Tags: ubs | banker | tax | prosecution

Ex-UBS Banker's Acquittal Shows US Tax Prosecution Difficulty

Tuesday, 04 Nov 2014 11:41 AM

Raoul Weil, who once ran UBS AG’s global wealth-management business, was cleared at trial of tax conspiracy despite the bank’s historic admission in 2009 that it helped thousands of U.S. clients abuse Swiss bank secrecy to cheat the Internal Revenue Service.

The federal jury in Fort Lauderdale, Florida, reached its verdict after deliberating about 90 minutes. Weil, 54, was indicted in 2008 on a charge of conspiring to help as many as 17,000 U.S. taxpayers hide $20 billion from the IRS. Weil was arrested last year in Bologna, Italy, and waived extradition. Weil, who didn’t testify, had faced five years in prison.

Weil is the highest-ranking official of three dozen foreign bankers, lawyers and advisers charged in a seven-year U.S. probe of offshore tax evasion. UBS, the largest Swiss bank, avoided prosecution in February 2009 by paying a $780 million fine and admitting it helped clients evade taxes from 2000 to 2007.

“The verdict shows you the difficulty of going after senior management who can at times blame the bank’s customers and lower-level employees for the bank’s mistakes,” Nathan Hochman, a former assistant attorney general who oversaw the Justice Department’s tax division, said in a phone interview. “It’s difficult to prove a historical case beyond a reasonable doubt when the government heavily relies on witnesses who have received very favorable treatment.”

Second Loss

The Weil verdict is the second tax trial loss for the U.S. in less than a week after a Los Angeles jury acquitted a retired senior vice president at Israeli-based Mizrahi Tefahot Bank Ltd. on charges he helped U.S. customers conceal their assets from the IRS.

Matthew Menchel, Weil’s lawyer, said, “This case never should have been brought.”

Prosecutors argued that Weil knew that UBS used sham corporate structures to help U.S. clients hide their identities from the IRS, and its bankers used cloak-and-dagger methods to deliver them cash and account statements.

“This conspiracy lasted for years and years, all done to conceal this business and hide these clients,” Mark Daly, a Justice Department trial attorney, said in summarizing a case that began Oct. 14. “It’s a pyramid. At the top, you’ve got the senior executives who have the power to either grow or shut down this business.”

Immunity

Martin Liechti, the prosecution’s star witness and the former UBS head of banking in the Americas, testified that Weil knew in 2002 that thousands of accounts didn’t comply with U.S. tax law. Liechti received immunity from prosecution in 2008. He was one of four UBS bankers and several clients who testified and got government deals in exchange for their cooperation.

Menchel argued in his summation that prosecutors failed to prove that Weil was part of a single conspiracy involving taxpayers. He also said that Weil was unaware of the activities of a group of bankers below him.

“There’s no evidence in this case that Mr. Weil knew and much less participated in activities by low-level bankers who were violating the bank’s own policies,” Menchel told the jury.

Menchel argued that Liechti lied about Weil.

“Mr. Liechti took this stand right in front of you and not only would he lie, but when I would catch him in that lie, he would lie to cover his lie,” Menchel said.

Debriefing

Prosecutors spent four months debriefing Liechti in 2008 before charging the bank with conspiracy the next year. In entering a deferred-prosecution agreement in 2009, UBS turned over data on 250 secret accounts to the IRS. It later agreed to reveal information on 4,450 more. The handover of names was a historic breach of Swiss bank secrecy.

Menchel and Liechti sparred at trial over whether the accounts of U.S. clients were actually in tax compliance.

“If it was not a problem, why did I spend four months here?,” Liechti, a Swiss resident, responded. “Why did I lose my job? Why did UBS pay a $700 million fine for this?”

Jurors heard nothing more about the UBS deal.

Weil was also told by lawyers that the existence of the U.S. cross-border business, including that portion that allowed taxpayers to not declare accounts, was agreed to by the IRS and permitted by U.S. tax law, Menchel argued.

In instructing the jury, U.S. District Judge James Cohn told the panel it must decide if “a single overall conspiracy did exist,” and if so, who its members were.

The judge said that if Weil acted in good faith, “sincerely believing himself to be in compliance with the law,” then he didn’t act willfully to violate the law.

Since 2009, more than 70 U.S. clients and three dozen offshore bankers, lawyers and advisers have been charged with tax crimes. More than 100 Swiss banks and 43,000 U.S. taxpayers applied to the U.S. to avoid prosecution over offshore accounts. Credit Suisse Group AG’s main bank subsidiary pleaded guilty and paid a $2.6 billion penalty.

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Raoul Weil, who once ran UBS AG's global wealth-management business, was cleared at trial of tax conspiracy despite the bank's historic admission in 2009 that it helped thousands of U.S. clients abuse Swiss bank secrecy to cheat the Internal Revenue Service.
ubs, banker, tax, prosecution
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2014-41-04
Tuesday, 04 Nov 2014 11:41 AM
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