Thread: UBS to reveal secret banking records in tax evasion settlement

UBS to pay $780M, open secret Swiss bank records

By DEVLIN BARRETT, Associated Press Writer Devlin Barrett, Associated Press Writer Wed Feb 18, 8:15 pm ET
WASHINGTON – Banking giant UBS has agreed to pay $780 million and turn over once-secret Swiss banking records to settle allegations it conspired to defraud the U.S. government of taxes owed by thousands of American clients.

As part of the deal struck in federal court in Fort Lauderdale, Fla., UBS has made the unprecedented step of agreeing to immediately turn over to the U.S. government account information for U.S. customers of the bank's cross-border business.

In doing so, federal authorities have struck a big crack in Switzerland's vaunted bank secrecy laws.

UBS will pay $780 million in fines, penalties, interest and restitution for conspiring to create sham accounts to hide the assets of U.S. clients from the U.S. government.

The financial hit on UBS is more than double the penalty imposed by federal authorities just last month on a different international bank, Lloyds TSB Bank PLC, for helping its clients skirt U.S. sanctions against Sudan, Iran and Libya.

"We accept full responsibility for these improper activities," Peter Kurer, chairman of Swiss-based UBS AG, said in a statement. He added that the bank was determined to abide by the terms of the deal with U.S. criminal and securities officials.

"Client confidentiality, to which UBS remains committed, was never designed to protect fraudulent acts or the identity of those clients, who, with the active assistance of bank personnel, misused the confidentiality protections," he said Wednesday.

About 17,000 American clients concealed their UBS accounts from the IRS, hiding total assets of roughly $20 billion, U.S. officials said.

According to U.S. officials, when an acquisition in 2000 of a U.S. company brought UBS a host of new, American clients, the bank set about to evade new reporting requirements for those clients. To do so, UBS ****utives helped U.S. taxpayers open new accounts in the names of sham entities.

Prosecutors contend that UBS ****utives used encrypted software and other counter-surveillance techniques to prevent anyone from detecting that they were actively marketing such Swiss bank secrecy — and tax evasion — to American taxpayers.

The clients, in turn, filed false tax returns that omitted the income they earned in their Swiss accounts, according to the court papers.

Federal officials said they had pulled aside a veil of secrecy that hid a corrupt international banking practice.

"This was not a mere compliance oversight, but rather a knowing crime motivated by greed and disrespect for the law," said Alexander Acosta, U.S. attorney for southern Florida.

Internal Revenue Service Commissioner Doug Shulman warned U.S. taxpayers hiding money overseas that it was time to come clean with Uncle Sam.

"People who have hidden unreported income offshore need to get right with their government. They should come forward and take advantage of our voluntary disclosure process," Shulman said.

Sen. Carl Levin, D-Mich., has estimated that abusive tax shelters and hidden offshore accounts cost the U.S. government nearly $100 billion a year in lost tax revenue.

Prosecutors are still hunting for UBS ****utive Raoul Weil, who was indicted in November 2008 on charges he conspired to defraud the government when he was managing the bank's cross-border business.

After the UBS settlement was announced Wednesday, Weil's lawyer Aaron Marcu said the charges should have been dropped against his client as part of the deal.

"Mr. Weil is an innocent victim of a political dispute between the United States and Switzerland over Swiss bank secrecy," Marcu said.

In June 2008 former UBS banker Bradley Birkenfeld pleaded guilty to a similar charge.

If UBS fails to turn over the clients' information, or stops cooperating with authorities, federal prosecutors could refile charges against the bank.

Under the deal, UBS also will completely stop engaging in the type of cross-border banking business that got them into trouble.

___

Associated Press writer Curt Anderson in Miami contributed to this report.

___

Copyright © 2009 The Associated Press. All rights reserved. The information contained in the AP News report may not be published, broadcast, rewritten or redistributed without the prior written authority of The Associated Press.

Anybody notice this?
No more privacy.

This was on Yahoo today.

Switzerland breaks with tradition on tax evasion


BERN, Switzerland – The Swiss government said Friday it would cooperate on cases of international tax evasion, breaking with a long-standing tradition of protecting wealthy foreigners accused of hiding billions of dollars in the Alpine nation.

The government insisted it would hold onto its cherished banking secrecy rules, but said other countries could now expect Swiss cooperation in cases where they provide compelling evidence of tax evasion.

