February 20, 2009
UBS Pressed for 52,000 Names in 2nd Inquiry
By LYNNLEY BROWNING
NY Times


The UBS memo was blunt: the “Swiss solution” could help affluent Americans.

That message, sent to the bank’s executives in July 2004, referred to a
UBS plan to help rich customers evade taxes by hiding money in offshore
havens like the Bahamas.

The memo, along with dozens of e-mail messages like it, were disclosed
on Thursday in a blistering court document filed by the Justice
Department, which sought to compel UBS, based in Switzerland, to divulge
the identities of 52,000 Americans whom the authorities suspect of using
secret offshore accounts at the bank to dodge taxes.

The move opened a new, unexpected front against UBS, which a day earlier
had agreed to pay $780 million to settle claims that it defrauded the
Internal Revenue Service, and against Switzerland’s long tradition of
banking secrecy.

The number of clients the authorities are seeking to identify is far
higher than previously believed, raising new questions about the scale
of UBS’s activities and the number of Americans who could be snared in
the investigation. Federal authorities initially focused on 19,000
accounts, and UBS turned over about 250 names on Wednesday. That figure
now seems certain to grow.

The court document alone dealt a stinging blow to UBS, whose corps of
private bankers discreetly tend the fortunes of billionaires and
multimillionaires. Filed in a Miami court, the papers provide a rare
inside look at the secretive ways of Swiss banking.

The 2004 memorandum, for instance, described how UBS created hundreds of
“dummy” offshore corporations where its clients could hide money from
the I.R.S. An e-mail message sent that year captured some of the coded
language used by UBS bankers. In their world, “one nut” meant $250,000,
while “one swan” meant $1 million. Colors were used to designate certain
currencies. Orange, for example, represented the euro; blue, the British
pound. Several messages described UBS actively referring clients to
outside lawyers and accountants in Switzerland and elsewhere who set up
secret accounts for them.

In a brief interview on Thursday, one UBS client said the bank also
provided wealthy clients with electronic devices with coded computer
chips that enabled them to gain access to their accounts and transfer
money secretly. The passwords changed each time the accounts were accessed.

In the criminal investigation that led to this week’s settlement, the
Justice Department had zeroed in on about 19,000 wealthy Americans.
Those UBS customers had a combined $20 billion in assets at the bank,
and may have evaded $300 million a year in federal taxes through UBS’s
undeclared offshore private banking services.

But the I.R.S. has been conducting a parallel investigation, and on
Thursday the Justice Department asked a federal judge to require UBS to
disclose to the I.R.S. the identities and records of the 52,000 clients.
In the past, UBS has suggested that the 19,000 accounts under
investigation, which it is now closing, were the extent of its
undeclared offshore banking services.

UBS, the world’s largest private bank, said it would vigorously
challenge the efforts.

As part of Wednesday’s settlement, the Justice Department received the
names and bank records of about 250 wealthy American clients of UBS.
According to people briefed on the matter, the department was preparing
to indict several on charges of offshore tax evasion. A Florida federal
judge is expected to approve the enforcement request in three to six
months, which allows UBS time to appeal and ask for extensions.

If UBS does not comply with the approved summons, it could be in default
of its deferred prosecution agreement, potentially opening itself and
its senior executives to indictment.

Samuel Buell, who helped to prosecute Enron and now teaches criminal and
securities law at Washington University in St. Louis, said that UBS’s
declaration that it would fight the government’s latest efforts
suggested the bank was caught in a bind. Federal prosecutors want it to
lift the veil of Swiss banking secrecy, but Swiss financial privacy laws
punish the disclosure of client names.

http://www.nytimes.com/2009/02/20/bu...gewanted=print
http://www.nytimes.com/2009/02/20/business/worldbusiness/20ubs.html?_r=1&hp=&adxnnlx=1235084414-RBbVDgzSaixxNaeu6P1i9w&pagewanted=print
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UBS...isn't that the bank on whose board sits Phil Gramm, former
Republican U.S. Senator from Texas and economic adviser to Sen. John McCain?

I wonder if this tax scam was Gramm's idea. Wouldn't surprise me.

On Fri, 20 Feb 2009 02:37:28 -0500, HK wrote:


As part of Wednesday’s settlement, the Justice Department received the
names and bank records of about 250 wealthy American clients of UBS.

Seems Swiss banking secrecy is already over, and I don't feel bad about
it at all.

thunder wrote:
On Fri, 20 Feb 2009 02:37:28 -0500, HK wrote:


As part of Wednesday’s settlement, the Justice Department received the
names and bank records of about 250 wealthy American clients of UBS.

Seems Swiss banking secrecy is already over, and I don't feel bad about
it at all.


It'll be interesting to see all the names and all the holdings and
finding out who the tax cheats are.

HK wrote:
thunder wrote:
On Fri, 20 Feb 2009 02:37:28 -0500, HK wrote:


As part of Wednesday’s settlement, the Justice Department received the
names and bank records of about 250 wealthy American clients of UBS.

Seems Swiss banking secrecy is already over, and I don't feel bad
about it at all.


It'll be interesting to see all the names and all the holdings and
finding out who the tax cheats are.

You can see them by looking at Obama's cabinet and his other political
appointments.

thunder wrote:
On Fri, 20 Feb 2009 02:37:28 -0500, HK wrote:


As part of Wednesday’s settlement, the Justice Department received the
names and bank records of about 250 wealthy American clients of UBS.

Seems Swiss banking secrecy is already over, and I don't feel bad about
it at all.


Also, the chairman of Bank of America has been summoned for a parley:

(CNN) -- Bank of America CEO and Chairman Kenneth Lewis has been issued
a subpoena by the New York State Attorney General's Office, which is
investigating whether the bank violated state law by withholding
information from investors, a source familiar with the investigation
told CNN.

Kenneth Lewis is the CEO and chairman of Bank of America, the nation's
largest bank.

Attorney General Andrew Cuomo has been highly critical of Wall Street
firms in general and Merrill Lynch in particular for the way they have
conducted themselves in the midst of a financial crisis.

Last week, he accused Merrill Lynch, which was acquired by Bank of
America late last year, of secretly doling out big bonuses before
reporting a huge quarterly loss.

"Merrill Lynch's decision to secretly and prematurely award
approximately $3.6 billion in bonuses, and Bank of America's apparent
complicity in it, raise serious and disturbing questions," Cuomo wrote
in a letter to Rep. Barney Frank, D-Massachusetts, chairman of the House
Committee on Financial Services.

In his letter to Frank, Cuomo said Merrill gave bonuses of at least $1
million each to 696 employees, with a combined $121 million going to the
top four recipients. The next four recipients were awarded a total of
$62 million, and the next six received $66 million, he said. In all, the
bonuses for 2008 totaled $3.6 billion.

"While more than 39,000 Merrill employees received bonuses from the
pool, the vast majority of these funds were disproportionately
distributed to a small number of individuals," Cuomo wrote. "Indeed,
Merrill chose to make millionaires out of a select group of 700 employees."

The attorney general said Merrill "awarded an even smaller group of top
executives what can only be described as gigantic bonuses."

- - -


Capitalism at its best.