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Last Updated: Jul 21, 2008 - 9:49:38 AM |
The Newport regatta has always drawn America's moneyed class, and the
Art Basel show in Miami is hot on the nouveau riche circuit—making both
glitzy venues ideal for financial giants to prospect for new clients.
But UBS, one of the world's largest banks, had another goal in mind
when it shelled out money for the UBS Regatta Cup in Newport or the Art
Basel Art Fair in Miami, or performances in major U.S. cities by the
UBS Vervier Orchestra.
The European banking behemoth, according to findings to be released on
Capitol Hill Thursday, dispatched "advisers" to the 25 most-affluent
housing areas in the United States to chat up the very rich and
persuade them to deposit money in UBS accounts that could evade U.S.
taxes.
American money is a big lure for global banks, but sending foreign
bankers to make pitches is illegal. The report, done by the Senate
Permanent Subcommittee on Investigations, said the advisers
http://www.portfolio.com/images/site/icn/icon-popNote.gifUBS sent to
the U.S. were supplied with encrypted laptops and business cards that
didn't connect them to the bank's "wealth management" operation. The
secrecy also extended to the bank advising its troops to carry only
cryptic notes and spreadsheets with no names attached.
Some even got role-playing advice: "One morning you are intercepted by
an F.B.I. agent. He looks for some information about one of your
clients and explains to you that your client is involved in illegal
activities. Question 1: What would you do in such a situation? Question
2: What are the signs indicating that something is going on?"
The Senate subcommittee's report, which probed the bank’s operations
between 2000 and 2007, was released to mark the beginning of hearings
that will put on the spot several top UBS officials as well as a lineup
of U.S. tax evaders.
UBS is a star witness. The co-star of the report, Liechtenstein Global
Trust, owned by the royal family of that microstate tax haven, refused
to participate.
UBS ran its U.S. operation through desks in Geneva, Zurich, and Lugano
and managed accounts for some 19,000 American clients, collecting $18
billion to $20 billion in assets that were "undeclared" to the I.R.S.,
and that earned the bank $200 million in profits.
After a new agreement with Switzerland in 2001 required reporting of
U.S. citizens' accounts with U.S. securities to the I.R.S., UBS helped
250 Americans sell about $2 billion in U.S. securities and opened new
accounts in the names of offshore corporations, and transferred assets
to those accounts, treating the shell companies as non-U.S. citizens.
As tax investigators circled, the bank sought to calm its American
tax-evading clients, the Senate probe found. A November 2002 letter
reassured them that "a Swiss bank which runs afoul of Swiss privacy
laws will face sanctions by its Swiss regulator" and "information
relative to your Swiss banking relationship is as safe as ever and that
the possibility of putting pressure on our U.S. units does not change
anything."
To avoid clients from being discovered by tax authorities, the bank
didn't use names when it wired funds; and when client advisers needed
to speak on the telephone, they used code names, the report said.
When the European Union required banks to identify the beneficial owner
of the assets involved in wire transfers, UBS restricted its Swiss
bankers' use of wires and began to require clients to fly to
Switzerland to withdraw cash. Other times, the bankers advised their
clients to use Swiss credit cards.
They also told clients to destroy all offshore banking records existing
in the United States and to misrepresent the receipt of funds from the
Swiss bank account in the United States as loans from the Swiss Bank.
A UBS spokesperson Karina Byrne said the bank wouldn't be curtailing
its global activities but declined to comment on the "tax-evasion
aspect." UBS is now under investigation by the I.R.S., the S.E.C., and
U.S Department of Justice, according to the Senate report.
L.G.T., which operates with cloak-and-dagger secrecy, was undone by a
disgruntled former employee who copied to DVDs about 1,400 names of
foreign account holders, including more than 100 Americans. He sold
them to German intelligence for $7 million and also talked to Senate
subcommittee staff about the practices of L.G.T., whose C.E.O. is
Prince Max von und zu Liechtenstein, the second son of Prince Hans-Adam
II, the nation's sovereign.
The Senate probe states that L.G.T. told U.S. clients to open accounts
in the name of Liechtenstein foundations and complex offshore
structures so they could hide their ownership.
It used "transfer corporations" as way stations to disguise asset
transfers to and from L.G.T. accounts. One was at the Banca del
Gottardo, the Lugano bank that was the Swiss subsidiary of Robert
Calvi's Banco Ambrosiano until that collapsed in 1982.
U.S. clients would be assigned code words to confirm the identities of
banker and client, according to the Senate report. It even used
"transfer accounts" inside the bank, moving deposits through them to
erase any paper trail. It also warned bankers: "CAUTION: Calls may be
made only from public phone booths abroad (Switzerland, Austria, etc.)!"
One satisfied client, until he was caught, was Frank Lowy, founder and
majority shareholder of Westfield, the world's largest shopping center
company, whose $6.4 billion ranks him No. 222 on Forbes' billionaires
list. Lowy had to pay $25 million in back taxes to Australia and was
tired of doing so. He used complex offshore structures to hide a paltry
$68 million.
Source:Ocnus.net 2008
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