NY AG sues banking giant UBS for securities fraud

[Fade]

NY AG sues banking giant UBS for securities fraud
By DAVID B. CARUSO
Associated Press Writer

NEW YORK (AP) - New York Attorney General Andrew Cuomo sued banking giant UBS for fraud Thursday, accusing the company of marketing tens of billions of dollars of auction-rate securities as safe even when they knew the investments were in trouble. The civil lawsuit claims bank executives pulled their personal investments from the floundering market last winter when they realized a crisis was brewing but continued to tell customers all was well.

"They knew what was happening to the market," said Cuomo deputy Eric Corngold. "Buyers of these securities didn't have a clue."

Story continued.... (http://www.breitbart.com/article.php?id=D924DIHO0&show_article=1&catnum=0)

[deagle]

isn't UBS also allowing for money laundering or other accounts that IRS can't touch also ??

[Macs.]

isn't UBS also allowing for money laundering or other accounts that IRS can't touch also ??

It's Swiss banking law.

[delio]

It's Swiss banking law.

Since they operate in the United States, UBS and its employees generally have to follow American laws, rules and regulations in their dealings with American clients..

[Winger]

I hope those execs get what they deserve if they are truly guilty. Penalties need to be stiffer when this kind of money is in play.

[delio]

Not sure about New York's case against it, but UBS had just made a big settlement with the Federal government, ...


UBS to Pay $780 Million to Settle Tax Case (http://www.nytimes.com/2009/02/19/business/worldbusiness/19ubs.html?hp)



http://www.nytimes.com/2009/02/19/business/worldbusiness/19ubs.html?hp
By LYNNLEY BROWNING (http://query.nytimes.com/search/query?ppds=bylL&v1=LYNNLEY%20BROWNING&fdq=19960101&td=sysdate&sort=newest&ac=LYNNLEY%20BROWNING&inline=nyt-per)
Published: February 18, 2009

In the hush-hush world of Swiss banking, the unthinkable is happening: secrets are spilling into the open.


UBS (http://topics.nytimes.com/top/news/business/companies/ubs_ag/index.html?inline=nyt-org), the largest bank in Switzerland, agreed on Wednesday to divulge the names of well-heeled Americans whom the authorities suspect of using offshore accounts at the bank to evade taxes. The bank admitted conspiring to defraud the Internal Revenue Service (http://topics.nytimes.com/top/reference/timestopics/organizations/i/internal_revenue_service/index.html?inline=nyt-org) and agreed to pay $780 million to settle a sweeping federal investigation into its activities.

It is unclear how many of its clients’ names UBS will divulge. Federal prosecutors have been examining about 19,000 accounts at the bank, but UBS ultimately may disclose the identities of only a few hundred customers.

But to some, turning over any names at all heralds the end of the secret Swiss bank account, whose traditions date to the Middle Ages.

“The Swiss are saying that this is the end of Swiss banking as they knew it,” said Jack Blum, an offshore tax specialist. “Nobody will trust the security of the Swiss bank account.”

As part of the settlement, UBS agreed to cooperate with a broad summons issued by the Justice Department to turn over the names. Under the terms of a so-called deferred prosecution agreement, the bank and its executives could be indicted if UBS didn’t identify the customers.
...
Prosecutors suspect that from late 2002 to 2007, UBS helped American clients illegally hide $20 billion, letting them evade $300 million a year in taxes.

In a striking admission, UBS said that from 2000 through 2007, some of its private bankers and managers had “participated in a scheme to defraud the United States” and the I.R.S. by helping American clients set up and conceal offshore accounts. The scheme involved falsifying or not properly obtaining or filing certain tax forms required of both the bank and its clients.

UBS’s offshore private banking business once employed some 60 private bankers in Lugano, Zurich and Geneva. Prosecutors claimed UBS referred clients to lawyers and accountants who set up secret offshore entities to conceal assets from the I.R.S.

UBS urged some American clients to destroy records and to stash watches, jewelry and artwork that they had bought with money hidden offshore in safe deposit boxes in Switzerland. The bank also encouraged them to use Swiss credit cards so the I.R.S. could not track purchases. In a statement on Wednesday, Peter Kurer, the chairman of UBS, said that “UBS sincerely regrets the compliance failures in its U.S. cross-border business that have been identified by the various government investigations in Switzerland and the U.S., as well as our own internal review. We accept full responsibility for these improper activities.”

