UBS tax evasion controversies
Bradley Birkenfeld, an American banker stationed at UBS Switzerland AG, broke Swiss banking secrecy laws to disclose client information to the U.S. Department of Justice (DOJ) alleging suspected tax evasion.
After the DOJ opened an investigation, UBS was fined US$780 million and reached a limited deferred prosecution agreement that was seen as a historically significant event in the banking industry of Switzerland.
[6] In June 2008, the U.S. Federal Bureau of Investigation made a formal request to travel to Switzerland to probe a multi-million-dollar tax evasion case involving UBS.
[7] That same month, a United States Senate panel accused Swiss banks, including UBS and LGT Group, of helping wealthy Americans evade taxes through offshore accounts, and calculated the total cost of this practice as being in excess of US$100 billion annually.
[8] The report specifically accused UBS AG and Liechtenstein's LGT Group of allegedly marketing tax-evasion strategies to wealthy Americans.
[10] Ironically, the DOJ decided to charge Birkenfeld with a felony count of conspiring to abet tax evasion by one of his clients, Igor Olenicoff.
"[15] In response to the report and the FBI investigation, UBS announced that it would cease providing cross-border private banking services to US-domiciled clients through its non-US regulated units as of July 2008.
[19] UBS agreed on 18 February 2009 to pay a fine of US$780 million to the U.S. government and entered into a deferred prosecution agreement on charges of conspiring to defraud the United States by impeding the Internal Revenue Service.
As part of the deal, UBS also settled Securities and Exchange Commission charges of having acted as an unregistered broker/dealer and investment adviser for Americans.
[22] Additionally, UBS paid US$200 million for settlement with the U.S. Securities Exchange Commission (SEC) to avoid a trial on UBS' alleged conduct that the company facilitated the ability of certain U.S. clients to maintain undisclosed accounts in Switzerland and other foreign countries, which enabled those clients to evade paying taxes related to the assets in those accounts.
[24] Shortly thereafter, Hillary Clinton, having been sworn in as Secretary of State in January, traveled to Geneva on March 6, 2009, to meet with the Swiss Foreign Minister to announce a settlement of the IRS suit.
Within a few months, the Internal Revenue Service and the Department of Justice had arranged a tentative settlement in which the Swiss Financial Market Supervisory Authority (FINMA) would reveal information on 4,450 of the 52,000 accounts sought by the IRS, preserving the anonymity of more than 90 percent of the United States customers of UBS's cross-border business.
[T]he tortured wording and the many limitations in this Annex shows the Swiss Government trying to preserve as much bank secrecy as it can for the future, while pushing to conceal the names of tens of thousands of suspected U.S. tax cheats.
[29] Renzo Gadola, a Swiss banker and investment manager, was arrested for helping American citizens evade paying taxes via offshore financial vehicles.
Gadola wore a wire that enabled federal agents to tape his clients who continued to maintain secret Swiss bank accounts with intent to defraud the United States.
[31][33] On 22 December 2010, Gadola pleaded guilty to conspiracy to defraud the United States by enabling American citizens to evade taxes.
[38] The DOJ charged Bagios with engaging in a conspiracy with Gadola, Martin Lack and Hansruedi Schumacher (arrested in 2009) of abetting tax evasion by American citizens.
On 6 November 2012, Bagios pleaded guilty to one count of conspiracy involving defrauding the federal government in excess of $1.08 million while an employee at UBS from 1993 to 2009.
[37] As part of a plea bargain, the DOL recommended Bagios be sentenced to time served, which amounted to 37 days of imprisonment and approximately 19 months of house arrest.
Lack was charged with conspiracy to abet tax evasion by Americans by enabling them to shelter their assets in a small regional bank in Switzerland.
Like Renzo, Lack advised his American clients not to cooperate with U.S. authorities or partake in the IRS's voluntary disclosure program created in the wake of the UBS tax evasion scandal.
[44] In January 2014, Weil pleaded not-guilty in federal court to helping U.S. taxpayers evade taxes on $20 billion in offshore assets.
[51] The investigation was spurred by the March 2012 publication of a muckraking book about UBS, Ces 600 milliards qui manquent à la France – Enquête au cœur de l'évasion fiscale ("Those 600 billion which France is missing – Inquiry into the heart of tax evasion"), estimated the amount of tax income lost to UBS-controlled offshore accounts at €600 billion.
[52] The crackdown in France began in earnest after the revelation that Jerome Cahuzac, who served as budget director in the government of President Francois Hollande, had a secret Swiss bank account.
[53] UBS faces fines of up to five billion euros for its alleged role in tax fraud, according to the French newspaper Le Temps.
[56] In February 2015, Bradley Birkenfeld, the key figure in the UBS tax evasion scandal in the U.S., was subpoenaed by French magistrate investigating the case.
[58] Federal Judge William Zloch gave Birkenfeld permission to travel to France from 27 February to 1 March 2015 to appear before the French court.
It is alleged that UBS Belgium actively recruited rich Belgians, proposing to funnel funds to secret Swiss accounts, enabling tax avoidance.
According to The Wall Street Journal, bearer bonds went out of favor in the U.S. in 1982 when their treatment under U.S. law was changed to discourage their use, as they had been an ideal vehicle for tax evasion.
The unfavorable tax treatment and penalties enacted in 1982 discouraged the use of bearer bonds, which made the possible use of such securities by UBS clients suspect.
