UBS and the governments of the U.S. and Switzerland are in talks to settle a major tax-evasion case that could require the Swiss bank to reveal some of the 52,000 account-holder names the U.S. has brought, reports The Wall Street Journal.

The talks would not reveal all of the names, but those mentioned could lead to criminal prosecutions of U.S. clients. UBS could turn over some names to the IRS if actual fraud under Swiss law could be cited in the accounts.

Evidence for fraud is one way for Swiss banks to disclose names without violating secrecy. In February, the Justice Department sued to gain access to the 52,000 accounts. But some 7,000 accounts are more likely to be subject to the settlement because they are tied to offshore companies and trusts—which are more susceptible to fraud.

Chief Executive Oswald Grübel, who took over in February, said the IRS’s demand for information “puts UBS in an untenable position, caught between the laws of two sovereign nations.”

UBS, long a popular banking institution for foreigners looking to avoid domestic taxation, is stuck in the middle of a legal battle against the U.S. Department of Justice and Internal Revenue Service. The two regulators are looking for account information for those clients of UBS that may have committed tax evasion through their overseas accounts.

Though UBS has already disclosed hundreds of client names to U.S. authorities in order to avoid criminal charges, the Swiss Federal Department of Justice and Police says that such a decision was illegal, and that the agency “prohibits UBS explicitly from handing over client information.”

UBS has paid $780 million in fines, but an impending court battle could prove far costlier. One Swiss newspaper estimated that UBS could pay as much as $4.6 billion to settle the charges.

The Justice Department said Swiss bank UBS has “systematically and deliberately” violated U.S. law by dispatching private bankers to recruit wealthy Americans in evading taxes and must reveal the identities of 52,000 of those clients, reports The Associated Press.

The filing asks U.S. District Judge Alan S. Gold to hold UBS accountable for conducting years of illegal business in the U.S. Such business earned the bank more than $100 million in fees but the U.S. did not receive hundreds of millions of dollars in unpaid taxes.

“It is time for UBS to face the consequences that it has brought upon itself,” said Justice Department tax attorney Stuart Gibson in the 55-page filing. “The United States has proven its case for enforcement.”

UBS spokesperson Karina Byrne said the bank is “open to an appropriate solution.”

The Internal Revenue Services summons seeks the identities of all U.S. taxpayers who had an “undeclared” account at UBS between 2002 and 2007. UBS wrote to its U.S.-based clients in March and April telling them to close their accounts within weeks and transfer any money to a specially created U.S. unit, to another bank, or to withdraw the funds. That grace period ends July 2.

UBS previously received a deferred prosecution agreement with the Justice Department in which is agreed to disclose the identities of up to 300 U.S. clients and pay $780 million to the U.S. government.

Accountant Steven Michael Rubinstein, one of the 300 clients, plead guilty last week in Fort Lauderdale federal court to charges of filing a false tax return and faces up to three years in prison.

Tapner has said he intends to pursue opportunities outside of financial services.

UBS said Yoon joined the Swiss bank in 1997 and since then held various executivepositions including head of the fixed income, currencies andcommodities business in Asia.

In addition to the departures, UBS is trying to raise capital to pay off its debts by offering more than 293.3 million new shares to a “small number of institutional investors” at 13 francs a share, a discount to the current price. Speculation around the move indicates that the bank may be using funds raised to begin paying back the Swiss government.

UBS said it expects a net loss in the second quarter, as a result of continuing credit write-downs and restructuring changes. UBS will officially report its second-quarter results on August 4.

The arrest was the first in an international tax controversy that has brought the Swiss bank under scrutiny from the Internal Revenue Service. The IRS had been investigating whether the bank defrauded the tax agency in the years from 2000 to 2007 by aiding thousands of Americans in concealing nearly $20 billion.

UBS admitted to its wrongdoing in February, saying that it had indeed helped Americans hide their money; the bank paid a fine of $780 million and said that it would assist the IRS in uncovering the identities of some, but not all, of the tax cheats. The U.S. government has filed suit demanding UBS reveal the names of the 52,000 American account holders, with Swiss officials balking.