Marcel Rohner, the group chief executive of UBS, said in a statement that “it is apparent that as an organization we made mistakes and that our control systems were inadequate.”

In January a senior UBS executive, Raoul Weil, was declared a fugitive, two months after being indicted by a federal judge in connection with the investigation of the bank. Mr. Weil, a Swiss citizen, oversaw the cross-border private banking operations from 2002 to 2007.

UBS had fiercely resisted turning over the names, even after some executives were indicted and implicated in the offshore private banking business. Swiss law distinguishes broadly between tax avoidance, tax evasion and tax fraud. Unlike in the United States, tax evasion is not a criminal offense under Swiss law.

The move by UBS to settle the case, on the eve of a Senate subcommittee hearing next Tuesday on the matter, signals how close the bank came to being indicted for not cooperating with prosecutors. Indictment is a near-certain death knell for corporations.

Of the $780 million that UBS will pay, $380 million represents disgorgement of profits from its cross-border business. The remainder represents United States taxes that UBS failed to withhold on the accounts. The figures include interest, penalties and restitution for unpaid taxes

As part of the deal, UBS also entered into a consent order with the Securities and Exchange Commission in which it agreed to charges of having acted as an unregistered broker-dealer and investment adviser for Americans.

The settlement caps a painful run for UBS, which suffered more than $50 billion in losses in the collapse of the American mortgage market and received a $60 billion bailout from the Swiss government last October.
The bank will not have to pay additional fines and penalties, which could have brought the deal to more than $1 billion.

People briefed on the issue said the banking crisis and the recession were factors in this decision by prosecutors.

[LineDoggie]

It'a Andrew Cuomo, He is Like Schumer jr. trying to get in the press all the time.

[delio]

The Wall Street Journal has a more comprehensive article, ...

http://online.wsj.com/article/SB123499439400216483.html?mod=testMod#articleTabs%3Darticle

The agreement will settle the criminal investigation against the bank, but a civil case against UBS filed by U.S. tax authorities remains open. In that case, U.S. authorities have subpoenaed UBS to turn over 19,000 names of clients who Internal Revenue Service investigators believe used UBS's services to avoid taxes.

Under Wednesday's agreement, UBS acknowledged the subpoena, but has the option to challenge it. If the bank's legal challenges are unsuccessful and it still refuses to turn over the names, U.S. prosecutors might be able to pursue new criminal charges against the bank.
..
Prosecutors in Florida have indicted one former high-level UBS executive, Raoul Weil, on charges of helping Americans evade taxes and temporarily detained a second executive as a material witness. Both executives are believed to be back in Switzerland. A U.S. judge has declared Mr. Weil a fugitive after he failed to respond to charges.

Wednesday's settlement doesn't protect Mr. Weil and potentially other UBS executives -- and possibly outside consultants. They continue to face prosecution. Mr. Weil's lawyer, Aaron R. Marcu, said in a statement late Wednesday, his client was an "innocent victim" of a political dispute between the U.S. and Switzerland. Mr. Marcu added that Mr. Weil told employees to follow Swiss and U.S. law.

Mr. Birkenfeld, the former UBS executive who tipped off U.S. officials, has pleaded guilty to the same charge of abetting tax evasion, and is helping the IRS and the Justice Department.

[0rphie]

I am afraid that what we are witnessing here is the demise of the Swiss banking empire. Who is going to entrust faithfully stolen capital to the Swiss when they can rat you out anytime?

[BearInBunnySuit]

I am afraid that what we are witnessing here is the demise of the Swiss banking empire. Who is going to entrust faithfully stolen capital to the Swiss when they can rat you out anytime?

Heh, that's what I was thinking too. Where will the dictators and despots go to to squirrel away their ill-gotten billions now?

[Macs.]

Heh, that's what I was thinking too. Where will the dictators and despots going to squirrel away their ill-gotten billions now?

Dubai and Co.

The Swiss banking system these days is much "cleaner" than many people want to make it look.

And they simply have other laws.

