The case includes as co-conspirators five unnamed bankers whom sources close to the matter identified as employees of HSBC Holdings Plc. The indictment said the bankers worked at a large international bank headquartered in England.
Defendant Vaibhav Dahake admitted in US district court in New Jersey to conspiring to conceal accounts in India. Dahake is an India native who became a naturalised US citizen in 2006 and now lives in Somerset, New Jersey.
The plea comes days after U.S. prosecutors said that an HSBC unit in India potentially aided thousands of Americans in dodging taxes, expanding the government's probe of offshore tax evaders and their banks.
"HSBC does not condone tax evasion and is cooperating with law enforcement in this matter," HSBC spokeswoman Juanita Gutierrez said.
Government lawyers cited Dahake in their request last week for permission to get information from the bank about American residents who may be using HSBC India accounts to evade federal taxes.
“Dahake is not an isolated incident,” the government said in a court filing last week, which detailed solicitations by several HSBC bankers to clients with the promise of secrecy.
The government is requesting authority to serve a “John Doe” summons on the bank to obtain the names of an unknown number of individuals who may have engaged in tax fraud.
HSBC has been soliciting clients of Indian origin living outside India since at least 2002, through a unit called NRI Services Division, the court documents filed by the U.S. government last week said.
Prosecutors used the same “John Doe” summons strategy in their case against UBS AG, which ultimately settled government charges against it by paying $780 million and agreeing to hand over nearly 5,000 client names to the United States.
UBS fought the government's bid to gain clients names, but ultimately relented after prolonged diplomatic wrangling and resolution of an internal debate inside Switzerland about bank secrecy.
Several lawyers said HSBC may be more willing to cooperate with the government, in part because the bank is not bound by strict Swiss secrecy laws, and to protect themselves.
“There is a long-standing set of principles that guide the Justice Department in deciding whether to bring a criminal complaint versus a company, and one is cooperation,” said Scott Michel, a lawyer who counsels wealthy clients at Caplin Drysdale.
He added the bank may be willing to "throw their clients under a bus" to avoid prosecution. The US government wrote some HSBC India clients last year, warning them that they are the target of a criminal probe. Tax authorities have been sifting through about 18,000 accounts gathered from an amnesty program that ended in 2009.
“HSBC is one of the casualties of that program,” said Brent Lipschultz, a partner at
accounting firm EisnerAmper's wealth management group. Internal Revenue Service Commissioner Douglas Shulman has said the government is shifting its focus beyond Europe to emerging markets.
Shulman has also said other institutions beyond UBS are under active investigation by the government.
