast noch schlimmer ist die Tatsache, dass dabei auch unser Rechtsstaat auf der Strecke bleibt. Die bundesrätliche Abwehrstrategie ist geprägt vom Reduit-Gedanken: Wann immer Gefahr in Verzug ist, gibt man wieder ein bisschen Terrain preis. Eine Defensiv-Taktik, bei dem der Gegner sich stets bestätigt sieht. Er kommt seinem Ziel Stück für Stück näher. Die Situation scheint in Anbetracht des übermächtigen Gegners, der Wirtschaftsmacht USA, ausweglos.

Braucht die Schweiz also einen neuen Winkelried? Wenn’s doch nur so einfach ginge wie bei den alten Eidgenossen. Punkto Mut und Wille zur Selbstbehauptung könnten wir allerdings ein gutes Stück abschneiden. So, wie sich die Schweiz gegenwärtig einschüchtern lässt, gibt sie ein dankbares Opfer ab. Gefragt ist also mehr Selbstbewusstsein und eine Vorwärtsstrategie.

Durch das Einfallstor der einseitigen Gruppenanfragen können die USA künftig
gross angelegte Raubzüge und weitere Erpressungsversuche lancieren.

Braucht die Schweiz einen neuen Winkelried? Ausschnitt aus dem Gemälde «Schlacht von Sempach» von Konrad Grob.
Selbstbewusstsein, in den wir als souveräner Rechtsstaat auf die Achtung und Einhaltung unserer Gesetze beharren. Zur Verfolgung von Straftaten über die Staatsgrenzen hinweg gibt es die bewährten Rechtshilfeverfahren. Steuerbetrug oder ähnliche Delikte können über ein Amtshilfeverfahren geahndet werden. Was die USA mit dem Vorwurf Verschwörung gegen den Staat (conspiracy) macht, ist schlicht und einfach Lynchjustiz aus dem vorletzten Jahrhundert.

Mit den jetzt grosszügig gelieferten Daten (verschlüsselt) liefert man den US-Behörden in vorauseilendem Gehorsam den Schlüssel zur Formulierung allfälliger Gruppenanfragen. Mit einem Ja zum Zusatzbericht stellt der Nationalrat möglicherweise bereits in der Frühjahrssession das Schloss zur Verfügung. Durch dieses Einfallstor können die USA dann künftig gross angelegte Raubzüge und weitere Erpressungsversuche lancieren. Das ist absolut inakzeptabel.

Glaubwürdiger wären wir als Rechtsstaat, wenn wir die fehlbaren Banker im eigenen Land hart bestrafen würden. Mit anderen Worten: Wir sind zwar nicht ohne Fehl und Tadel, doch die uns anklagenden US-Behörden leben selber in keinster Weise das vor, wessen sie uns beschuldigen. Hat nicht ein gewisser Madoff sich zu Lasten unzähliger Anleger, Pensionskassen und Unternehmen auf der gesamten Welt bereichert? Ohne dass die für die Aufsicht verantwortlichen Behörden in den USA jemals dafür hätten geradestehen müssen? Ist das nicht auch eine Art von Verschwörung gegen andere Staaten?

Der Spiess ist endlich umzukehren. Die USA sind als Rechtsstaat in die Pflicht zu nehmen, ihrem unerträglichen Rechtsimperialismus ist mit einem Nein zu Gruppenanfragen und weiteren Zugeständnissen Einhalt zu gebieten. Auch eine Grossmacht muss sich an das Recht anderer Staaten halten.