US accuses 2 ex-Baer bankers of aiding tax evasion

Tue Oct 11, 2011 8:46pm EDT

* Indictment: $600 mln was hidden for 180 Americans

* Indictment of two bankers does not name employer

* Person briefed on matter says bank is Julius Baer

By Lynnley Browning

Oct 11 (Reuters) - U.S. prosecutors on Tuesday indicted two former private bankers with Julius Baer on charges of selling tax evasion services to wealthy Americans, drawing yet another Swiss bank into the crosshairs of the U.S. Justice Department amid a widening crackdown on offshore tax evasion.

While the indictment of the two bankers, Daniela Casadei and Fabio Frazzetto, did not name their employer and referred only to "Swiss Bank #1," that bank is Julius Baer, according to a person briefed on the matter.

The two bankers and an unspecified number of unnamed colleagues helped about 180 wealthy American clients of Julius Baer hide about $600 million in assets in secret Swiss bank accounts that went undeclared to the U.S. Internal Revenue Service, according to the indictment.

Casadei and Frazzetto were accused of conspiracy to defraud the United States.

Bank Julius Baer, one of Switzerland's oldest private banks, is part of Bank Julius Baer Group, a large asset management firm that is traded on the Swiss stock exchange.

The bank, headquartered in Zurich, could not immediately be reached for comment.

The charges against the two bankers come as the U.S. Justice Department turns up the heat on Swiss banks that help wealthy American clients evade taxes.

Credit Suisse AG received a target letter, a step toward possible indictment, in July, and about a dozen other banks are under criminal scrutiny. Scores of bankers and clients have been indicted over the past year or so.

TRICKS OF THE TRADE

The latest indictment, by federal prosecutors in the Southern District of New York, sheds new light on the tricks of the trade in Swiss private banking.

It accused Casadei and Frazzetto of helping American clients open Swiss accounts in code names, encouraging them to put assets in the names of foreign relatives, setting up sham corporate entities to hide their clients' ownership of the assets, and reassuring clients that they would not be found out because the bank no longer had an office in New York.

In 2005, Swiss bank giant UBS AG bought a 21.5 percent stake in Julius Baer in a transaction in which Baer simultaneously bought more than $3 billion in private banking assets from UBS. UBS later sold the stake.

For one American client who travelled to Zurich to meet with Casadei, the banker provided what she called "travelling statements," or bank statements that did not identify the client, who had inherited his assets, by name, the indictment said. The bankers also used a dual-coding system for accounts, with the number identifying the owners of accounts different from the number of the actual account, it said.

The indictment also referred to two unnamed client advisers -- a term for private bankers -- at the bank and to a second Swiss bank, identified only as "Swiss Bank #2."

One unnamed client adviser told American clients to transfer her funds from Julius Baer to the second Swiss bank, and to use obscuring names, known as "fantasy" names, such as "the Hydrangea Account," "the Red Rubin Account" and "The Green-White House Account," to hide her ownership of both bank accounts, according to court papers. The unnamed client adviser joined UBS's Zurich office in 2005.

The identity of the second bank could not be immediately learned.

ADVICE THAT CLIENTS IGNORE THE UBS INVESTIGATION

According to the prosecutors, Casadei told the American client that because the bank "no longer had a presence in the United States," it was immune from the criminal investigation of UBS by the U.S. Justice Department.

Similarly, Frazzetto told one client that his bank "was not exposed to investigation like UBS" because it "did not have a presence in the United States," but he urged clients nonetheless not to carry any documents identifying Julius Baer as their bank, according to the indictment.

In 2009, after years of being investigated by the U.S. Justice Department, UBS AG averted indictment for selling tax evasion services to wealthy American clients of its private bank. It agreed to pay $780 million, enter into a deferred-prosecution agreement and turn over around 255 client names as part of the deal.

According to court papers, Casadei also told one client in South Carolina who was spooked by the UBS probe that he could continue to maintain his account at Julius Baer with secrecy by hiring a third-party independent financial adviser to administer his account at the bank. Casadei provided the client with a list of the third-party advisers, according to the court papers. The third-party advisers, Casadei said, were former employees of the bank who had left to set up their own firms.

Casadei also advised one client to use an Israeli cousin as the nominee holder of an account held by two sisters, according to the prosecution case, and Frazzetto had a client use a trust named "Horsal" in the offshore tax haven of Liechtenstein.

According to court papers, Casadei worked at Julius Baer's Zurich office from at least the early 1990s through 2010 and Frazzetto worked at the Zurich office from around 2005 through around 2010. The two bankers were said to have managed U.S. client assets worth $13.2 million, and Frazzetto U.S. client assets worth $20.5 million.

The nationalities and locations of the two bankers were not specified in the indictment.

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