tax notes international - Tuck School of Business - Dartmouth College

HIGHLIGHTS
U.S. Widens Investigation of
Swiss Bank
by Randall Jackson
U.S. prosecutors reportedly are expanding their investigation
of the actions of UBS AG, the Swiss banking
giant that has been accused of helping its U.S. clients
conceal taxable assets.
Officials are looking into the possibility that the
bank helped tens of thousands of U.S. taxpayers hide
income in offshore accounts. New evidence reportedly
has led investigators to believe that the original estimate
that UBS helped about 17,000 U.S. residents
evade taxes may be too low and that thousands of previously
unknown accounts may exist.
Investigators now are looking into whether previously
unidentified investment vehicles may have been
used and whether divisions of the bank in addition to
the previously targeted wealth management section
may have been involved, according to a January 26
Wall Street Journal report.
The talk of additional illegal activity comes close on
the heels of a January 13 order declaring former UBS
official Raoul Weil a fugitive. Weil failed to surrender
to U.S. authorities after the November 12, 2008, unsealing
of an indictment charging him with conspiring
to defraud the U.S. government. (For prior coverage,
see Tax Notes Int’l, Jan. 26, 2009, p. 307, Doc 2009-856,
or 2009 WTD 10-1.)
Weil was head of the international portion of UBS’s
wealth management division from 2002 to 2007 and
was appointed chair and CEO of the bank’s global
wealth management and business banking division on
July 6, 2007.
Peter Kurer, who was appointed chair of UBS on
April 23, 2008, told investors in a January 15 presentation
that the bank’s key goals for 2009 include reaching
a settlement with the U.S. Justice Department and ensuring
the ‘‘recovery of UBS’s reputation,’’ according
to the Wall Street Journal report.
UBS is at the center of both criminal and civil investigations
in the United States and reportedly is hoping
to avoid felony indictments through ongoing talks with
the Justice Department. Unnamed sources close to the
discussions say UBS officials have offered to confess to
criminal activity and pay a fine in the neighborhood of
$1.2 billion as part of a deal.
In the civil case, the Justice Department and the
IRS reportedly are contemplating an additional, perhaps
more comprehensive, summons aimed at forcing
UBS to turn over the names of American account
holders. On July 1, 2008, a federal judge in Miami issued
a John Doe summons requiring the bank to disclose
the U.S. account holders’ names. However, UBS
has thus far failed to comply.
Unnamed individuals involved in the case say UBS’s
best hope appears to be a resolution of the criminal
case while the civil case continues. Furthermore, any
deal is likely to be between the U.S. government and
UBS, and will not include the American taxpayers allegedly
involved.
‘‘It’s my impression that whatever the settlement is
between the bank and the U.S. government, this will
not legally impact the taxability or non-taxability of
the bank’s customers,’’ William M. Sharp Sr., a Tampa
tax attorney with UBS clients, said in the Journal report.
The criminal case has proven particularly damaging
to UBS as it tries to cope with the global financial crisis.
In October 2008 the bank reportedly required a $60
billion bailout from the Swiss government to stay
afloat.
♦ Randall Jackson is a legal reporter with Tax Notes
International. E-mail: rjackson@tax.org
380 • FEBRUARY 2, 2009 TAX NOTES INTERNATIONAL
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