U.S. indicts Wegelin bank for helping Americans avoid tax

Fri Feb 3, 2012 9:07am EST

A logo of the Swiss bank Wegelin is pictured at a building in Bern, in this January 27, 2012 file photo.    REUTERS/Michael Buholzer/Files

A logo of the Swiss bank Wegelin is pictured at a building in Bern, in this January 27, 2012 file photo.

Credit: Reuters/Michael Buholzer/Files

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(Reuters) - The United States indicted Wegelin, the oldest Swiss private bank, on charges that it enabled wealthy Americans to evade taxes on at least $1.2 billion hidden in offshore bank accounts, the U.S. Justice Department said on Thursday.

The announcement, by federal prosecutors in Manhattan, represents the first time an overseas bank has been indicted by the United States for enabling tax fraud by U.S. taxpayers.

The indictment said the U.S. government had seized more than $16 million from Wegelin's correspondent bank, the Swiss giant UBS AG, in Stamford, Connecticut, via a separate civil forfeiture complaint. Because Wegelin has no branches outside Switzerland, it used correspondent banking services, a standard industry practice, to handle money for U.S.-based clients.

UBS could not be reached for immediate comment.

The charges against Wegelin, of fraud and conspiracy, provide a rare glimpse into the world of Swiss private banking in the wake of a crackdown on UBS AG. In 2009, UBS paid $780 million and entered into a deferred prosecution agreement with the Justice Department over charges it engaged in fraud and conspiracy by enabling scores of Americans to evade taxes through its private bank. The bank later turned over the names of more than 4,500 clients, a watershed in Swiss bank secrecy, which protects the confidentiality of clients and their data.

The indictment signals a ramping up of pressure on 10 other Swiss banks under investigation by the Justice Department, including Credit Suisse, Julius Baer and Basler Kantonalbank.

Six days ago, Wegelin -- founded in 1741 -- effectively broke itself up by selling the non-U.S. portion of its business. The indictment represents the latest blow to the tradition of Swiss bank secrecy in a long-running U.S. crackdown on tax dodgers.

Switzerland is seeking a global solution for its entire banking industry, not just the 11 banks under criminal scrutiny.

On Tuesday, the Swiss finance ministry handed U.S. authorities encrypted data on bank employees who served U.S. clients suspected of dodging taxes, and said it would only provide the key to decipher the data once the row was settled.

ACCOUNTS FOR FORMER UBS CLIENTS?

The U.S. Justice Department said Wegelin "affirmatively decided to capture for Wegelin the illegal U.S. cross-border banking business lost by UBS and deliberately set out to open new undeclared accounts for US taxpayer-clients leaving UBS," the indictment said. U.S. clients were told that Wegelin presented less risk amid the crackdown because it had no branches outside Switzerland and "had a long tradition of bank secrecy."

The indictment also accused Wegelin of helping two unnamed Swiss banks "repatriate undeclared funds to their own U.S. taxpayer-clients by issuing checks drawn on Wegelin's Stamford correspondent account." The transfers were separated into chunks below the $10,000 threshold at which such transfers are reported to the IRS. Wegelin, the indictment said, "co-mingled" the repatriated funds with other, unrelated funds, to better conceal their origin and nature.

The charges against Wegelin were filed as a superseding indictment of three previously charged Wegelin bankers: Michael Berlinka, Urs Frei and Roger Keller. The three men were charged on January 4 with fraud and conspiracy. The superseding indictment named several unindicted co-conspirators, including one who served as a team leader for the three men at the Zurich branch.

The charges provided new details on how the bank worked to solicit new U.S. clients fleeing UBS. According to the indictment:

* Wegelin, one of the last "pure" private banks, is principally owned by eight managing partners and run by an executive committee that included partners. One unindicted co-conspirator, named as Executive A at the bank, was a member of Wegelin's executive committee and worked in Zurich.

* Wegelin used a special code, "BNQ," on around 70 new U.S. undeclared accounts that were opened over 2008 and 2009. It also sometimes opened accounts for U.S. citizens who held passports from other countries, and opened the accounts through the non-U.S. passports.

* Wegelin recruited U.S. clients through a website, www.SwissPrivateBank.com, that was run by an unidentified third party. The website boasted there that "Swiss bank secrecy is not lifted for tax evasion ... Neither the Swiss government nor any other government can obtain information about your bank account." Unlike the United States, Switzerland generally does not consider tax evasion to be a crime.

* Wegelin gave accounts special names, including "Elvis" and "Limpopo Foundation." The charges detailed the bank's work for nearly three dozen American clients, known only as clients A through JJ.

* Wegelin encouraged clients not to come forward to the U.S. Internal Revenue Service and disclose their names in exchange for reduced penalties. Clients who did so in recent years helped provide the Justice Department with a roadmap to the inner workings of Wegelin - a map that led to the bank's indictment.

(Reporting By Lynnley Browning in Hamden, Connecticut; Editing by Kevin Drawbaugh, Howard Goller, Phil Berlowitz)

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Comments (10)
gpmcginn wrote:
I’m just a middle class USA person. Not the “poor” that Mitt doesn’t give a darn about.
As Mitt might say: “Like eat your food stamps – the fiber is good for you and we put dyes in the stamps that will hasten your death – OH I was told not to say that but I’m really bad with off the cuff or off the brain statements. Must be due to my genetic limited gene pool. I’m certainly not the $$ guy that can call a $10,000 bet off the cuff for any to except.”

So can anyone confirm: Is this the bank where Mitt and Ann keep their money? Will they take a $100 US deposit?

Feb 02, 2012 10:22pm EST  --  Report as abuse
FoxxDrake wrote:
Only 1.2 Billion? Only?

How about 4 Trillion.

This bank, other Swiss banks, Austrian banks, South American, Panamanian, Isle of Man, Cayman Islands, Japanese, Hong Kong, Singapore and oh yea, United States banks and their lawyers, accountants and Wall Street.

1.2 Billion from this tiny old weak bank.

Bovine Scat.

They will pay a 20 million dollar fine and business will continue as usual.

Feb 02, 2012 11:06pm EST  --  Report as abuse
Intriped wrote:
A facade for public acceptance to seem as if though something major has been accomplished. It is still legal to park funds in the Caimans as I was paid through the Caimans as a USA Defense Contractor Employee from the money originally allocated to the Contractor from the US Government. Now tell me if this is not hypocritical by proxy? I suspect our own Treasury parks funds in banks like the Caimans as well as Panamanian Banks which BTW have not been touched. I wonder why?

Feb 02, 2012 11:23pm EST  --  Report as abuse
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