Rubinstein, whose arrest date was unspecified by the IRS, had an account with UBS between 2001 and 2008; the charge against him specifies his 2007 tax return was egregious. Rubinstein’s UBS account was worth at least $6 million, according to the IRS.

Rohner is being replaced by 65-year-old Oswald Grübel, who had beenCEO at Swiss rival Credit Suisse Group until he retired in 2007. In astatement, UBS said Rohner told UBS’s board in January that he plannedto retire as CEO after the conclusion of the “ongoing investment bankrepositioning and wealth management restructuring phase.”

But Rohner’s departure comes less than two years after he was namedCEO. In July 2007, Rohner replaced Peter Wuffli just as the bank wascoming to grips with massive write-downs tied to bad bets on securitiesunderpinned by subprime mortgage loans.

Separately, the Financial Times reports that UBS was accused of “serious failure” by Luxembourg’s financial regulator for its custodian role of a $1.4 billion fund that allegedly funneled money to Bernard Madoff’s  admitted $50-billion Ponzi scheme.

]]> http://www.directorship.com/ubs-chief-rohner-resigns-grübel-steps-in/feed/ 0 http://www.directorship.com/ubs-tax-dodgers-coming-forward/ http://www.directorship.com/ubs-tax-dodgers-coming-forward/#comments Thu, 01 Jan 1970 00:00:00 +0000 Joseph McCafferty http://www.directorship.com/?p=3972 Come out from the shadows, UBS tax dodgers; all is (sort of) forgiven. Spurred by increasing efforts by the Internal Revenue Service to identify potentially thousands of American UBS clients who used the Swiss bank’s wealth management to avoid paying taxes, several of these tax dodgers are voluntarily coming forward and admitting their guilt, avoiding criminal prosecution in the process.

The IRS has set up a voluntary disclosure program that allows UBS clients to acknowledge their tax evasion, paying back taxes in addition to a penalty—and avoiding any further risks of jail time. The program allows tax dodgers to come forward with the details and documentation of their evasion, and, through an attorney intermediary, negotiate a settlement.

The IRS and other U.S. authorities have been working for months to identify and prosecute systematic tax evasion among clients of UBS who used offshore tax withholding (legal in Switzerland) to hide assets from the U.S. government. The IRS believes about 20,000 American UBS clients hid up to $20 billion in assets through UBS-sponsored tax dodges.

The U.S. Department of Justice began probing UBS in June; since then, investigators have attempted to gain access to the internal records of the Swiss bank, with moderate success. UBS clients who come forward are banking that the IRS will be successful in uncovering the details of the thousands of tax dodges—prosecuting these cases is generally a difficult and costly undertaking.

The IRS is confident that offering amnesty will lead to better results for both regulators and tax dodgers. “We have a lot of names and we’re pursuing them aggressively,” said IRS commissioner Douglas Shulman. “People definitely will be better off if they come to us before we find them. And the chances of us finding them increase every day.”

The investigation into UBS’s potentially wrongful doings began in June with the confession of a former UBS executive who said he had assisted his American clients in dodging millions in taxes. The banker, Bradley Birkenfeld, admitted to hiding 200 million tax-eligible dollars on behalf of his clients between 2001 and 2006. Following Birkenfeld’s confession, the FBI sent agents to Switzerland to obtain evidence to build a case against the bank.

While tax evasion is legal in Switzerland, it is illegal in the United States, and UBS executives are thus liable in the event that they have indeed enabled their American clients to avoid taxation. Prosecutors believe that UBS concealed $20 billion through the use of offshore accounts between 2000 and 2007, resulting in a $300 million evasion, according to The New York Times.

Like most financial firms worldwide, UBS is reeling from the financial crisis, having suffered billions in subprime mortgage-related losses and a credit rating reduction. They have recently received support from the Swiss government, which has purchased a 9 percent stake in the company for $60 billion.

