American tax authorities are looking for $140 million (CHF125 million) from the former slush funds of Italian company Mediaset. Frozen by Switzerland in 2005, the cash was reclaimed in 2016 by Hollywood producer Frank Agrama, implicated at the time in a case which resulted in the conviction of the former Italian prime minister Silvio Berlusconi. Since then, the cash has disappeared.This content was published on December 8, 2020 - 11:00
Not all American taxpayers with undeclared accounts in Switzerland have been uncovered by the International Revenue Service (IRS). While the small fry were caught in shallow waters, several large fish continue to lurk in the depths of the banking sector. Some have even managed to escape to more lenient jurisdictions.
While the IRS is occupied with the biggest tax evasion case in US history, involving tech mogul Robert Brockman, and Geneva banks SYZ and Mirabaud & Cie, they are also trying to pick up the trail of another fortune hidden in Switzerland more than 20 years ago: that of Los Angeles producer Frank Agrama and his wife. The information was revealed in a judgement by Switzerland's highest court - the Federal Court - made public on November 16, 2020.
Agrama is a central figure in the Mediaset case which, among the dozens of Italian investigations that targeted Silvio Berlusconi, was the only one which resulted in a conviction of Il Cavaliere.
After emigrating to Italy from his native Egypt, Farouk “Frank” Agrama moved to Los Angeles in 1977 and obtained American citizenship. Responsible for several flops such as Queen Kong and Dawn of the Mummy, Agrama had better success in building relationships between the Hollywood studios and his former Italian connections.
From 1988, Agrama bought the broadcast rights to films and television series, including the famous Queen Kong and Dawn of the Mummy, which he then resold to the Mediaset group at inflated prices via offshore companies entrusted to straw woman Paddy Chan in Hong Kong. These operations enabled Berlusconi’s group to reduce his profits in Italy and to fuel his slush funds. Agrama was the guardian of these funds through his companies Wiltshire trading Ltd, Melchers Ltd and Renata Investment Ltd, and operated UBS accounts in Lugano.
The case blew up in 2005 when the Milan prosecutor’s office referred Berlusconi, then Prime Minister of Italy, along with 12 others including Agrama, for trial. The Office of the Attorney General of Switzerland proceeded to block CHF140 million held in Agrama’s Lugano accounts.
This sequestration did not stop Agrama from considering the money to be his. In 2009, when the American assault on Swiss banking secrecy was raging, he voluntarily disclosed to the IRS the existence of his Swiss accounts. He omitted to mention the context in which they were embroiled, and Uncle Sam’s tax collectors obviously did not make the connection with Mediaset.
Despite the impossibility of accessing his UBS accounts, Agrama is said to have settled the fine linked to his voluntary disclosure with other cash hidden in his web of offshore entities. And his patience was rewarded in the end.
In 2013, Berlusconi was definitively convicted for tax fraud by Italy’s highest court, the Court of Cassation. But the cases against the other accused continued. In October 2016, Berlusconi’s son, Piersilvio Berlusconi, vice president of Mediaset, was acquitted alongside its president Fedele Confalonieri. A few days after the ruling, the federal prosecutor’s office released Agrama’s CHF140 million.
The hunt continues
The US authorities did not respond until two months later. On December 14, 2016, the IRS requested administrative assistance from Switzerland in targeting the accounts of Agrama and his associates. The existence of this request for assistance is revealed in a decision by the Federal Administrative Court (FAC) which granted assistance to the US, and in turn confirmed in a judgment by the Federal Court made public on November 16, 2020.
In its request, the IRS accused Agrama in his 2009 declaration of having omitted revealing the existence of the Italian proceedings against him. Cleverly, he had limited his declaration to the amount of money held in the UBS accounts, without indicating its source. Worse, according to the FAC, Agrama transferred these funds to his offshore accounts after they were released by the Swiss attorney general.
The rulings of the two Swiss courts note that the American authorities requested certain elements of their request remain confidential in order not to harm the investigation. Twenty-two years after its accounts were opened at UBS Lugano, the hunt for Mediaset’s slush funds can therefore resume.
American tax authorities estimate that overcharging the Italian company for the television rights enabled Agrama to book at least $185 million in four years, from 1998 to 2002.
The federal prosecutor refused to comment. Agrama and his wife are defended by Raffaelle Bernasconi. The companies Harmony Gold Ltd, Wiltshire Trading Ltd, Melchers Ltd, and Renata Investment Ltd are represented by Paolo Bernasconi. Both lawyers declined to answer our questions.
Swiss Federal Court – Ruling of November 4, 2020 (in French, Germand and Italian)External link
Swiss Federal Administrative Court – Ruling of October 8, 2020External link
USA v. Frank Agrama – Declaration of James Pack (October 25, 2019)External link
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