If charges stick, aiding tax evaders is serious. It is jail time ina any Western country. Probably death in most Asian Societies........
May 8, 2008
Probe May Lay Open UBS
U.S. Investigation
Into Private Bank
To Embroil Clients?
By GLENN R. SIMPSON in Washington, DAVID CRAWFORD in Zurich, AND CARRICK MOLLENKAMP in London
May 8, 2008
The secrets of UBS AG's private bank could be spilling into the open at a time when Switzerland's biggest bank is struggling to maintain a reputation tarnished by billions of dollars in losses.
U.S. prosecutors are investigating whether the private bank, which provides services to wealthy individuals, was involved in tax-evasion schemes that may have been carried out through Liechtenstein, a European principality that was beyond the reach of U.S. tax officials. The U.S. investigation is being aided by a former UBS insider who has met with U.S. prosecutors, according to two people with knowledge of the situation. U.S. securities regulators also are conducting an inquiry.
MORE ON UBS
⢠UBS to Sell Mortgage Assets, Cut Jobs1
⢠UBS Sale Holds a Caution2
⢠Video: Simon Kennedy on UBS's move 3The U.S. probe into UBS's private bank, the world's largest as ranked by assets under management and one that prides itself on conservatism and confidentiality, threatens to implicate UBS clients. The former UBS employee, who also is under investigation for potential wrongdoing, has provided U.S. officials with names of American clients of UBS, said the people familiar with the probe.
A UBS spokesman said that access to client data are provided only on a "need-to-know" basis. "We are not aware of any data loss," the spokesman, Serge Steiner, said.
The inquiry into the dealings of the lucrative private bank comes at a time when UBS is facing harsh criticism for lack of oversight at its investment bank, which made an ill-fated push into the selling and trading of securities tied to U.S. subprime home loans. The bank has written down some $38 billion, and on Tuesday reported a first-quarter net loss of 11.54 billion Swiss francs ($10.97 billion), together with plans to cut some 5,500 jobs.
"Such investigations could hamper UBS's wealth management, too, and hurt trust," said Dirk Becker, an analyst at Landsbanki Kepler. "UBS can only hope to solve this problem quickly."
The investment bank's troubles are already spilling over into the private bank, which had been a reliable earner. UBS said the private bank attracted only 5.6 billion Swiss francs in fresh money during the months from January to March, a fraction of the 30 billion francs it took in a year earlier.
New UBS Chairman Peter Kurer, former top legal counsel for the bank, and Chief Executive Marcel Rohner have said they are taking steps to restore confidence in UBS. Those have included efforts to unload troubled securities, cut back risky operations and raise some $30 billion in fresh capital from UBS shareholders and investors including those from Asia and the Middle East.
This week, UBS disclosed in a securities filing that the U.S. Justice Department and the Securities and Exchange Commission are examining whether UBS aided U.S. clients in avoiding taxes. The probe is focused on advice given by UBS between 2000 and 2007. According to the filing, the Justice Department "is examining whether certain U.S. clients sought, with the assistance of UBS client advisors, to evade their U.S. tax obligations."
The UBS probe is being led by the U.S. Attorney's Office for the Southern District of New York and may have ties to an investigation being conducted by the Internal Revenue Service and other national tax agencies into how banks in Liechtenstein played a role in helping German, U.S., British, French, Canadian and Australian clients evade taxes. A spokesman for the Justice Department declined comment.
Countries are investigating their citizens for hiding assets in the tiny principality, located between Austria and Switzerland, as part of an international probe. Liechtenstein's largest financial firm, LGT, is one target of the inquiry. A spokesman for LGT said the bank is unfamiliar with the new investigation and unable to confirm or deny details at this time.
One potential focus of the U.S. probe is whether UBS sought to get around a U.S.-Swiss tax treaty that requires the Swiss to identify U.S. money in Switzerland. According to people familiar with the situation, U.S. citizens may have approached a UBS office in New York for help in avoiding taxes on funds held in UBS's private bank. The people said UBS took on the clients but may have deposited their money in Liechtenstein -- a move that would have allowed the Swiss bank to avoid the treaty with the U.S. Liechtenstein officials have said they are willing to cooperate with U.S. investigators.
Additionally, U.S. securities regulators are examining whether UBS took the right steps to register as a broker or investment adviser in the U.S.
Martin Liechti, Zurich-based head of North and South America for UBS's international wealth-management business, was detained at one point by U.S. authorities as part of the tax probe, said a person familiar with the situation. Mr. Liechti isn't the former UBS insider who approached U.S. prosecutors, said people familiar with that communication. Mr. Steiner, the UBS spokesman, said that a senior UBS employee was briefly detained as a "material witness" in connection with the Justice Department probe of U.S. private bank clients, but declined to discuss specific names.
Mr. Liechti wasn't available at his office for comment.
--Goran Mijuk in Zurich and Amir Efrati in New York contributed to this article.
