US tax evasion case implicates Swiss bank

UBS said it was treating the investigations with the "utmost seriousness" Diederich

A tax evasion probe in the United States is investigating suspicions that Swiss bank UBS illegally helped American clients dodge duties on their wealth.

A former UBS banker is poised to plead guilty to tax fraud next week and give a “full confession” to a US court. Such revelations could damage UBS’s position in the US and break Swiss banking secrecy laws.

The ex-UBS employee was arrested last month and charged with helping an American real estate developer to evade taxes. The accused originally denied the offence, but indicated last week that he would change his plea on June 9 and cooperate with prosecutors.

The American citizen left UBS in 2006 and now lives in Switzerland and works for a Geneva-based private bank. His lawyer stated in court that he was ready to give information to the US authorities about former clients that would violate Swiss law.

A top UBS executive was also arrested last month as a material witness in the case and released on bail provided he did not leave the country. The US authorities also released a warrant for the arrest of a Liechtenstein businessman who has so far not been tracked down.

The US Department of Justice and the financial regulatory body, the Securities and Exchange Commission, are also investigating cross border services provided by Swiss-based UBS staff to American clients between 2000 and 2007. These investigations are not directly linked to the tax evasion criminal case.

Looking the wrong way?

UBS said in a statement that it was “treating these investigations with the utmost seriousness and has committed substantial resources to cooperate with both investigations”.

“UBS intends to appropriately and responsibly address and correct any issues raised in the investigations,” the statement continued.

The bank would not comment on the ongoing criminal case against its former employee.

The Swiss government is following the investigations into UBS and the Swiss ambassador to the US, Urs Ziswiler, has been in contact with the authorities concerning the matter.

However, Professor Hans Geiger of Zurich University’s Swiss Banking Institute told swissinfo that the US was turning over the wrong stones.

“The average US citizen does not evade taxes, and if so, they do not come to Switzerland. If we are a tax haven, then it is for Europe and the Middle East, not the US,” he said.

“UBS has more employees in the US than in Switzerland so it has tried hard to comply with regulations and to be a good citizen. One person or another may make mistakes, but the bank systematically looks to operate correctly.”

Tax havens

Swiss law does not recognise tax evasion as a criminal offence and banks are only obliged to cooperate with the investigators of other countries if fraud can first be proved.

This makes Switzerland, along with other states, a prime location for the wealthy to park their assets under the radar of their home tax agencies.

However, Switzerland negotiated a deal with the US in 2001 that allowed its banks to manage the wealth of American clients on US soil only if they named such individuals to the tax authorities.

Tax havens fell under the spotlight in February when a German investigation found evidence of Switzerland’s neighbour, Liechtenstein, encouraging its citizens to evade taxes. But Swiss bankers and politicians have rigorously defended the Swiss system.

swissinfo, Matthew Allen with agencies

Tax evasion case

In December 2007, an American billionaire property developer admitted filing a false tax return and had to pay $52 million (SFr54 million) in backdated taxes.

In April of this year, a top UBS executive was detained in the US as a material witness in a tax evasion investigation probe.

On May 14, two people (a former UBS employee and a Liechtenstein businessman) were charged by the US authorities with helping an American billionaire avoid paying taxes on $200 million of assets deposited in Swiss and Liechtenstein bank accounts.

They are accused of creating fictitious trusts and companies to conceal the identity of their client from the US tax authorities.

The Liechtenstein businessman has so far evaded the US authorities. The indictment also charged “others known and unknown” with the same offences.

The ex-UBS banker indicated on May 29 said that he would change his plea to guilty at a court hearing on June 9. His lawyer also stated that he would provide the US prosecutors with details of his actions.