[delio]

Pressure Builds on UBS Over Secrecy

U.S. Officials Vow Tough Action On Tax Havens



By David S. Hilzenrath
Washington Post Staff Writer
Thursday, March 5, 2009; D01


The chairman of Switzerland's largest bank announced yesterday that he is stepping down, less than two weeks after the banking giant UBS admitted it defrauded the U.S. government by helping American clients evade taxes.

Meanwhile in Washington, a Senate investigative panel increased the pressure on UBS to reveal client secrets, and other leaders vowed new efforts to combat bank secrecy.

Testifying on Capitol Hill, Treasury Secretary Timothy F. Geithner promised "a much more ambitious effort to deal with offshore tax havens."

Addressing a joint session of Congress, British Prime Minister Gordon Brown called for a global ban on "shadow banking systems." Brown urged that G-20 nations tackle the issue at an April summit in London.
UBS's $780 million settlement with the U.S. government last month enabled the bank to avoid a potentially crippling criminal prosecution, at least temporarily. But yesterday's developments underscored that the settlement resolved relatively little and served largely to set the stage for broader battles.

The stakes are high all around. For the United States, Britain and other like-minded nations, it's about collecting sorely needed tax revenue and holding tax cheaters accountable.

For Switzerland, it's about preserving the cornerstone of its economy, an approach to banking that attracts deposits from around the world.

Under the settlement, the Swiss gave the U.S. government information about 250 to 300 American clients, the Swiss president has said.

That concession provoked protests from bankers and others in Switzerland who fear it could shatter confidence in the nation's banks.

UBS made no explicit mention of the settlement in a news release yesterday announcing that Peter Kurer won't stand for reelection as chairman next month. The statement credited Kurer with addressing another problem, the global banking crisis. UBS has suffered heavy losses on mortgage-related investments.
Kurer's departure follows the replacement last week of UBS's chief executive.

UBS clients have withdrawn a large volume of deposits; either they need their money or they no longer want to keep it at UBS.

At a Senate hearing yesterday, the focus was on secrets UBS still refuses to give up -- details about tens of thousands of accounts in which Americans' money was hidden from the IRS.

The U.S. government has sued UBS for release of that information in a federal court in Florida. If UBS ultimately loses the case and refuses to turn over the names, the Justice Department could proceed with the criminal prosecution that the settlement put on hold, and it could use UBS's admissions of wrongdoing as evidence.

Appearing before the Senate's permanent subcommittee on investigations, UBS executive Mark Branson said the bank has given up all the information it can about the clients in question "without subjecting its employees to criminal prosecution in Switzerland."

That did little to placate subcommittee Chairman Carl M. Levin (D-Mich.), who said the bank's conduct "amounts to a declaration of war . . . against honest, hardworking taxpayers."
From 2000 to 2007, UBS failed to withhold about $220 million in U.S. income taxes on about $20 billion of assets on deposit at the bank, said John A. DiCicco, acting assistant attorney general for the Justice Department's tax division.
Under the recent settlement, UBS admitted that it helped American taxpayers conceal their ownership of Swiss accounts. The bank referred clients to firms that set up sham companies to nominally hold title to the accounts.

As early as 1999, UBS recognized that its activities in the United States violated U.S. law, an IRS agent said in a recent court filing, citing an internal bank legal memo. Such activities "entail considerable risks for the Bank, because the Bank lacks the necessary license to provide these services," the memo said. The memo concluded that there were steps UBS could take to "at least dramatically reduce the risk of the SEC becoming aware of the activities of the Bank in the U.S. market."

In 2000, a law firm told UBS that advising clients to hide behind offshore companies "could be viewed as actively helping our clients to evade US tax, which is a U.S. criminal offence," according to an internal memo.
Bank documents brought to light in various investigations show that UBS employed elaborate subterfuges to operate covertly in the United States.

One UBS client adviser spelled out a "new code to facilitate discreet email contacts" in which a client requesting "2.5 orange nuts" was seeking 625,000 euros, according to a court filing.

To avoid detection by U.S. authorities, Swiss bankers traveling to the United States on client business were trained to use such precautions as switching hotels.

"In case of emergency"-- in other words, if detained by the authorities, according to the IRS agent's statement -- UBS bankers were told to contact a "security risk governance" hotline that was staffed 24 hours a day, seven days a week, an internal bank document shows.

"In case of interrogation by any authority . . . protect the banking secrecy," a September 2006 training document said.

Staff researcher Julie Tate contributed to this report.