October 28, 2009 / 3:56 PM / 10 years ago

Ex-client of UBS gets house arrest for tax fraud

MIAMI (Reuters) - A former client of UBS AG who cooperated in a U.S. probe of the Swiss bank’s ties with wealthy Americans hiding money overseas was sentenced to one year house arrest and a fine on Wednesday for a multimillion-dollar tax evasion scheme.

Steven Michael Rubinstein, 55, was the first former customer of UBS to be sentenced for tax fraud following a protracted U.S. legal battle with the bank that ended in August with an agreement to crack open Switzerland’s long tradition of bank secrecy.

Rubinstein, a Florida accountant who pleaded guilty to a single count of tax evasion in June, was sentenced to a total of three years of probation including 12 months of house arrest. He was also ordered to pay a $40,000 fine.

UBS settled a sweeping U.S. criminal probe earlier this year by paying a $780 million penalty and admitting it helped U.S. citizens evade taxes.

It then ended a related civil suit in August by agreeing to turn over the names of 4,450 wealthy U.S. clients with undisclosed offshore accounts.

Rubinstein’s sentence, handed down by a federal court judge in Miami, was in line with the Justice Department’s recent request for leniency for Rubinstein due to what it described as his substantial cooperation in a probe centering on Americans with undisclosed offshore accounts at UBS.

The U.S. government had alleged that Rubinstein, who worked for a company in the yacht business, evaded taxes on $3 million by stashing funds in a British Virgin Islands corporation set up through a UBS account that was active from 2001 to 2008.

He had faced a maximum sentence of three years in prison, but the Justice Department called for no more than a 12-month sentence in a court filing last Friday.

Federal Court Judge Marcia Cooke called the sentence reduction unusually lenient in her remarks to the courtroom on Wednesday but said no one should underestimate the value of Rubinstein’s cooperation with authorities in their crackdown on tax evasion.

“Thousands if not millions of taxpayers now know what the legal landscape is,” said Cooke. “We will not tolerate offshore tax evasion.”

Her remarks came after Rubinstein, who had posted $12 million bail after his arrest, voiced contrition for his tax dodging and vowed that he would never stray outside the law again.

“I’m embarrassed and ashamed to be standing here before you,” said Rubinstein.

“I will continue to assist the government in any manner requested,” he added.

Jeffrey Chernick, another former UBS client who has pleaded guilty of tax evasion, is due to be sentenced in Fort Lauderdale, Florida, on Friday for hiding more than $8 million from U.S. tax authorities.

The Justice Department has also asked for a reduced sentenced for Chernick, citing his cooperation in UBS-related criminal investigations.

Reporting by Tom Brown; Editing by Philip Barbara

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