UBS France accused of abetting tax evasion

After the US, France is now taking a closer look at UBS activities AFP

A French journalist has accused UBS France of systematically helping major clients stash funds in Switzerland, depriving their government of tax revenue.

Antoine Peillon’s new book claims that the Swiss bank’s employees secretly sought out customers to convince them to hide their money outside the country.

“These employees were selling a turnkey solution for tax evasion, including legal advice, transporting money, and almost always the creation of a dummy company in some exotic tax paradise,” writes the author in his book.

UBS has categorically denied the claims. “The accusations contained in this book are false and unfounded,” said the bank, which is considering whether to lodge a complaint, in a statement.

   

According to Peillon, the affair began to unravel in 2008. Because of the financial crisis, managers at UBS France were made redundant, including a group of internal auditors who had uncovered the fraudulent practices.

These employees filed a complaint with the employment tribunal and warned the Bank of France’s supervision authority.

Media echo

In 2010, media began to carry stories about the accusations made by the former managers.

“According to these managers, UBS created two sets of books between 2002 and 2007 to hide undeclared Swiss accounts,” wrote French website rue89 in March last year.

The supervision authority provided prosecutors with an initial report last year, and they in turn asked the National Judicial Customs Service to carry out a preliminary investigation.

According to the business newspaper Les Echos, the authority has just provided the prosecutors a fresh report focusing again on the audits of UBS’ private asset management. It also sent the bank a warning to comply with French legal norms.

But if the facts are as stated, why hasn’t UBS France yet been prosecuted?

“Many of the people I spoke to asked the same question,” admits Peillon.

His theory? Among the people who might be embarrassed by an investigation could be wealthy French taxpayers secretly involved in financing the presidential campaigns of the right, including those of the current president, Nicolas Sarkozy.

Tax evasion

Peillon also believes the parliamentary majority has not done enough to fight tax evasion.

“Since 2009, Switzerland has suffered from a barrage of aggressive talk, but the fact is almost nothing has been done,” he said. “Most requests for judicial cooperation [with Switzerland] have got nowhere, often because the French were clumsy.”

The infamous list of 3,000 French Swiss account holders, passed on to the French judicial authorities by a an employee of HSBC Geneva, and which was to be used against the Swiss banks by Eric Woerth, the former French budget minister, has amounted to a whole lot of nothing, according to Peillon.

A situation that has been compounded by a recent court decision to not allow prosecutors to  use the list as proof of wrongdoing.

The journalist, who works for the Catholic newspaper la Croix, estimates that €2.5 billion (SFr3.1 billion) ends up in Swiss coffers  every year. Tax evasion has led to €600 billion leaving the country, with around €108 billion stashed in Swiss banks.

Peillon has been accused of serving political interests in the run-up to the French presidential election in few weeks’ time.

His brother is Vincent Peillon, a prominent member of the Social Democrat party and an adversary of Swiss banking secrecy. He is also widely expected to become a minister if his party’s candidate François Hollande becomes head of state.

“He’s he and I’m me,” shoots back Peillon. “My investigation was not politically motivated.”

No deal with Paris

France has so far rejected the idea of a bilateral accord with the Swiss concerning tax evasion.

The accord suggested by the Swiss Bankers Association would allow French residents who are account holders to remain anonymous, with the Swiss authorities levying a tax and passing on the proceeds to the French.

The French have complained about the lack of cooperation from the Swiss concerning tax evasion investigations, with few requests for aid being accepted.

Three years of trouble

UBS was the first Swiss bank to be investigated by US prosecutors. It was forced to pay a $780 million fine for helping US citizens avoid paying tax.

A year later, the Swiss government agreed to hand over the names of 4,500 American UBS clients, a decision ratified by parliament in 2010. 

US tax amnesties saw 30,000 American clients of Swiss financial institutions admit to having undeclared accounts abroad, providing the IRS and the justice department with proof they were aided and abetted by Swiss banks.

A number of Swiss bankers and lawyers were arrested or indicted in the US, including three managers at the Wegelin private bank. In January, Wegelin announced most of its activities had been ceded to the Raiffeisen group.

A few days later in a first for a foreign bank, the US authorities indicted Wegelin for helping clients defraud the IRS.

Eleven Swiss banks are under investigation in the US. Talks are ongoing between the US and Swiss authorities to find a global solution to the crisis.

(Adapted from French by Scott Capper)