‘The Government Can Destroy Anyone’: How An IRS-Led Global Alliance Ruined An Innocent American Banker | Eastern North Carolina Now

    Publisher's Note: This post appears here courtesy of the The Daily Wire. The author of this post is Luke Rosiak.

    In the Bahamas in early 2021, Sam Bankman-Fried was allegedly conducting a brazen, multi-billion dollar scheme. He virtue-signaled for liberal causes, was put on the cover of magazines, and-until things got really bad-seemed to stay off the authorities' radar.

    Around 800 miles east at the same time, a conservative activist named Peter Schiff was running his own bank in Puerto Rico. Schiff is a financier and prominent economist who regularly speaks publicly about how he thinks the government should be run: with fewer taxes and less regulation. The U.S. government teamed up with four other countries to undertake the "world's largest tax evasion probe" against Schiff. Despite "a very significant investment by all the countries involved," they found nothing.

    Then they destroyed him anyway. Authorities leaked the existence of the investigation to the media, then cited the resulting negative publicity to take the bank from him, costing him more than $10 million.

    The IRS' top criminal enforcement official flew to Puerto Rico to hold a press conference where he gave the impression that the IRS was shutting down Schiff's bank for facilitating tax evasion and money laundering-even though, if you were paying close enough attention, that was not the case.

    Schiff's Euro Pacific Bank (EPB) was actually being closed by a Puerto Rican oversight board that claimed that it was "critically insolvent." In other words, the board claimed the bank might not be able to return its customers' money if there was a run on accounts-which is what happened in the case of Bankman-Fried. But Schiff's bank catered to ultra-conservative clients who prioritized keeping their money over earning interest. The bank didn't lend out its deposits, and profits came mostly from charging fees for transactions. EPB kept its depositors' money on hand, making it perhaps the most run-proof bank in the world.

    The Puerto Rican regulator later acknowledged EPB had more than enough cash to cover all of its deposits. Nonetheless, Puerto Rico put it into receivership to "liquidate." It said Schiff couldn't be permitted to own it because of "negative press": articles based on law enforcement officials leaking the existence of the investigation which ultimately found nothing. A year later, the receiver has not returned any of the deposits, amounting to more than $65 million, to the bank's thousands of customers.

    Schiff had a track record of being right on economic issues. He warned early on that cryptocurrency was-as Bankman-Fried demonstrated-bad news. NPR heralded him for predicting the economic collapse of 2008.

    He also had a fear that the government couldn't always be trusted to behave ethically. And with every twist in the saga, he was seemingly more correct about that, too.

    In 2018, Schiff did something apt to cause panic inside the IRS: He went on the Joe Rogan Experience, the largest podcast in the country, and encouraged people to move to Puerto Rico. It's a U.S. territory with great weather and beautiful women, he said. And-perhaps most importantly-the U.S. tax code exempts its residents from the federal income tax.

    "I live in Puerto Rico. And thanks to my appearance on your show, a lot of other people now live there, too," he said in a subsequent appearance. "I've just got to tell you how many people I run into and they say, 'Peter, you know, I moved here because of you.' Really, how'd you hear about it? 'Oh, Joe Rogan.'" Each one of those transplants was availing themselves of a provision set up by the U.S. itself, but they also represented dollars to which the IRS was no longer entitled.

    The same year, the governments of the U.S., Australia, Britain, Canada, and the Netherlands teamed up to create the "Joint Chiefs of Global Tax Enforcement," or the J5, mirroring the "Five Eyes" program of the intelligence community. J5 was born out of embarrassment over a scandal known as the Panama Papers, in which hacked emails from a law firm in that Latin American country illustrated how wealthy westerners, including then-British Prime Minister David Cameron, had benefited from stashing money in offshore locations.

    Authorities couldn't seem to differentiate between an economist's philosophical and political beliefs that taxes should be minimal and a willingness to commit crime. And so a prominent Fox News guest became the subject of a sprawling criminal probe.

    Though a massive web of crypto tax evasion was rocking the global financial sector during the same time period, J5 appeared to do little for two years. Instead, in 2020, it took its first major action: setting its sights on Schiff in what it called an "unprecedented" "global day of action" that showed that "the J5 are closing in."

    But this seemed like less the result of expert sleuthing than the kind of lead that might turn up from a Google search for people who don't like taxes. Schiff uses a megaphone to voice his criticism of the tax code. His father was a famous tax protester who died in prison for refusing to pay. Schiff routinely does media appearances where he takes a libertarian's view of measures like the PATRIOT Act, a component of which involves the government more closely tracking people's bank accounts.


    Schiff incorporated Euro Pacific Bank (EPB) in Puerto Rico in 2017. He said it was based there because that's where he lived, and that it catered to small businesses who did business in multiple countries and needed currency exchanged, as well as people who were attracted to the fact that it was marketed as a "100% reserve" bank, where all the money would be safely stored and not put into risky loans.

