* Court papers detail work with India clients in U.S.
* Charges a sign of pressure on bank's tax services
* Indictment mentions two unnamed New York bankers
(Adds former federal prosecutor, HSBC spokesman comments)
By Lynnley Browning
Sept 28 The United States heaped more pressure
on HSBC Holdings (HSBA.L)HBC.N, Europe's second-largest bank,
on Wednesday with an indictment that laid out the role of two
unnamed senior HSBC executives in providing tax evasion
services to Americans born in India.
Federal prosecutors in Milwaukee charged an Indian-American
client of HSBC with evading U.S. taxes through the global
bank's India operations and conspiracy to defraud the United
States. Prosecutors also identified two New York-based bankers,
whom it did not name, as unindicted co-conspirators.
The client, Arvind Ahuja, a board-certified neurosurgeon in
Greendale, Wisconsin, was charged in a superseding indictment.
Ahuja was originally indicted in June for tax fraud
involving more than $8.7 million in an Indian branch of HSBC.
Court papers say that over 2006 through 2009, Ahuja failed
to report to the tax-collecting U.S. Internal Revenue Service
more than $1.2 million in interest income he earned from the
account, as well as to disclose the account's existence to the
IRS, as required by U.S. law.
The superseding indictment signals a ramping up of pressure
on HSBC and could lead to charges against two unnamed bankers
listed in the new filing, based on past procedures involving
Credit Suisse CSGN.VX, Switzerland's second-largest bank.
"It is clear from the new indictment that the government is
gearing up to charge certain HSBC India bankers for their
involvement in the scheme," said Jeffrey Neiman, a former
federal prosecutor in Florida who worked on tax evasion cases
involving UBS AG (UBS.N), the big Swiss bank.
"These were not bankers living and working abroad. These
were bankers living and working in New York and who, according
to the indictment, were actively soliciting US clients to
conceal undeclared assets overseas," he said.
HSBC spokesman Clinton Riley said, "HSBC does not condone
tax evasion and fully supports U.S. efforts to promote
appropriate payment of taxes by U.S. taxpayers."
He added that "HSBC does not comment on discussions we may
or may not be having with authorities on this or other matters.
In all cases, HSBC cooperates fully with requests from U.S.
authorities and engages to resolve matters."
The indictment is part of a broadening U.S. investigation
into Swiss and Swiss-style banks that sell offshore private
banking services that enable American clients to hide income
offshore and evade U.S. taxes.
The probe has widened to include Israel and India. In 2010,
the Justice Department mailed "target" letters to around 50
Indian-Americans with offshore bank accounts, telling them they
were under scrutiny for suspected offshore tax evasion through
accounts in India.
HSBC is based in London but has Swiss-style private banking
services around the world.
In April, the U.S. Justice Department asked a federal court
for permission to force the bank to turn over the names of
wealthy Indian-American clients suspected of evading taxes
through offshore accounts at the bank's operations in India.
The superseding indictment pinpoints two HSBC bankers as
Banker No. 1 and Banker No. 2.
Banker No. 1 was identified as vice president of NRI
Services, North America. NRI Services - which stands for Non
Resident Indian - is a unit of HSBC India that operates in New
York and Fremont, Calif., according to court papers.
The unit targets wealthy Indian-Americans for offshore
private banking services, and serves over 160,000 people of
Indian origin living outside of India.
Banker No. 2 was identified as an assistant vice president
of NRI. Both bankers worked in New York, according to court
papers, which cited email correspondence in which Banker No. 2
called Ahuja "one of our largest NRI client."
The existence of HSBC's NRI operations emerged in January,
when prosecutors indicted Vaibhav Dahake, an India-born
naturalized U.S. citizen, on similar charges of evading taxes
through HSBC's India operations. The bank was not named in his
indictment. It was identified by sources briefed on the matter
The superseding indictment details what it says was HSBC's
use of methods to allow Ahuja to escape detection by U.S. tax
authorities. The HSBC bankers procured credit and debit cards
for Ahuja to use via HSBC affiliates in India and the British
tax haven of Jersey. The cards allowed Ahuja to use his funds
without disclosing their existence to U.S. authorities, in part
to invest in real estate in India.
The bankers also mailed account correspondence to an
address in New Delhi, rather than to his Wisconsin address.
Ahuja was provided an HSBC checkbook that did not have the NRI
name on it.
An action similar to the Justice Department's April summons
on HSBC was filed against Swiss banking giant UBS in 2009,
after the bank entered into a deferred-prosecution agreement
with U.S. authorities and paid a $780 million fine over its
private banking operations that fueled tax evasion by wealthy
The action, a broad summons known as a John Doe summons,
sought to force UBS to disclose the identities of 52,000
American clients but was later dropped after UBS agreed to turn
over 4,450 client names.
(Reporting by Lynnley Browning in Fairfield, Conn.; editing by
Howard Goller, Kevin Drawbaugh and Tim Dobbyn)