Swiss banking giant UBS AG
The settlement announced on Wednesday further cracks Switzerland's trademark bank account secrecy and could expose some UBS customers to Internal Revenue Service scrutiny and law enforcement action.
Justice Department officials said Switzerland's largest bank had entered what is known as a deferred prosecution agreement on charges of conspiring to defraud the United States by impeding the IRS, the U.S. tax collection agency.
Officials described the agreement as one of the biggest settlements ever. It eclipses a $456 million pact in 2005 with accounting firm KPMG over the promotion of tax shelters.
Under the settlement, UBS admitted to helping U.S. taxpayers hide accounts from the IRS.
About 17,000 of 20,000 U.S. cross-border clients concealed their identities and the existence of their accounts, with $20 billion in assets, from the IRS, the Justice Department said. Some of these clients are unindicted co-conspirators.
We accept full responsibility for these improper activities, Peter Kurer, chairman of UBS, said in a statement.
The Justice Department did not say how many names of UBS clients would be filed under U.S. court seal. But Swiss newspaper, Le Temps, said in an article on its website on Wednesday, that the data would involve about 250 clients.
After 18 months the U.S. government will recommend dismissal of charges against UBS providing it honors the terms of the agreement.
The UBS charges and agreement represented the latest court developments in a long-running, high-profile investigation.
In January, the former head of UBS AG's wealth management business, Raoul Weil, was formally declared a fugitive after failing to surrender to U.S. authorities on charges of conspiring to help wealthy Americans hide assets from U.S. tax authorities.
A lawyer for Weil, Aaron Marcu, issued a statement expressing disappointment that Weil's indictment was not dismissed as part of Wednesday's settlement.
Mr. Weil is a highly respected banking executive in Switzerland who engaged in no misconduct. Indeed, following an extensive investigation, the Swiss Financial Market Supervisory Authority (FINMA) expressly found in a report released today that there was no evidence that Mr. Weil was aware of or participated in any conspiracy to violate U.S. law, Weil's attorneys said in a statement.
The chairman of the U.S. Senate's investigations subcommittee welcomed the settlement as a tremendous breakthrough.
Efforts to tear away the offshore cloak of secrecy are gradually succeeding and will continue, said Sen. Carl Levin, a Michigan Democrat who worked to expose offshore tax schemes.
Ralph Cole, portfolio manager at Ferguson Wellman Capital Management in Portland, Oregon, who helps invest $2.2 billion, said the settlement was a modest positive for UBS.
It's a good thing to have this behind them, said Cole. But I think for most people, the concern with UBS was not these regulatory issues, it was more balance sheet items.
Under orders from Swiss market regulators, UBS agreed to immediately provide the U.S. government with the identities of, and account information, for certain U.S. customers.
UBS has also agreed to a speedy exit of the business of providing banking services to United States clients with undeclared accounts.
The agreement called for UBS to pay a total of $780 million in fines, penalties, interest and restitution and was accepted by a federal judge in Ft. Lauderdale, Florida.
It will be interesting to see what this means for them longer term with high net worth people. What does it mean to have a Swiss bank account now if your name can be turned over to the Feds? It was seen as a haven, but now it may not be that way, Cole said.
VEIL OF SECRECY
John DiCicco, acting assistant attorney general of the Justice Department's Tax Division, said in a statement, The veil of secrecy has been pulled aside and we will continue to aggressively pursue those who shirk their federal tax obligations or assist others in doing so.
Department officials cited the bank's willingness to acknowledge responsibility for its actions, its cooperation and remedial action so far and promised future cooperation and remedial action.
The U.S. Securities and Exchange Commission said that UBS will settle U.S. regulators' claims that it acted as an unregistered broker-dealer and investment adviser.
UBS' actions helped certain U.S. clients maintain undisclosed accounts in Switzerland and other foreign countries, which in turn enabled the clients to avoid paying tax obligations, the SEC alleged.
From 1999 through 2008, UBS acted as an unregistered broker-dealer and investment adviser to thousands of U.S. clients and offshore entities with U.S. citizens as beneficial owners, the SEC said.
The SEC also alleges that UBS conducted business through client advisers located primarily in Switzerland, who were not associated with a registered broker-dealer or investment adviser.