Swiss Banker Charged With Conspiring in Massive Tax Fraud

The Justice Department today announced that a senior Swiss banker has been indicted on charges of conspiring to defraud the U.S. government by helping about 20,000 U.S. clients hide $20 billion in assets from the Internal Revenue Service.

The indictment of Raoul Weil alleged that he conspired with a host of others at his bank, overseeing a business that employed encrypted laptops, numbered accounts and counter-surveillance techniques to help American clients conceal their identities and evade taxes.

Weil oversaw the bank’s cross-border business that catered to U.S. clients, generating about $200 million a year in revenue for the bank, the Justice Department said in a news release.

The announcement did not name the bank, describing it only as a large Swiss bank with offices worldwide.

A report on UBS’s Web site says an executive name Raoul Weil was head of UBS’s wealth management international business between 2002 and 2007. The indictment says the Raoul Weil charged in the case was head of the unnamed Swiss bank’s wealth management business from 2002 through 2007.

Weil was named chairman and chief executive of UBS’s global wealth management and business banking operations in 2007, the UBS site said.

Other bank executives “at the highest levels of management” are unindicted co-conspirators, according to the indictment.

The action announced today is part of a larger clash between the U.S. government and the tradition of secrecy that has been central to Switzerland’s lucrative banking industry.

UBS, which is Switzerland’s largest bank and has extensive operations in the United States, has been the focus of multiple investigations related to accounts held by Americans at its offices in Switzerland. The Justice Department, the IRS and the Securities and Exchange Commission have been probing a variety of issues, including whether UBS helped Americans dodge taxes, whether UBS fulfilled its obligation to withhold taxes when American clients sold certain investments, and whether UBS bankers from Switzerland catered to clients in the United States without registering to do business here, according to a recent UBS report.

UBS spokesman Mark Arena said by e-mail that the firm had received a request for comment from The Washington Post and was working on a response.

U.S. authorities also are looking at dozens of Americans suspected of holding Swiss accounts that they have not declared to the Treasury or the Internal Revenue Service. Failing to disclose the accounts can be a federal crime, as can failing to pay taxes on income earned by the accounts. Government officials suspect citizens have used Swiss accounts to deprive the U.S. Treasury of considerable tax revenue.

The government has been pressing the Swiss to turn over the names of an estimated 19,000 Americans who hold secret accounts with UBS in Switzerland. Swiss law generally prohibits such disclosure unless there is evidence the individual committed a crime such as tax fraud, and the Swiss definition of tax fraud does not include the mere failure to report income; it requires a more elaborate deception.

UBS recently gave the IRS, the Justice Department and the Manhattan district attorney’s office the names of about 70 American clients who have accounts with UBS in Switzerland and have not filled out so-called W-9 forms authorizing UBS to disclose information about their accounts to the IRS, a source with access to information about the matter said.

The information UBS provided on those clients related to wire transfers from their UBS accounts in the United States to their UBS accounts in Switzerland, the source said. The clients were not given a chance to object to the disclosure — a right they would have had if the information were coming from Switzerland, the source said. The source spoke on condition of anonymity to avoid potentially adverse consequences of speaking openly.

Asked for comment on the disclosures, a UBS spokesman drew a distinction between information available in the United States and information kept in Switzerland. “Client data located in Switzerland has not been provided to the U.S. authorities,” bank spokesman Michael Willi said.

In addition to information from UBS, federal investigators have obtained the names of about 30 Americans with undeclared accounts at UBS in Switzerland from other parties, a source close to the case said, speaking on condition of anonymity because of the information’s sensitivity.

The U.S. government has probed UBS with help from two key American sources: billionaire real estate developer Igor M. Olenicoff, who was a client of the bank, and former UBS employee Bradley Birkenfeld, whose job involved promoting Swiss accounts to wealthy Americans such as Olenicoff.

Olenicoff pleaded guilty last year to filing a false tax return. Birkenfeld pleaded guilty in June to helping Olenicoff evade $7.2 million in taxes by hiding $200 million of assets in Switzerland and Liechtenstein.

Birkenfeld told the U.S. government that UBS helped wealthy Americans conceal their ownership of Swiss accounts, according to court records. For example, UBS allegedly helped Olenicoff form a Bahamian corporation to hold title to an account in which he placed $60 million and ownership of a 147-foot yacht, according to a federal court filing.

Birkenfeld was one of 40 to 50 Swiss-based UBS bankers who periodically traveled to the United States to cater to American clients, typically carrying information about the clients’ portfolios on encrypted computers, according to the filing. As Birkenfeld told the government, UBS trained its Swiss-based private bankers to avoid detection by falsely stating that they were entering the United States for pleasure rather than business.

At the request of one client, Birkenfeld used funds from the client’s Swiss account to buy diamonds. Then, Birkenfeld smuggled the diamonds into the United States in a tube of toothpaste, according to a statement of undisputed facts filed in connection with his plea.

Others with inside knowledge of the bank also are assisting investigators, a source close to the case said, speaking on condition of anonymity because of the information’s sensitivity.

The investigations are already having a chilling effect on people with secret overseas accounts. Lawyers who specialize in tax cases say they have been approached by many new clients worried that the government will gain access to their accounts. The lawyers said clients not already under federal scrutiny may be able to come clean with the government and avoid the most serious consequences.

Staff researcher Julie Tate contributed to this report.

By David S. Hilzenrath
Washington Post Staff
Wednesday, November 12, 2008; 2:51 PM

Source: The Washington Post

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