US: UBS Executive Indicted in U.S. Inquiry

Publisher Name: 
The New York Times

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.

AMP Section Name:Financial Services, Insurance and Banking