A former UBS AG (UBSN) banker was indicted on a charge of conspiring to help wealthy Americans evade taxes by hiding accounts in a smaller Swiss regional bank.
Martin Lack, a Swiss resident and independent investment adviser, helped U.S. clients hide assets from the Internal Revenue Service through accounts at UBS and the so-called cantonal bank, according to an indictment in federal court in Fort Lauderdale, Florida. That bank, not named in the indictment, is Basler Kantonalbank, according to a person familiar with the matter.
The indictment cites nine U.S. customers that Lack assisted. He helped them withdraw cash from undeclared accounts and discouraged them from joining an IRS amnesty program, according to the indictment. UBS, the largest Swiss bank, avoided prosecution in 2009 by paying $780 million and admitting it helped Americans evade taxes.
“Lack would and did solicit U.S. customers to open undeclared accounts at UBS and Cantonal Bank because Swiss bank secrecy would assist U.S. customers to conceal their ownership of the accounts,” according to the indictment.
Lack is accused of conspiring with Renzo Gadola, a UBS banker from 1995 until 2008. Gadola pleaded guilty Dec. 22 in federal court in Miami, admitting that he encouraged U.S. clients to move their undeclared UBS accounts to Basler Kantonalbank. (BSKP) He is cooperating with prosecutors.
Lack was the executive director of the UBS North America International business until 2003, according to the indictment. That year, he set up Lack & Partner Asset Management AG in Zurich. Lack didn’t immediately return a call left at the firm today.
Michael Buess, a spokesman for Basler Kantonalbank, a Swiss regional lender based in Basel, said he couldn’t confirm or deny any “cooperation between Lack and Basler Kantonalbank.”
Lack traveled to the U.S. to visit customers with undeclared accounts, giving one a prepaid cell phone to call him, according to the indictment.
Lack, who shared an office with Gadola, feared he would be arrested after 2008 if he visited the U.S., according to the indictment. Both men worked with a Mississippi client who gave $445,000 in cash to Lack in 2007 to open an account at the cantonal bank, according to the indictment.
In 2009, Lack told the customer not to join an IRS voluntary disclosure program that let U.S. taxpayers avoid prosecution by declaring their offshore accounts, according to the indictment. Lack offered also offered to provide fake documents to make the money appear to be the proceeds of a loan, according to the indictment.
‘Practically Zero Percent’
Gadola met the customer on Nov. 6 in a Miami hotel and told him not to declare the account because the likelihood of detection was “practically zero percent,” according to the indictment. Authorities, who secretly recorded the meeting, charged Gadola the next day. His case was made public Dec. 15.
Lack also provided a total of $180,000 in cash to a Texas customer in three meetings from 2003 to 2007, according to the indictment.
In avoiding prosecution, UBS agreed in February 2009 to give the IRS data on 250 accounts and later handed over data on an additional 4,450 accounts to resolve an IRS lawsuit. That spurred the voluntary disclosure program, which drew 15,000 taxpayers in 2009 and another 4,000 after that.
Taxpayers who joined the program had to identify their offshore accounts, bankers and advisers, as well as how they moved their money. More than 200 of those taxpayers have been questioned as U.S. prosecutors build new criminal cases.
Since 2009, more than two dozen UBS clients have been charged, as well as several bankers and advisers. Prosecutors also have indicted seven European bankers of Credit Suisse Group AG on charges of conspiring to help clients in the U.S. evade taxes.
The bank said July 15 that the Justice Department notified it that it was a target of a criminal probe over former cross-border private-banking services to U.S. customers.
The Lack case is U.S. v. Lack, 11-cr-60184, U.S. District Court, Southern District of Florida (Fort Lauderdale). The Gadola case is U.S. v. Gadola, 10-cr-20878, U.S. District Court, Southern District of Florida (Miami).
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