February 5, 2012 in Featured
Swiss bank indictment details tax evasion ploys (USA Today):
It was a cool August Tuesday in 2007 when Swiss banker Urs Frei walked into a Manhattan restaurant for meetings with two U.S. clients. One of the clients carried an unmarked envelope containing $16,000 in cash.
For an extremely expensive lunch? Hardly.
For what a new federal indictment alleges was a secret rendezvous in a plot that enabled more than 100 wealthy Americans to evade federal taxes on at least $1.2 billion in assets hidden in foreign bank accounts.
Federal prosecutors in New York on Thursday announced criminal conspiracy charges against Wegelin & Co., Switzerland’s oldest bank; Frei, a client adviser in the bank’s Zurich branch, and two fellow bankers there.
Prosecutors separately used a civil forfeiture action to seize more than $16 million in Wegelin funds held in a correspondent account at Swiss banking giant UBS’ Stamford, Conn. location. Wegelin, which has no U.S. branches of its own, used that account for transactions with its American clientele.
The charges provide a rare inside glimpse at anti-spy maneuvers the well-heeled account holders and their bankers allegedly used in an effort to avoid detection and prosecution. The techniques included recruiting American clients via a website titled SwissPrivateBank.com, identifying the clients’ accounts only by numbers, by a special code marked “BNQ” or, in one case, by an “Elvis” pseudonym.
“It’s standard procedure for private bankers like this to go to extreme lengths to conceal their clients’ transactions. You hear stories about hiding money in ski poles or using phony names and things like that,” said George Clarke, a Miller & Chevalier law firm partner in Washington, D.C., who has represented clients with foreign accounts.
The charges, the first time a foreign bank has been indicted on charges of facilitating U.S. tax fraud, mark the latest escalation of a long-running Justice Department crackdown on offshore tax evasion that has shattered Switzerland’s vaunted tradition of banking secrecy. UBS in 2009 paid a $780 million settlement to avoid criminal prosecution on charges that its bankers helped thousands of American clients duck federal taxes.
Wegelin Indictment Heightens Swiss Bankers’ Nerves (Reuters):
The first indictment of a Swiss private bank over hiding untaxed money for wealthy Americans has heightened tension among private bankers fearful of being next in the firing line.
The United States has indicted St.Gallen-based Wegelin, the oldest Swiss private bank, on charges it enabled Americans to evade taxes on at least $1.2 billion in offshore bank accounts.
The indictment, which was announced by the U.S. Justice Department on Thursday, set Wegelin rivals in Zurich and Geneva buzzing on Friday, highlighting the fear of another U.S. strike against a private bank.
“It seems the U.S. is shooting at everything in sight and we don’t know when it’s going to stop. I think the chances of another bank being indicted are pretty big,” a Geneva private banker said.
“After all, why should the U.S. stop? Switzerland is small, it’s an easy target, but a lot of money can be made out of it. When this whole thing started we didn’t know how far the U.S. would go, but now we’ve found out.”
Switzerland’s finance department, foreign ministry, regulator Finma, banking lobby and finance ambassador SIF were silent on the indictment of Wegelin.
Wegelin itself, founded in 1741 and run by loquacious and gregarious private banker Konrad Hummler, also didn’t comment.
The threat of imminent U.S. indictment, seen as the kiss of death for businesses, drove Wegelin to sell itself last week.
The indictment is the culmination of months of uncertainty for private bankers, many of whom won’t travel to the United States, even for personal reasons, for fear of being arrested.
Several Wegelin rivals chided Hummler for “bringing on the indictment himself” through repeated verbal swipes at U.S. officials as they began cracking down on offshore centers like Switzerland. Unusually outspoken among banking peers who typically prefer to blend in and live and work in relative obscurity, Hummler courted press attention, which he successfully translated into business for Wegelin.
However, he did not fear irking U.S. authorities repeatedly. Justice officials were annoyed by a “farewell, America” letter he wrote to Wegelin clients in 2009, in which Hummler urged clients to sell any U.S. securities they owned given heightened Internal Revenue Service scrutiny of tax dodgers, according to people briefed on the matter.
Related Material From the Archive:
- Wegelin & Co. Swiss Bank Aiding U.S. Tax Evasion Indictment
- UBS to hand over names of 4,450 clients to U.S.
- Rothschild Bank AG Zurich Annual Report 2008/2009
- Robert Allen Stanford Indictment
- Tax Havens: International Tax Avoidance and Evasion
- Deutsche Bank set to take Sal. Oppenheim stake
- Regulators close 132nd U.S. bank so far this year
- Swiss Authorities Investigate Money Laundering Linked to Russian Tax Fraud Scheme