"We want assistance to be restricted to individual cases to prevent fishing expeditions," President Hans-Rudolf Merz told a news conference, referring to the practice of seeking information about many individuals in the hope of discovering a few tax evaders.

A number of countries are hoping to avoid being blacklisted by world powers when they meet in April to discuss stepping up their fight against tax cheats.

Austria and Luxembourg also said Friday they would step up cooperation on tax probes. But the greatest pressure has been on Switzerland, which is embroiled in a dispute with the United States over wealthy Americans that have stashed money in its biggest bank, UBS AG.

Swiss authorities have provided the U.S. with the bank details of up to 300 wealthy Americans suspected of tax fraud, but refuse to identify about 50,000 more U.S. account holders Washington wants.

The bank, and the government, have said further cooperation would violate Swiss law, which makes an unclear distinction between the serious crime of tax fraud and the minor offense of tax evasion.

Merz said the country — which already works with other countries to fight terror financing and return dictator cash — will now adopt standards set by the Paris-based Organization for Economic Cooperation and Development for countries working together against tax evasion. Switzerland had refused to commit to the standards since they were written in 2000 for fear of compromising banking secrecy rules.

"Banking secrecy does not protect tax crimes," Merz said. The change, he added, "will increase the acceptance of the (Swiss) financial center and give customers greater confidence" and safeguard jobs in a sector that employs tens of thousands of people in Switzerland.

He said, however, that Switzerland will maintain banking confidentiality for clients unless foreign governments produce concrete evidence of tax evasion. Switzerland's new cooperation will come into force after agreements with other governments that provide Swiss banks with new financial opportunities, he added.

Merz's announcement came a day after Switzerland's tiny neighbor Liechtenstein bowed to outside pressure by adopting the standards in a similar attempt to shed its label as a tax haven where foreigners can safely hide their money. Several others tax havens — including Andorra, Bermuda and the islands of Jersey and Guernsey in the English Channel — also have signaled over the past month that they would open their books to foreign tax inspectors.

Switzerland has been struggling to come up with a strategy for preserving banking secrecy while satisfying the demands of the United States, France, Germany and other foreign governments looking to crack down on tax evaders. The confidentiality of bank accounts is a sacred cow in the country, comparable to its long-standing neutrality, and has helped the country become one of the world's richest.

Swiss bank vaults hold an estimated $2 trillion of foreign money.

The Swiss Bankers Association said it supported the decision, but now wants "an end to all improper international criticism of Switzerland and its legal system, and also an end to threats to put Switzerland on a so-called 'black list.'"

The industry group said it expects all agreements to refrain from retroactively punishing banks or clients for old infractions.

Shares in UBS AG and Credit Suisse Group rose on the announcement and were both up over 5 percent for the day.

The Swiss government also said Friday it would take part in a U.S. civil case against UBS, which is being accused of facilitating massive tax evasion by wealthy Americans. The Swiss will protect their "sovereign interests," according to a statement.

The UBS case represents the most serious crisis in the Swiss banking community since the uproar in the 1990s over Jewish accounts left unclaimed after World War II. After reacting slowly, Swiss banks eventually agreed on a $1.25 billion out-of-court settlement with the descendants of Holocaust survivors.

Switzerland passed its banking secrecy laws in 1934 during a worldwide depression and under the threat of espionage by France and Nazi Germany, which aggressively courted Swiss bank employees to divulge the names and data of customers. Strict penalties were imposed for violating bank confidentiality.

Still, secrecy standards have eroded.

Switzerland has retooled the rules over the past two decades to make it easier for poor countries to reclaim assets stashed in Swiss banks by their former dictators, and has become a world leader in returning potentate cash.

And after the 2001 terrorist attacks on the United States, the neutral country took a key role to freeze assets and investigate suspected financiers of global terrorism.

On Yahoo today - End of an Era with Privacy!


US, Swiss keep deal on secret accounts under wraps

By Associated Press Writer 24 mins ago

MIAMI – The Swiss and U.S. governments announced a deal Wednesday to settle American demands for the identities of suspected tax dodgers, despite Switzerland's vaunted bank secrecy. But they kept all details under wraps, including how many of the 52,000 names sought by the IRS from banking giant UBS AG will be revealed.