Senior executives at Swiss bank UBS knew at least three years ago that the firm was in violation of U.S. securities laws. Internal letters uncovered that the firm violated U.S. law in dealings with its American clients, according to The New York Times.

UBS is currently being investigated into whether it violated securities and tax laws by helping wealthy Americans hide money overseas. The letters now show that the bank ignored early warning signs of violations.

Marcel Rohner, who was head of the bank’s global wealth management unit and has been CEO since 2007, Peter Kurer, the bank’s former top lawyer who now serves as chairman, and several in-house lawyers and compliance officers are also under scrutiny, according to the NYTimes.

Four letters were disclosed by people and indicate that top UBS executives were first alerted to potential problems as early as June 2005. The U.S. Justice Department formally announced in May 2008, its investigation of the bank.

A letter seen by the Financial Times shows that in May 2006, written by Kurer and copied to Marcel Rohner and Lawerence Weinback, a UBS director who now sits on the company’s audit committee, inquires about whether the bank helped its wealthy American clients evade taxes. The letter was written to Bradley Birkenfeld, a former UBS banker.

Birkenfeld admitted earlier in 2008 to helping a billionaire U.S. businessman evade millions in taxes while at UBS. In the letter, Kurer acknowledged that he had received information from a whistleblower that resulted in an internal investigation. UBS interviewed 12 of its private bankers, according to FT.

“I thank you for drawing my attention to this compliance issue,” Kurer wrote. He added that in keeping with bank policy, the whistleblower “must not fear any retaliation,” according to FT.

Despite Kurer advising that bankers face a strenuous approval process, bankers remained under immense pressure to acquire new clients. They were encouraged to travel to the U.S. at least four times a year to take clients out informally to plays and sporting events to retain and potentially meet new clients, according to FT.

UBS closed its offshore banking business for U.S. clients back in November 2007 due to the tougher regulation environment.

Former Samsung CEO Lee Kun-hee was convicted of tax evasion charges on July 16. His three-year sentence was suspended and he will not be serving any prison time, according to The New York Times.

Lee was fined $109 million but was cleared of criminal charges for breach of trust, by the Seoul Central District Court. Two Samsung affiliates had sold stock to Lee’s son, Jae Yong, at unfairly low prices to ensure father-son succession.

Lee resigned after being indicted in April. Former chief counsel at Samsung, Kin Yong-chul, alleged that Lee and his aids transferred significant funds to ensure that the Lee family remained in control of management.

Prosecutors said they found $4.5 billion of Lee’s assets under other names and that he evaded $112 million in taxes. However they were unable to find evidence to bring bribery charges against Lee.

A Senate report, issued July 16, examines allegations that Swiss bank UBS and LGT, owned by the royal family of Liechtenstein, helped wealthy individuals evade taxes in the United States. The Senate Permanent Subcommittee on Investigations, prepared a 115 page report laying out how eight individuals used offshore accounts to avoid paying taxes, according to The New York Times.

Three of the eight under fire are Frank Lowry, the Australian billionaire who runs the Westfield Group, the world’s largest owner of shopping centers, Richard M. Chong, a venture capitalist, and Harvey Greenfield, the owner of the Commonwealth Toy and Novelty Company, which sells Beverly Hills Pups. According to the NYTimes, the attorney for Lowy, Robert Bennett, called the report “biased and misleading.” The others declined to comment.

Federal prosecutors have widened their investigation into the private banking practices of UBS, the world’s largest private bank. Two senior UBS executives are scheduled to testify July 17 before the Senate panel.

The hearing will also include videotaped testimony for Heinrich Kieber, a German citizen and a former low-level employee of LGT, who is now in the witness protection program, according to the NYTimes.

Michigan Democrat Senator Carl Levin, whose staff ran the investigation, said in a statement on Wednesday, “Tax havens are engaged in economic warfare against the United States, and the honest, hardworking American taxpayer is losing.”