(Bloomberg) Restaurateur Rowen Seibel has made the gossip pages for getting socked by Diane von Furstenburg’s son and multimillion-dollar court fights he’s waging with celebrity chef Gordon Ramsay.
Now, the 34-year-old New Yorker is poised to learn the fate of a much more important battle when he’s sentenced Friday for using undeclared Swiss bank accounts and a Panamanian shell company to hide more than $1 million from the Internal Revenue Service.
Seibel, who owns restaurants in New York, Washington and Las Vegas, pleaded guilty in April and faces as much as 18 months in prison. His attorney says his client should be spared jail time.
He represents the trailing end of a wave of prosecutions of Americans accused of hiding money in Switzerland—a sprawling investigation that began in 2007 and has resulted in big fines for Swiss banks and more than 150 cases against alleged tax dodgers and their enablers. Many have ended with financial penalties, and some with prison time.
More than 54,000 Americans avoided prosecution through an amnesty program that let them voluntarily disclose their previously secret accounts, ponying up $8 billion in back taxes, penalties and interest.
Absolute No-No
Seibel tried to join the amnesty program but the IRS turned him down, court records show. He acknowledged one secret account —but only after stealthily moving his money to another undeclared account at a different bank.
That type of move is an absolute no-no. “It is an essential component of the IRS’s voluntary disclosure policy that a taxpayer coming forward must be truthful and complete,” said Scott Michel, a criminal tax defense attorney at Caplin & Drysdale in Washington. “Anyone who doesn’t follow that rule will undoubtedly anger the IRS and, depending on the circumstances, perhaps be committing a separate crime.”
Prosecutors say Seibel’s Swiss banking began back in 2004. The then-23-year-old, fresh out of New York University’s business school, flew with his mother to UBS Group AG’s offices in Switzerland to open an account, the government says. The account was not in his name, but identified in internal bank records with the phrase “CQUE.”
For an additional fee, Seibel made sure the bank wouldn’t mail any account information to him in the U.S., since that could risk exposure to the IRS, say prosecutors.
The account was opened with $25,000, and over the next year, his mother arranged for cash and checks totaling about $1 million to be deposited. Over the next several years, prosecutors say, Seibel actively monitored and managed the account.
As it happened, the UBS banker who helped the Seibels was Bradley Birkenfeld, who blew the whistle in 2007 on how his employer helped thousands of Americans evade taxes. He later was sentenced to 40 months in prison and earned a $104 million whistle-blower award from the IRS for exposing the bank’s schemes.
Since then, more than 80 banks, including UBS and Credit Suisse Group AG, have agreed to pay about $6 billion to the U.S. in penalties and fines.
Prosecutors say Birkenfeld had met with Seibel’s mother. Birkenfeld said in an interview that he remembered meeting with them and believed he had set up the account.
Shell Company
In early May 2008, news broke that Birkenfeld had been indicted and was cooperating with U.S. investigators. Three weeks later, prosecutors say, Seibel traveled to Switzerland to shut down his UBS account.
But he didn’t move his money back into the U.S. and declare it to authorities. Instead, he set up a Panamanian shell company, opened yet another account at a different Swiss bank—Banque J. Safra—and moved all $1.3 million into the new Safra account, held by the Panamanian entity.
“This was a shrewd move by Seibel to avoid detection by U.S. authorities,” prosecutors wrote in an Aug. 12 court filing.
Later that year, Seibel opened his first restaurant, Serendipity 3, in New York City. He opened a second restaurant, with the same name, at Caesars Palace in Las Vegas in 2009 and a third in Washington two years after that. He also went into business with Ramsay in a series of restaurants in Las Vegas and Los Angeles.
Ramsay Partnership
Ramsay, the host of Master Chef and Hell’s Kitchen, has accused Seibel in a lawsuit of inept management. Seibel, in his lawsuit, says Ramsay took his investment to open a different restaurant.
It wasn’t Seibel’s first turn in the gossip pages. Back in 2003, he allegedly flirted with the fiancée of Alex von Furstenburg, the son of the legendary fashion designer. Von Furstenburg slammed his car into Seibel’s. “I hurt my knuckle, probably when I hit him in the head,” von Furstenburg told police, according to press reports.
In 2009, the government introduced its first offshore voluntary disclosure program, allowing U.S. taxpayers to avoid prosecution and pay reduced penalties for declaring their hidden accounts.
‘Otherwise Disappeared’
Seibel’s mother didn’t qualify, her then-lawyer told her, because IRS agents had already questioned her about Birkenfeld, prosecutors say in a filing. Her attorney, however, suggested that her son could, according to the filing.
In October 2009, Seibel applied for amnesty but said he didn’t know the status of his UBS account until he asked—more than a year after he transferred the money to the Safra account. He claimed that the deposits had “been stolen or otherwise disappeared.”
Today, Seibel splits time between a 19th-floor apartment on Central Park South in Manhattan and a $3 million home in Las Vegas, according to court filings and public records.
Seibel’s legal team is arguing against prison time and proposing community service, citing the harmful effect that prison would have on his mother, who battled cancer and is now extremely disabled. The account was also opened and funded by his mother, not Seibel, said his attorney Robert Fink, of Kostelanetz & Fink LLP in a court filing. Fink said Seibel’s mother wasn’t able to respond to questions about the matter.
‘Are You Kidding?’
U.S. prosecutors have been unsuccessful getting prison terms for many Americans who hid the most money in offshore accounts—even sums far larger than Seibel’s. Fink cited H. Ty Warner, the billionaire creator of Beanie Babies, who evaded almost $5.6 million in taxes on an undisclosed account with as much as $107 million. Warner’s evasion was the largest of more than 100 cases in a crackdown against taxpayers and enablers who used offshore accounts to cheat the IRS. He was sentenced to probation and community service.
In contrast, Fink told the Manhattan court, Seibel has “fully cooperated.”
Told of the amount at stake with Seibel, Birkenfeld said in an interview: “Are you kidding me? All the people I exposed, and they got to walk away.”
—With assistance from David Voreacos
