Back in 2008, the U.S. Department of Justice issued an indictment for the CEO of the UBS division that handled American cross-border business. This was around the time that the Justice Department was investigating UBS for its role in offshore tax evasion.
In February 2009, UBS admitted guilt related to charges that it provided banking services to U.S. clients with undeclared bank accounts and paid fines, penalties, restitution and interest totaling $780 million. Few individual prosecutions have occurred, however that changes this week with the trial of the UBS banker.
In this case, the banker lived in Switzerland, a country that does not extradite citizens in tax prosecutions. While on vacation in Italy, the banker was arrested on an Interpol warrant by Italian police.
The CEO has since maintained he was unaware of and did not help American customers hide assets from the Internal Revenue Service. If convicted of the tax fraud charges, the banker could face up to five years in prison and a fine of $250,000.
The trial may reveal new details about how UBS negotiated to conceal its role in offshore account fraud. The names of those with hidden accounts will not come into play. However, documents filed show there were high-level diplomatic negotiations by Swiss officials who sought to protect Swiss banks.
The government will need to show that the banker knew of and participated in the fraud. His attorneys will likely argue that the CEO’s responsibilities were very broad and he was unaware of what those below him were doing. The prosecution argues that the CEO oversaw improper activities, such as using “nominee entities, encrypted laptops, [and] numbered accounts” to hide the identities of U.S. customers.
This case has become more complicated because some witnesses fear arrest if they travel to the U.S. to testify. The banker will have several witnesses testify via video from London. The case is a continuation of the Justice Department crackdown on offshore accounts and those who facilitate their use.
Source: CNBC, “Who does this Swiss banker have the goods on? Stay turned,” Eamon Javers, Oct. 13, 2014