Depending on the scale of the deal, it could be a new blow to Switzerland's reputation as a safe place to hide assets from the tax man back home.

Switzerland has long been under pressure from European neighbors and the U.S. to open its bank records for foreign tax authorities. The IRS case against UBS has been partly credited with pushing the Swiss government to agree in March to comply with tax investigation rules from the 30-nation Organization for Economic Cooperation and Development. UBS earlier this year named about 300 American clients in a separate case.

William Sharp, a Florida tax lawyer who represents American UBS clients, said he expects the agreement to allow Swiss authorities to interpret bank secrecy laws more broadly and allow a "substantial handover" of names.

"I would guess that the U.S. would not enter into this agreement in the absence of a major fine and penalty without having at least several hundred if not thousands of names turned over," Sharp said.

The IRS in February asked U.S. District Judge Alan S. Gold in Miami to force Zurich-based UBS to turn over names of some 52,000 American clients believed to be hiding nearly $15 billion in assets in secret accounts. UBS and the Swiss government had resisted, arguing that to do so would violate Swiss banking confidentiality laws that date back centuries.

The Swiss and U.S. governments announced in late July they had agreed in principle on major issues but released no details. They had hoped to present a final deal at a hearing Aug. 7, but resolving the differences took longer.

On Wednesday, lawyers for the U.S. and UBS told the judge in a brief conference call they had sealed the deal.

"The parties have initialed agreements. It will take a little time for the agreements to be signed in final form," Justice Department lawyer Stuart Gibson told the judge.

IRS Commissioner Doug Shulman said the deal "protects the United States government's interests." Shulman's two-sentence statement added only that more details will be released when the Swiss government signs the agreement as early as next week.

UBS and the Swiss government also welcomed the news and said no terms would be disclosed until it is signed. Swiss Justice Minister Eveline Widmer-Schlumpf said the agreement "is in the interests of both states."

The Swiss government got involved in the negotiations because the case goes to the heart of the country's legally enshrined banking secrecy.

Swiss banks hold an estimated $2 trillion of foreign money, and financial services add about 12 percent of GDP to the national economy. According to the Boston Consulting Group, those holdings amount to one-fourth of the world's foreign-owned assets.

Raymond Baker, director of Global Financial Integrity, an organization that works to end illegal international money transfers and improve transparency, has been following the case closely. He said the deal may waive bank secrecy for some but not all clients and that it is too soon to guess how many names might be revealed.

"It will be curious to see whether in the UBS settlement there were other negotiations that might have effects on other banks," Baker said, saying it was possible other Swiss banks might be required to disclose more information.

The U.S. and Switzerland in January agreed to increase the amount of tax information they share to help crack down on tax evasion. The details of that agreement, which have also not been revealed, could have an effect on what banks have to disclose.

UBS paid a $780 million penalty earlier this year and turned over names of about 300 American clients in a deferred prosecution agreement with the Justice Department. In that case, UBS admitted helping U.S. citizens evade taxes, which experts say is not a violation of Swiss bank secrecy laws.

So far, three UBS customers whose names were divulged under the prior agreement have pleaded guilty to tax charges in federal court. Hundreds of others holders of secret accounts at UBS and other Swiss banks have voluntarily come forward to the IRS under an amnesty program that requires payment of taxes and penalties but generally does not include the threat of prison.

That amnesty program ends Sept. 23.

News of the agreement has had an immediate effect at tax lawyer Sharp's office: "Our phone has been ringing off the hook since this morning. Clients recognize that voluntary disclosure is the only way to avoid the risk of being turned over," he said.

New York-listed shares in UBS were trading nearly 4 percent higher at $15.25.

___

On Yahoo today!

Tax dodgers scramble to come clean amid crackdown

WASHINGTON – A deal with Switzerland settling U.S. demands for the names of suspected tax dodgers from a Swiss bank has a lot of wealthy Americans with offshore accounts nervously running to their tax advisers — and the Internal Revenue Service.

"They are very frightened," said Richard Boggs, chief ****utive of Nationwide Tax Relief, a Los-Angeles-based tax firm that specializes in clients with tax debts exceeding $100,000. "You have the super rich who are not used to being pushed around and they are finding themselves in unfamiliar territory."

