From the AP, via Yahoo! News:
Swiss banking giant UBS has agreed to "pay $780 million in fines, penalties, interest and restitution for conspiring to create sham accounts to hide the assets of U.S. clients from the U.S. government." As a part of the settlement, they have agreed to open their banking records to U.S. criminal and securities officials.
The scheme is one part of the abusive tax shelters and hidden offshore accounts that Sen. Carl Levin has estimated to cost the U.S. government nearly $100 billion a year in lost tax revenue.
Here is how the scheme worked:
UBS acquired a U.S. company in 2000, then created a way to evade reporting requirements for "a host of new American clients" by opening new accounts using aliases. The AP article didn't name the company, but my guess is Paine Webber. According to prosecutors, "UBS executives used encrypted software and other counter-surveillance techniques to prevent anyone from detecting that they were actively marketing such Swiss bank secrecy — and tax evasion — to American taxpayers." Then the "host of new American clients" filed false tax returns that omitted the income they earned in the new accounts.
Alexander Acosta, U.S. attorney for southern Florida, said "This was not a mere compliance oversight, but rather a knowing crime motivated by greed and disrespect for the law."
Peter Kurer, chairman of Swiss-based UBS AG, said in a statement, "We accept full responsibility for these improper activities ... Client confidentiality, to which UBS remains committed, was never designed to protect fraudulent acts or the identity of those clients, who, with the active assistance of bank personnel, misused the confidentiality protections."
The terms of the deal with U.S. officials requires UBS to turn over the clients' information, cooperate with authorities, and stop engaging in the cross-border banking business that resulted in charges. Prosecutors could refile charges against the bank if they violate terms of the deal.
UBS executive Raoul Weil was indicted in November 2008 "on charges he conspired to defraud the government for overseeing the bank's cross-border business." He is currently at large. Another UBS banker, Bradley Birkenfeld, pleaded guilty to a similar charge in June 2008.
Internal Revenue Service Commissioner Doug Shulman said, "People who have hidden unreported income offshore need to get right with their government. They should come forward and take advantage of our voluntary disclosure process." If I were one of the "host of new American clients" who filed false tax returns, I would be camping in my lawyers office - trying to cut a deal.
As previously mentioned, this is one part of the abusive tax shelters and hidden offshore accounts. We know that most companies don't pay federal taxes and more than 25 percent of America's corporate profits go through tax havens.
It is time the super wealthy and corporations started paying their fair share of taxes.
ADDITIONAL INFO from N.Y. Times:
... It is unclear how many of its clients’ names UBS will divulge. Federal prosecutors have been examining about 19,000 accounts at the bank, but UBS ultimately may disclose the identities of only a few hundred customers.
But to some, turning over any names at all heralds the end of the secret Swiss bank account, whose traditions date to the Middle Ages.
"The Swiss are saying that this is the end of Swiss banking as they knew it," said Jack Blum, an offshore tax specialist. "Nobody will trust the security of the Swiss bank account."
(...)
Prosecutors suspect that from late 2002 to 2007, UBS helped American clients illegally hide $20 billion, letting them evade $300 million a year in taxes.
(...)
UBS urged some American clients to destroy records and to stash watches, jewelry and artwork that they had bought with money hidden offshore in safe deposit boxes in Switzerland. The bank also encouraged them to use Swiss credit cards so the I.R.S. could not track purchases.
(...)
The move by UBS to settle the case, on the eve of a Senate subcommittee hearing next Tuesday on the matter, signals how close the bank came to being indicted for not cooperating with prosecutors. Indictment is a near-certain death knell for corporations.
Thanks, oblomov.