NY businessman gets 3-month prison sentence in Fla. for conviction in UBS bank secrets case

Toy salesman gets 3 months jail in UBS tax probe

FORT LAUDERDALE, Fla. — A federal judge Friday rejected a plea for probation from a New York businessman who admitted concealing $8 million in secret Swiss bank accounts, imposing instead a three-month prison term in the high-profile tax evasion case.

U.S. District Judge James I. Cohn said toy salesman Jeffrey Chernick deserves credit for his cooperation in the broad U.S. probe of Swiss bank UBS AG. But he said allowing Chernick to avoid prison for filing a false tax return “sends the wrong message” in a case that has made international headlines.

“If the court issues a slap on the wrist, to me the notoriety becomes negative,” Cohn said. “It essentially informs the public that you can cheat on your income taxes and get away with probation.”

Chernick, 70, had faced between 18 months and two years under federal sentencing guidelines. Prosecutors asked Cohn for a nine-month prison term, noting that Chernick’s disclosures led directly to the indictments of a Swiss banker and Swiss lawyer on conspiracy charges as well as charges against other UBS clients in the U.S.

Chernick’s cooperation has also helped investigators open new tax evasion probes in Hong Kong, Singapore, the Cayman Islands, Liechtenstein, Panama and Mexico, according to court documents.

“It has resulted in some very significant investigative steps,” said Michael Ben’Ary, trial attorney in the Justice Department’s tax division.

Chernick also agreed to pay back taxes and a sizable $4.5 million penalty, said his attorney Douglas Tween. Chernick, of Stanfordville, N.Y., told Cohn he is “ashamed” of what has happened but takes full responsibility.

“I blame no one but myself. I’ve done everything I can to make up for it,” said Chernick, who reports to prison Jan. 4.

The sentencing was the second this week in South Florida in a UBS case, with another convicted former bank client scheduled to learn his fate next Friday. A Miami federal judge sentenced accountant Steven Michael Rubinstein to a year of house arrest and probation for an identical tax crime, again giving him credit for cooperation in the probe.

The prosecutions are the result of a February deferred prosecution agreement between UBS and the Justice Department in which the bank agreed to turn over names of more than 150 Americans suspected of dodging taxes.

UBS reached a second settlement in August with the U.S. that requires disclosure of another 4,450 American clients believed to be hiding assets in secret accounts. That case has reverberated through tax haven countries around the world, signaling a more aggressive U.S. stance 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, far more than in a normal year.