    Though it was an off-shore bank holding money for people from other countries (it was not permitted to have Puerto Rican customers under its license, and had no other U.S. customers), Schiff said it had extreme compliance measures to ensure that people weren't using the bank for illicit purposes. It refused to do business with people whose money was made in arenas Schiff viewed as shady, such as cryptocurrency or gambling, and rejected 75% of applicants because they did not satisfy the bank's compliance officers, he said.

    "We were doing it by the books. Even though I disagree with the laws, I'm not gonna break them. I'm not an idiot. If I was going to break the laws, I'd keep quiet about it," Schiff told The Daily Wire.

    He said authorities couldn't seem to differentiate between an economist's philosophical and political beliefs that taxes should be minimal and a willingness to commit crime. And so a prominent Fox News guest became the subject of a sprawling criminal probe.

    "I think they targeted me because of who I am," he said.

    In January 2020, two IRS agents visited Schiff's home on the island holding a summons from a grand jury based in Sacramento, California. The letter said "we request that you not disclose the fact that you have been served with the subpoena" because it could "seriously hamper the investigation."

    U.S. officials are also barred from disclosing information about grand jury proceedings, part of a process designed to protect people who may not wind up being charged, much less convicted, of anything. But journalists soon knew of the secret document. Reports surfaced citing authorities who revealed a massive investigation into a bank that, in one television program's words, posed a "grave organized crime threat to the nation that must be confronted at any cost."

    Just as five national governments worked together on the probe, four news outlets did, too. They included The New York Times and three Australian outlets: The Sydney Morning Herald, The Age, and Australia's 60 Minutes, a television program with the same name and style as the U.S. show. The media pieces, which ran in coordinated fashion in October 2020, amounted to breathless cheerleading for a government task force that, so far, hadn't seemed to show any results.


    The head of Australia's criminal tax enforcement, Will Day, sat for an interview with Australia's 60 Minutes, whose segment had the feel of serving up Schiff's head on a platter as part of an over-the-top marketing piece for Day and the J5, which it called "a secret alliance of tax cops." 60 Minutes Australia closed by saying, "It may be months before we find out how many other Australians are stashing their dirty money in Euro Pacific Bank, but Will Day says the investigation is a potent reminder to anyone thinking about dodging tax... [he's] coming for them."

    60 Minutes Australia's case that "the money trail shows us the secret tactics used by super-wealthy Australians to dodge tax and leads to the man at the center of it all, the face of the bank, Peter Schiff" was seemingly based on only two things: Schiff's politics and the J5's word. Schiff is known "thanks to his controversial views about the economy and taxes," it said. And his bank "is at the center of the biggest tax evasion investigation in the world."

    When Schiff, who sat for an interview with 60 Minutes Australia, denied that his bank did anything wrong, the journalist told him "but you do know the IRS visited you this year, surely that was an indicator?" The journalist revealed that he knew of the government subpoena, and after Schiff replied that the government ordered him not to discuss it, the program played dramatic music and said "Schiff is really lost for answers."

    Judge Ian McNeil Jackman-the brother of actor Hugh Jackman-wrote in a defamation case that "Whether Mr Schiff has expressed political views antipathetic to taxation does not support an assertion that he in fact endorses, permits and condones the illegal avoidance of tax in practice."

    While luring U.S. citizens to Puerto Rico might have rankled the IRS, Australian officials may have had their own motive to want publicity. The month before, a major bill that would grant the government new powers for a "Financial Accountability Regime" had been introduced in Parliament. It had failed the prior year, and it needed a groundswell of public concern about financial fraudsters to pass. 60 Minutes said its segment "highlights a major flaw in Australia's anti-money laundering regime" and that "the government must pass new laws."

    A reasonable person might rightfully be suspicious of a small bank that holds the money of individuals from other countries in a low-tax jurisdiction. It seems like a classic location where tax evasion and money laundering could occur. Yet, despite five governments and four news outlets investigating, the stories didn't provide a single example of a customer using the bank for tax evasion or money laundering, much less the bank's complicity.


    Of the names of customers that 60 Minutes invoked, there was no indication they used the bank for wrongdoing-though the media didn't present it that way.

    "According to official sources, this man, Darby Angel, started an account with Euro Pacific Bank... he's also a convicted drug trafficker," the program said. In reality, Angel had a drug conviction 18 years earlier. The criminal record was so old that it was sealed by the Australian government and wouldn't come up in any background check. On top of that, he never used his EPB account at all, and EPB had closed it years prior, according to an independent audit conducted by DLA Piper at EPB's request.

    Another EPB customer was Simon Anquetil, an executive of a payroll company who had no criminal record when he opened an account in 2015, but years later was charged with and pleaded guilty to major tax crimes in Australia. DLA Piper said those crimes had nothing to do with the bank. In 2016, EPB rejected an application from the company that committed the fraud and blocked five wire transfers associated with it; in February 2017, before he was charged, it disbursed money from his account to the Australian government; and in March 2020, it closed his account, the independent report found. A third customer name was a person who in 2013 was arrested but never charged with a crime.