UBS Questioned by Senator Over $350 Million Tax Evasion Case

(Bloomberg) — UBS Group AG was asked by a powerful US lawmaker about whether the bank it acquired, Credit Suisse Group AG, failed to report an American accused of evading taxes on $350 million in income.

Senator Ron Wyden, chairman of the Senate Finance Committee, asked in a letter whether Credit Suisse told US tax authorities about accounts held by Douglas Edelman, a former military contractor who sold $7 billion of jet fuel to the US for use in military campaigns in Afghanistan and the Middle East.

Edelman and his wife, Delphine Le Dain, were accused in an indictment unsealed July 3 of hiding his profits from the Internal Revenue Service for nearly two decades in one of the largest tax evasion schemes in US history. He was arrested that day in Spain and faces extradition to the US, the Justice Department said at the time. 

The indictment offers “substantial new evidence that Credit Suisse and its employees played a significant role facilitating Edelman’s alleged criminal tax conspiracy,” Wyden, an Oregon Democrat, said in the letter sent Wednesday to UBS Chief Executive Officer Sergio Ermotti.

US Probe

Wyden’s letter came as the Justice Department investigates whether Credit Suisse helped Americans hide assets from the IRS despite pledging to end the practice a decade ago. In a high-profile case, Credit Suisse pleaded guilty in 2014, paid $2.6 billion and admitted it helped thousands of Americans evade taxes. 

Under the plea deal, Credit Suisse agreed to identify undeclared accounts to the IRS. Last year, Wyden’s committee said that since 2014, the bank identified “thousands of previously undeclared accounts” valued at more than $1.3 billion. That included about two dozen with accounts of $20 million or more.

A spokesperson for UBS, which completed its acquisition of Credit Suisse last year, declined to comment. The Zurich-based bank has said that it was cooperating with US authorities on identifying potentially undeclared US assets held by Credit Suisse clients.

US-based attorneys for Edelman and Le Dain declined to comment. A Justice Department spokesman also declined to comment. 

In his letter, Wyden asked Ermotti for “an updated number of previously undeclared accounts and the value of those accounts.” It also asked Ermotti to “explain in detail what actions Credit Suisse employees took in relation to Edelman’s accounts upon learning that Edelman had failed to disclose his accounts to US authorities, as required by US law.”

Edelman was the half-owner of defense contracting businesses Mina Corp. and Red Star Enterprises that supplied fuel to the US after the Sept. 11 attacks, the US said. The 43-page indictment alleges that Edelman engaged in elaborate efforts to hide his profits from the IRS by using undisclosed foreign bank accounts, false documents and phony statements.

He falsely said his wife, a French citizen, owned the companies, repeating this account to a congressional subcommittee in 2010, the Defense Department, the IRS and the Justice Department, according to prosecutors.

Chalet, London Townhouse

Edelman moved his money to Switzerland, the Bahamas, Singapore and the United Arab Emirates, while creating entities in Panama, Belize and the British Virgin Islands to hide his assets, the US charged. Using the names of others, he bought yachts, a Spanish house, an Austrian ski chalet and a London townhouse, according to prosecutors.

Between 2005 and 2008, Edelman held accounts at Credit Suisse. In 2008, the bank told his accountant that because of increased US scrutiny of offshore tax evasion, he had to close his account and move his money or disclose his assets to US authorities, according to the indictment.

Edelman moved his funds to another Swiss bank. Under the plea agreement, Credit Suisse had to disclose all undeclared US accounts closed and transferred from August 2008 to May 2014. Disclosing those account holders, known as “leaver lists,” was a US requirement for Credit Suisse, several other Swiss banks that faced criminal charges, and 80 Swiss banks that made deals to avoid prosecution.

In his letter, Wyden asked whether Credit Suisse was aware that Edelman was allegedly concealing his accounts from the US and aided him in moving the funds.

In March, a Brazilian-American businessman, Dan Rotta, was indicted for allegedly using Credit Suisse, UBS and other Swiss banks to hide more than $20 million in assets from US tax authorities over 35 years. Rotta was charged in Miami with hiding assets from the IRS in two dozen secret Swiss accounts between 1985 and 2020. Rotta pleaded not guilty and denies wrongdoing. 

(Updates with Justice Department response in second section.)

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