3 March 2005 – LAWFUEL -The Law News Network – The United States Attorney’s Office for the Northern District of California announced that Randolph S. Bronte, 53, was convicted of five counts of tax fraud by a federal jury today. After a six day trial and a short deliberation, the jury found that the defendant filed false federal income tax returns for the years 1998, 1999, and 2000. The case was tried before Judge Charles Breyer in San Francisco.
In a second superseding indictment, Bronte was charged with two counts of tax evasion and three counts of filing false tax returns involving the years 1998-2000. The evidence at trial showed that during those years the defendant failed to report $4,888,515 of income from his offshore hedge fund activities. As a result, Bronte evaded approximately $1.5 million in taxes.
U.S. Attorney Kevin V. Ryan stated, “This conviction sends a clear signal that individuals cannot evade taxes by laundering their income through offshore accounts.”
The defendant is native of Los Angeles, California and currently resides in Tiburon, California. Upon graduation from college, Bronte moved to Tokyo, Japan where he was employed by a medium-sized Japanese securities firm.
By 1983, Bronte joined Morgan Stanley & Co., Inc. as a vice president where he built a large business in Japanese equity warrants and convertible bonds. In 1989, at the peak of a seven year bull market in Japanese shares, Mr. Bronte became a director of the Swiss Bank Corporation with a mandate to design hedging strategies for the bank’s considerable holdings of Japanese equity warrants and convertible bonds. He was allocated a major line of capital which he successfully employed in warrant arbitrage strategies.
In August 1994, Mr. Bronte moved his base of operations from London, England to Tiburon, California to have better access to a growing American interest in investment in the region. In 1999, he incorporated Stephen Bronte Advisors LLC to accommodate a substantial growth in assets under his management. He formed a private hedge fund based in Bermuda called Sakura Fund, LTD, which bought and sold Japanese securities. He also formed a domestic entity called Sakura Fund, LP.
The federal income tax returns the defendant prepared and filed for the years 1995-2003 showed claimed operating losses in each year for a total of almost $1.6 million. Since 1994, the defendant has paid no income tax and has reported no taxable income. During this period, the defendant bought a house for approximately $7 million and a vacation home in Squaw Valley, California.
Bronte claimed his income was gifted from his wealthy in-laws in Japan. The defendant claimed that his in-laws had accounts in the Cayman Islands and Bermuda and used those accounts to wire funds to the defendant and his wife. The entities purportedly used by his in-laws to hold their assets were called Quantitive Investment LTD and Dartmoor Holding LTD. The evidence at trial showed that during the years 1995-2000 approximately $6,500,000 was wired from these entities for the benefit of the defendant and his wife. The evidence showed that the defendant was laundering his business income through bank accounts and entities in the Cayman Islands to conceal their true source.
The evidence at trial also showed that his in-laws were not wealthy, and that his wife and her parents are deceased. The only remaining family member was the defendant’s sister-in-law. In her deposition, taken in Tokyo, Japan on December 13, 2004, she testified that her parents were not wealthy. The evidence also showed that the defendant had lied about the source of his income to bankers, accountants, IRS agents, and his own attorney. The evidence also showed that the money was from the defendant’s offshore business activities, which he had hidden in accounts in the Cayman Islands, Bermuda, and the British Virgin Islands.
Following the return of the verdict, Judge Breyer immediately remanded the defendant to the custody of the U.S. Marshals finding that he was a substantial flight risk. In making this ruling, the Judge said that, from his review of the evidence, it was clear that the defendant had repeatedly lied, that because the defendant was facing a lengthy prison sentence and had money offshore, he was a substantial flight risk.
The maximum statutory penalty for each count of tax evasion count is 5 years in prison and $250,000 fine. The maximum statutory penalty for each count of filing false tax returns is 3 years in prison and a fine of $250,000. However, the U.S. District Court will determine the sentence to be imposed after considering the Federal Sentencing Guidelines and other relevant factors. The sentencing of the defendant is scheduled for May 18, 2005, before Judge Breyer in San Francisco.
The conviction is the result of a lengthy investigation by agents of the Internal Revenue Service. Jay R. Weill, Chief of the Tax Division, is the Assistant U.S. Attorney who prosecuted the case.
A copy of this press release and related court filings may be found on the U.S. Attorney’s Office’s website at www.usdoj.gov/usao/can . Related court documents and information may be found on the District Court website at www.cand.uscourts.gov or on .
All press inquiries to the U.S. Attorney’s Office should be directed to Luke Macaulay at (415) 436-6757 or by email at Luke.Macaulay3@usdoj.gov .
