U.S. says building criminal cases against UBS clients

MIAMI Tue Aug 18, 2009 6:39pm EDT

The logo of Swiss bank UBS can be seen outside its New York office August 12, 2009. REUTERS/Lucas Jackson

The logo of Swiss bank UBS can be seen outside its New York office August 12, 2009.

Credit: Reuters/Lucas Jackson

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MIAMI (Reuters) - The United States is building criminal cases against more than 150 American clients of Swiss bank UBS as part of a crackdown on tax evasion now made easier by a deal over access to secret account information.

U.S. prosecutors gave their first official confirmation of the initial number of criminal investigations in a filing on Tuesday with a federal court in Fort Lauderdale, Florida. The number of criminal probes is widely expected to mushroom soon.

In the same court document, the prosecutors requested a sharply reduced prison sentence for ex-UBS banker Bradley Birkenfeld, a key informant in the ongoing U.S. prosecutions of wealthy American clients of UBS.

The request was made a day before U.S. and Swiss authorities were due to announce details of a negotiated settlement of their legal dispute over access to further names of UBS clients suspected of cheating U.S. tax collectors.

In the court filing, prosecutors said evidence provided by Birkenfeld had been critical to uncovering a "multibillion-dollar scheme to defraud the United States" involving UBS bankers and their U.S. customers.

The U.S. case against UBS, which has been closely watched by the global offshore banking industry, has challenged Switzerland's tradition of bank secrecy and confidentiality.

In his own separate court filing, Birkenfeld said he was the first known banker operating in Switzerland who sought to "peel back the curtain" of its bank secrecy laws.

He also said his extensive cooperation with U.S. authorities, beginning as a whistle-blower in 2006, had reportedly led the United States to extend its inquiry into illicit activity by other foreign banks.

Based largely on his information, UBS could have been forced to give the U.S. Internal Revenue Service the names of 19,000 U.S. clients suspected of tax evasion, he said.

In February, as part of a "deferred prosecution agreement," UBS agreed to pay $780 million to settle charges that it had helped American clients evade taxes on about $20 billion concealed in offshore accounts.

Information obtained from UBS, as part of that agreement, led directly to the criminal investigations now open against more than 150 Americans across the United States, prosecutors said in Tuesday's court filing.

Four American clients of UBS, three in Florida and one in California, are already being prosecuted on criminal charges.

Citing the broader settlement of the UBS case, due to be finalized on Wednesday, the prosecutors' filing said: "It is expected that ... UBS will produce the identities and account information of additional UBS customers who are believed to have violated United States law."

5,000 NAMES

A U.S. legal source told Reuters on Monday that UBS was expected to give U.S. authorities the names of about 5,000 more Americans suspected of using the Swiss bank to evade taxes.

In their court filing, prosecutors said Birkenfeld, a U.S. citizen who will be sentenced on Friday, had faced up to five years imprisonment after pleading guilty in June 2008 to helping a U.S. billionaire hide $200 million in assets from U.S. tax authorities.

The prosecutors asked that Birkenfeld's sentence be cut to 2-1/2 years imprisonment.

Birkenfeld was employed at UBS from 2001 to 2005 and served as a director of its private banking division. He had many U.S. clients and acknowledged, when he pleaded guilty in June 2008, that he once smuggled a customer's diamonds into the United States in a toothpaste tube.

He admitted helping clients set up sham entities to hold assets in offshore finance centers such as Switzerland, Panama, the British Virgin Islands, Hong Kong and Liechtenstein.

In the court document filed through his attorney, Birkenfeld appealed for a sentence involving only probation, with any detention to be served at home.

"Mr. Birkenfeld ... has gained international notoriety as a result of his indictment and guilty plea. This infamy already serves as a deterrent to others," the document said.

(Reporting by Tom Brown; Editing by Pascal Fletcher and Leslie Gevirtz)

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