The U.S. and Swiss governments announced a court settlement last week in efforts by the IRS to force Zurich-based UBS AG to turn over the names of some 52,000 Americans believed to be hiding nearly $15 billion in assets in secret accounts.

Justice Department and UBS lawyers told a federal judge in Miami in a brief conference call Wednesday they had initialed a final deal. But they did not disclose any details, such as how many of the 52,000 names sought by the IRS will be revealed.

Even before the settlement, the high-profile case — coupled with other U.S. efforts to go after Americans hiding undeclared assets — has scared hundreds of tax dodgers to turn themselves in. Boggs said his firm has been taking on 100 new cases a month, a big increase over previous years.

Peter Zeidenberg, a litigation partner at the law firm DLA Piper in Washington, said he, too, is he seeing more people with undeclared assets seeking information about their legal options.

His advice: "I don't think you have much of a choice but to come forward. ... I think the landscape is permanently changed."

The IRS long has had a policy that certain tax evaders who come forward before they are contacted by the agency usually can avoid jail time as long as they agree to pay back taxes, interest and hefty penalties. Drug dealers and money launderers need not apply. But if the money was earned legally, tax evaders can usually avoid criminal prosecution.

In March, the IRS began a six-month amnesty program that sweetened the offer with reduced penalties for people with undeclared assets. IRS Commissioner Doug Shulman said the response has been unprecedented.

Shulman wouldn't say how many people have applied so far. But the IRS said 400 people applied to voluntarily disclose undeclared assets in a single week in July, compared with fewer than 100 applications all last year.

The amnesty program, which ends Sept. 23, is part of a larger effort by federal authorities to crack down on international tax evaders.

"Each time someone walks through the door with a disclosure, we get more information. We get more information about other people. We get more information about other financial institutions," Shulman said. "If people have been hiding assets in the past, they should be nervous, and they should be a lot more suspect about doing it in the future."

The U.S. recently reached agreements with several countries, including Luxembourg and Switzerland, to share more tax information in the future, just as the IRS is strengthening its enforcement ranks.

President Barack Obama, in his proposed 2010 budget, asked Congress to pay for 800 additional agents, examiners and lawyers to go after people who hide money overseas. Obama also wants Congress to require overseas financial institutions doing business in the U.S. to share more information with the IRS.

Earlier this year, UBS admitted assisting U.S. citizens in evading taxes as part of a deferred prosecution agreement with the Justice Department. UBS agreed to disclose the names of about 300 American clients and pay a $780 million penalty. The IRS subsequently filed its case seeking the names of 52,000 additional U.S. taxpayers believed to be hiding assets in UBS accounts.

So far, four UBS customers whose names were given to U.S. authorities under the prior agreement have made deals to plead guilty to tax charges in federal court.

"The UBS case, the agreements we are signing, the legislative proposals and the enforcement efforts are all meant to send one message, which is that if you owe tax to the U.S., we are going to use every tool we have available to get that," said Michael Mundaca, acting assistant treasury secretary.

Sen. Carl Levin, D-Mich., applauded the administration's efforts, but said more can be done to catch tax evaders. Levin has introduced a bill that would direct the treasury secretary to maintain a list of nations that "impede U.S. tax enforcement" and give him authority to impose financial penalties against uncooperative countries.

Levin's initial list of 34 countries and other jurisdictions would include Switzerland, the Cayman Islands, Bermuda, the Bahamas, Hong Kong and Panama.

"We should have put a clampdown on these tax havens a long time ago," he said in an interview.

Raymond Baker of Global Financial Integrity, a Washington-based group that advocates tougher policies against international money laundering, said he is encouraged by the administration's efforts. But he's not ready to call it a crackdown.

"As we get past the UBS case, is the momentum for continuing to go after tax evaders going to be sustained?" Baker said. "I think it's too early to tell."

It would, however, be risky for a wealthy tax dodger to wait to see if the government's stepped up efforts continue, said Boggs, the tax adviser. He said his firm usually recommends a "strategic surrender" to the IRS.

"We basically are waving a white flag and telling the IRS that we have every intention of resolving this issue in the mutual best interest of the government and our client," Boggs said.

"Historically, the best outcomes that we have been able to negotiate have always involved good faith from the taxpayer," he said. "And good faith means getting to the IRS before they get to you."

___

Wonder how much tax money IRS picked up with this amnesty program?