Write to Glenn R. Simpson at glenn.simpson@wsj.com4 and David Crawford at david.crawford@wsj.com5
May 8, 2008
Probe May Lay Open UBS
U.S. Investigation
Into Private Bank
To Embroil Clients?
By GLENN R. SIMPSON in Washington, DAVID CRAWFORD in Zurich, AND CARRICK MOLLENKAMP in London
May 8, 2008
The secrets of UBS AG's private bank could be spilling into the open at a time when Switzerland's biggest bank is struggling to maintain a reputation tarnished by billions of dollars in losses.
U.S. prosecutors are investigating whether the private bank, which provides services to wealthy individuals, was involved in tax-evasion schemes that may have been carried out through Liechtenstein, a European principality that was beyond the reach of U.S. tax officials. The U.S. investigation is being aided by a former UBS insider who has met with U.S. prosecutors, according to two people with knowledge of the situation. U.S. securities regulators also are conducting an inquiry.
MORE ON UBS
⢠UBS to Sell Mortgage Assets, Cut Jobs1
⢠UBS Sale Holds a Caution2
⢠Video: Simon Kennedy on UBS's move 3The U.S. probe into UBS's private bank, the world's largest as ranked by assets under management and one that prides itself on conservatism and confidentiality, threatens to implicate UBS clients. The former UBS employee, who also is under investigation for potential wrongdoing, has provided U.S. officials with names of American clients of UBS, said the people familiar with the probe.
A UBS spokesman said that access to client data are provided only on a "need-to-know" basis. "We are not aware of any data loss," the spokesman, Serge Steiner, said.
The inquiry into the dealings of the lucrative private bank comes at a time when UBS is facing harsh criticism for lack of oversight at its investment bank, which made an ill-fated push into the selling and trading of securities tied to U.S. subprime home loans. The bank has written down some $38 billion, and on Tuesday reported a first-quarter net loss of 11.54 billion Swiss francs ($10.97 billion), together with plans to cut some 5,500 jobs.
"Such investigations could hamper UBS's wealth management, too, and hurt trust," said Dirk Becker, an analyst at Landsbanki Kepler. "UBS can only hope to solve this problem quickly."
The investment bank's troubles are already spilling over into the private bank, which had been a reliable earner. UBS said the private bank attracted only 5.6 billion Swiss francs in fresh money during the months from January to March, a fraction of the 30 billion francs it took in a year earlier.
New UBS Chairman Peter Kurer, former top legal counsel for the bank, and Chief Executive Marcel Rohner have said they are taking steps to restore confidence in UBS. Those have included efforts to unload troubled securities, cut back risky operations and raise some $30 billion in fresh capital from UBS shareholders and investors including those from Asia and the Middle East.
This week, UBS disclosed in a securities filing that the U.S. Justice Department and the Securities and Exchange Commission are examining whether UBS aided U.S. clients in avoiding taxes. The probe is focused on advice given by UBS between 2000 and 2007. According to the filing, the Justice Department "is examining whether certain U.S. clients sought, with the assistance of UBS client advisors, to evade their U.S. tax obligations."
The UBS probe is being led by the U.S. Attorney's Office for the Southern District of New York and may have ties to an investigation being conducted by the Internal Revenue Service and other national tax agencies into how banks in Liechtenstein played a role in helping German, U.S., British, French, Canadian and Australian clients evade taxes. A spokesman for the Justice Department declined comment.
Countries are investigating their citizens for hiding assets in the tiny principality, located between Austria and Switzerland, as part of an international probe. Liechtenstein's largest financial firm, LGT, is one target of the inquiry. A spokesman for LGT said the bank is unfamiliar with the new investigation and unable to confirm or deny details at this time.
One potential focus of the U.S. probe is whether UBS sought to get around a U.S.-Swiss tax treaty that requires the Swiss to identify U.S. money in Switzerland. According to people familiar with the situation, U.S. citizens may have approached a UBS office in New York for help in avoiding taxes on funds held in UBS's private bank. The people said UBS took on the clients but may have deposited their money in Liechtenstein -- a move that would have allowed the Swiss bank to avoid the treaty with the U.S. Liechtenstein officials have said they are willing to cooperate with U.S. investigators.
Additionally, U.S. securities regulators are examining whether UBS took the right steps to register as a broker or investment adviser in the U.S.
Martin Liechti, Zurich-based head of North and South America for UBS's international wealth-management business, was detained at one point by U.S. authorities as part of the tax probe, said a person familiar with the situation. Mr. Liechti isn't the former UBS insider who approached U.S. prosecutors, said people familiar with that communication. Mr. Steiner, the UBS spokesman, said that a senior UBS employee was briefly detained as a "material witness" in connection with the Justice Department probe of U.S. private bank clients, but declined to discuss specific names.
Mr. Liechti wasn't available at his office for comment.
--Goran Mijuk in Zurich and Amir Efrati in New York contributed to this article.
Write to Glenn R. Simpson at glenn.simpson@wsj.com4 and David Crawford at david.crawford@wsj.com5
