UBS client gets house arrest in U.S. tax case

LOS ANGELES (Reuters) - A California client of Swiss bank UBS AG was sentenced to six months home detention for tax evasion in the latest case stemming from a U.S. government probe of citizens hiding billions of dollars in offshore assets.

John McCarthy, a businessman from the wealthy seaside enclave of Malibu, also was placed Monday on three years supervised probation and fined $25,000 for his guilty plea to a single felony count of failing to report a foreign bank account from 2003 through 2008.

In addition to the fine, McCarthy was ordered to make restitution of more than $485,000 he owed to the government, which he already has paid, and to perform 300 hours of community service, which he can do while under home detention.

He had faced a maximum penalty of five years in federal prison and $250,000 in fines. But Judge Valerie Baker Fairbank said she weighed in McCarthy's favor his cooperation with authorities, the fact that he had no prior criminal record and had otherwise "led a responsible, law-abiding life."

Dressed in a dark business suit, McCarthy, said little in court. In a hushed voice before he was sentenced, he told the judge, "I wish to apologize to the court, to my family ..."

He is the sixth UBS client to receive a prison sentence or probation after pleading guilty to tax evasion charges in connection with a U.S. investigation of wealthy citizens suspected of concealing assets from the Internal Revenue Service by funneling money into secret Swiss bank accounts.

ADMITTED HIDING OVER $1 MILLION FROM IRS

McCarthy must wear an electronic ankle bracelet to monitor his movements while under home confinement but may venture outside his home to pursue employment, go grocery shopping, and attend religious functions and any medical appointments for himself and his immediate family. The judge also said he may travel to Las Vegas to visit his father, subject to advance approval of his probation officer.

McCarthy admitted in his August plea deal to skimming more than $1 million from his domestic business and channeling it to a UBS account he opened in Switzerland in the name of a Hong Kong entity called COGS Enterprises Ltd.

Swiss laws protect bank customers from outside scrutiny and restrict the ability of foreign authorities to obtain tax information about account holders.

But under pressure from U.S. prosecutors accusing the bank of complicity in tax evasion, UBS broke with that tradition in February of 2009, agreeing to pay a $780 million penalty and hand over data relating to about 250 U.S. clients.

The information was used to snare McCarthy and others, while about 14,700 individuals came forward on their own under a U.S. tax amnesty program last year.

UBS settled a second IRS case in August by agreeing to turn over the names of some 4,450 more American account holders.

But that deal was thrown into question after Swiss courts in January blocked the disclosure of a UBS client's account data, ruling her information could only be divulged if she were found to have engaged in fraudulent behavior. The courts held that her failure to file a tax form did not constitute fraud.

A top Justice Department lawyer said last month that U.S. tax prosecutors are examining more than 7,000 accounts from foreign banks beyond UBS, including other Swiss banks.

In February, a U.S. client of London-based HSBC pleaded guilty to conspiracy over assets stashed abroad to evade taxes, the first plea in recent U.S. government tax prosecutions to involve a foreign bank other than UBS.

(Reporting by Steve Gorman; Editing by Tim Dobbyn)