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US: UBS Executive Indicted in U.S. Inquiry


by LYNNLEY BROWNINGThe New York Times
November 12th, 2008

A senior Swiss executive at the banking giant UBS has been indicted in an investigation of the bank and its offshore private banking services for wealthy Americans, federal prosecutors said on Wednesday.

The executive, Raoul Weil, oversaw UBS’s lucrative cross-border private banking operations from 2002 to 2007.

In a move that could spell bigger trouble for UBS, the indictment also referred to unindicted co-conspirators who “occupied positions of the highest level of management within the Swiss bank.” The individuals, the document said, sat on committees that oversaw legal, compliance, tax, risk and other issues. The indictment also referred to unindicted senior bankers, and the managers and “desk heads” who oversaw them.

Prosecutors for the United States attorney’s office in the Southern District of Florida charged Mr. Weil with conspiracy, contending that he allowed American clients to evade taxes by hiding assets overseas in accounts that went undeclared to the Internal Revenue Service.

The Justice Department contends that UBS, which is based in Zurich and has large operations in the United States, illegally helped up to 20,000 American clients hide $20 billion in offshore accounts, thereby evading $300 million a year in taxes from 2000 to 2007.

The indictment said that up to 17,000 clients of UBS illegally concealed their names and control of cross-border accounts from the I.R.S. The indictment named up to 20,000 American clients as unindicted co-conspirators, reflecting a new strategy by the Justice Department to tackle the consumers of abusive offshore deals.

Mr. Weil resigned immediately. In a statement, UBS said that “Mr. Weil has determined that, in the interest of the firm and its clients, and in order to defend himself, he will relinquish his duties at this time pending the resolution of this matter.” On an interim basis, Marten S. Hoekstra, the deputy chief executive of global wealth management and business banking and head of wealth management for the United States, will assume Mr. Weil’s duties, the statement said.

A lawyer for Mr. Weil, Aaron R. Marcu of Covington & Burling, said in a statement that the indictment was “totally unjustified and without any factual basis. Mr. Weil denies any suggestion that he was aware of, engaged in or tolerated any illegal conduct in the operation of UBS’s U.S. cross-border business.”

The indictment significantly ramps up the pressure on UBS, which is under scrutiny both in the United States and in Europe over whether it has helped clients evade taxes by hiding money in offshore accounts. The bank is struggling to preserve its centuries-old tradition of Swiss banking secrecy amid the scrutiny.

The indictment is the second in the case. In May, Bradley C. Birkenfeld, an American who was a senior private banker at UBS, was accused of helping a UBS client evade taxes through undeclared offshore accounts. He pleaded guilty in June and is cooperating with prosecutors in their investigation. Mr. Birkenfeld is expected to be sentenced to in January.

The offshore banking services brought in annual revenue of $200 million before UBS said it shut them down this year.

Mr. Weil, who turns 49 on Thursday, was the head of UBS’s wealth management business, which included the United States cross-border business now under scrutiny. He was promoted in July 2007 to chief executive of a UBS division that oversaw the United States cross-border business and worldwide private banking.

The bankers, managers and desk heads identified as co-conspirators helped American clients hide assets by preparing forms called W8-BENs that made it look as if offshore entities, and not the clients, held the assets. The clients also failed to file I.R.S. disclosure forms that are required if they have an interest in foreign financial accounts worth more than $10,000.

One unnamed manager referred clients in 2000 to outside lawyers and accountants to set up illegal offshore entities with UBS. Another manager told clients worried about being caught by the I.R.S. that UBS “would not be pressured” to disclose clients’ identities.

Mr. Weil, the indictment said, referred to the private banking business he oversaw as “toxic waste,” because he knew that UBS was flouting United States tax and securities laws as well as a special agreement between the bank and the I.R.S. Mr. Weil, the indictment said, instructed bankers to expand the private banking business even as it was coming under federal scrutiny.

Letters reviewed by The New York Times in August showed that senior executives were alerted at least three years ago to possible violations of securities laws in dealings with American clients of its private bank. The letters cast a spotlight on the senior executives who were copied on them, including Marcel Rohner, who led the bank’s global wealth management unit and has been chief executive since 2007, and Peter Kurer, the bank’s former top lawyer, who is now its chairman.





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