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UBS client in U.S. charged in latest tax case
August 14, 2009 / 7:18 PM / 8 years ago

UBS client in U.S. charged in latest tax case

LOS ANGELES (Reuters) - A California client of UBS AG will plead guilty to a federal criminal charge stemming from a U.S. government investigation into tax evasion at the Swiss bank, U.S. prosecutors in Los Angeles said on Friday.

The new case, against Malibu resident John McCarthy, was announced after the disclosure on Wednesday that UBS and the U.S. and Swiss governments had agreed to settle a lawsuit in Miami that sought to force the bank to reveal the names of up to 52,000 of its wealthy American clients suspected of hiding nearly $15 billion of assets.

This is the fourth prosecution using information released by UBS under an earlier deferred prosecution agreement it reached with U.S. authorities in February, when the bank agreed to pay $780 million and to hand over data relating to about 250 U.S. clients.

Washington’s lawsuit against UBS, the world’s second- largest wealth manager, strained relations between the United States and Switzerland because it challenged Swiss bank secrecy laws. Details of the settlement announced on Wednesday are expected to be released next week, legal sources said.

The steady drumbeat of criminal charges against rich U.S. tax evaders appeared designed to pressure suspected offenders to voluntarily disclose their unreported overseas accounts as part of an amnesty program that expires on September 23.

U.S. Attorney Thomas O‘Brien said in a statement that tax prosecutors in Los Angeles will target people who hid funds in secret bank accounts in Europe and Asia to avoid taxes.

Eileen Mayer, chief of IRS-Criminal Investigation, called the McCarthy case “the tip of the iceberg” and vowed to pursue people hiding income offshore.

McCarthy agreed to plead guilty to a single felony count of failing to report a foreign bank account from 2003 through 2008, prosecutors said. He faces up to five years in prison, three years’ supervised release and up to $250,000 in fines, the plea agreement showed.

McCarthy’s first court appearance is set for September 14 in Los Angeles.

The government estimated its tax loss at between $200,000 and $400,000 in a plea agreement that requires McCarthy to cooperate with an Internal Revenue Service (IRS) audit and to repatriate any funds he holds outside the United States.

He also agreed to pay a penalty equal to 50 percent of the highest balance held in the unreported account for each of the years from 2003 to 2008, the plea agreement showed.

Prosecutors said McCarthy opened a UBS bank account in Switzerland in 2003 in the name of a Hong Kong entity called COGS Enterprises Ltd.

McCarthy admitted to skimming more than $1 million from his domestic business and funneling it to the UBS account in Switzerland, prosecutors said.

With the help of a UBS representative and his Swiss attorney, McCarthy moved more money offshore to the COGS account and other Swiss accounts he controlled without being detected by U.S. tax authorities, prosecutors said.

McCarthy’s attorney could not be reached immediately for comment.

Reporting by Gina Keating and James Vicini; additional reporting by Pascal Fletcher in Miami; editing by Gary Hill and Andre Grenon

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