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The most persistent advocate of disclosure laws has been Morgenthau, who was abruptly fired by the Nixon Administration last December and replaced by a Republican. Democrat Morgenthau is now a deputy mayor of New York —and still convinced that his probing into bank records of foreign accounts "was making the Administration extremely nervous." Before he was fired, Morgenthau had persuaded federal grand juries to indict 75 persons for financial crimes involving secret bank accounts, and had referred dozens of other cases to the Internal Revenue Service. The cases demonstrate a variety of ways in which U.S. businessmen put their Swiss connections to illegal but profitable use. Items:
¶ Two Manhattan men, Irving Braverman and Sydney Rosenstein, were indicted for tax evasion on a large scale. According to the indictment, they own 50% of Foremost Brands Inc. and McInerney Sales Inc., and also acted as sales representatives in Europe for several U.S. corporations, making their sales largely to American PXs. They are accused of diverting some $3 million in commissions to a secret bank account through a dummy trust registered in Liechtenstein.
¶ The Houston Oil Field Materials Co., now International Systems & Controls, was indicted for violating margin requirements while making a takeover attempt through a foreign account. According to Government prosecutors, HOMCO transferred $300,000 to a Uruguay-based brokerage firm. The money was deposited in First Hanover Corp. as margin for purchase of $1 million worth of shares of Holly Sugar Corp., ostensibly for the Uruguay firm, but in fact for HOMCO. Next HOMCO made a public offer, which raised the price of Holly Sugar shares—and then dumped its holdings for about $1 million profit.
¶ One taxpayer brashly claimed a bad-debt deduction because a foreign company had failed to repay a loan; in reality he owned the company, and the "loan" was a payment to himself from a secret foreign account.
The most interesting transaction through Swiss banks, however, bears no evidence of illegality. It involved Randolph H. Guthrie, a senior partner of Nixon's former law firm. Guthrie's firm, which represents the Banque de Paris et des Pays-Bas, last fall was instrumental in arranging a $40 million loan for the New York-based conglomerate Liquidonics Industries to gain control of UMC Industries, a St. Louis defense contracting firm. Had the deal been arranged through an American bank, it would have violated SEC margin requirements. Guthrie asserts—and he has not been disputed—that margin requirements do not apply to foreign banks. Liquidonics was unable to repay the $40 million, so the Swiss bank took over its stock and gave it to a subsidiary. The new chairman of UMC Industries: Randolph H. Guthrie.