Switzerland’s Wegelin & Co. said three bankers were charged with conspiring to help U.S. clients hide more than $1.2 billion from American tax authorities.
Michael Berlinka, Urs Frei and Roger Keller helped Americans open dozens of accounts and hide them from the Internal Revenue Service after a U.S. crackdown on offshore tax evasion led clients to flee bigger Swiss banks in 2008 and 2009, according to an indictment filed yesterday in federal court in Manhattan.
All three employees remain at the bank, spokeswoman Albena Bjorck said in an e-mailed statement today. Wegelin, the oldest Swiss private bank, no longer has U.S. clients, and it is negotiating with U.S. authorities, Bjorck said. The indictment doesn’t name Wegelin, referring to “Swiss Bank A” and saying all three worked at its Zurich branch.
The indictment signals a broadening crackdown by U.S. prosecutors, who filed tax charges against more than three dozen U.S. clients of UBS AG (UBSN) and Credit Suisse Group AG (CSGN), Switzerland’s two biggest banks, and London-based HSBC Holdings Plc (HSBA), Europe’s biggest bank. They also have charged at least 24 bankers, advisers and attorneys, including seven Credit Suisse bankers.
“This is a further example of what the government has been saying all along -- that they are not stopping with UBS or Credit Suisse,” said Bryan Skarlatos, a tax attorney with Kostelanetz & Fink LLP in New York. “The criminal grand jury investigations are continuing with respect to banks in Switzerland and other countries.”
The indictment comes amid U.S.-Swiss talks to resolve a U.S. probe of offshore tax evasion. Officials seek to reach a civil settlement with Swiss banks and resolve criminal probes of 11 of them, including Wegelin, which is based in St. Gallen.
U.S. prosecutors charged UBS in 2009 with helping Americans hide assets from the Internal Revenue Service. UBS avoided prosecution by admitting it aided tax evasion, paying $780 million and handing over data on 250 accounts. It later disclosed another 4,450 accounts, causing U.S. customers to seek new banks.
As those clients fled UBS and another large Swiss bank, Berlinka, Frei and Keller and “Managing Partner A” wooed them, according to the indictment. The bank, which is principally owned by eight managing partners, also solicited accounts through a third-party website, SwissPrivateBank.com, prosecutors said.
The men told clients their undeclared accounts would stay hidden from the IRS because the bank “had a long tradition of bank secrecy, and, unlike UBS, did not have offices outside Switzerland,” making it “less vulnerable to United States law enforcement pressure,” according to the indictment.
“In or about 2008, the managing partners affirmatively decided to take advantage of the flight of U.S. taxpayers with undeclared accounts by opening new undeclared accounts for many of them at Swiss Bank A,” the indictment said. “Swiss Bank A opened new undeclared accounts for at least 70 U.S. taxpayers.”
Berlinka, 41, began working at the bank in 2008; Frei, 51, started in 2006; and Keller, 47, began in 2007, according to a statement by U.S. Attorney Preet Bharara. The men, who live in Switzerland, face as long as five years in prison if convicted.
“Wegelin & Co. has in the meantime ceased all dealings with U.S. clients and the employees concerned have taken on other tasks within the bank,” Bjorck said. The bank “has authorized its lawyers in the U.S. to negotiate with the U.S. justice authorities to the extent possible under Swiss law,” she said. Wegelin declined to comment further by phone.
At least 17 others accused in the tax crackdown live outside the U.S. and haven’t responded in U.S. court to the charges.
Since 2009, about 30,000 Americans have avoided prosecution by disclosing their offshore accounts to the IRS. Prosecutors have debriefed hundreds of those clients to learn which banks and advisers helped them cheat the IRS. The Justice Department has used those interviews to build several criminal cases.
“The U.S. government has followed the trail of the money in the 2009 voluntary disclosure cases,” said Paul Behling, an attorney at Withers Bergman LLP. “They saw that it went from the big Swiss banks to the smaller Swiss banks or out of Switzerland and to Hong Kong, Singapore, Israel and India.”
The indictment details how Berlinka, Frei and Keller helped 23 U.S. clients open undeclared accounts at their bank. Kenneth Heller, a disbarred New York maritime attorney who pleaded guilty on June 27 to hiding more than $26.4 million in accounts at UBS and Wegelin, also is referred to in the indictment. He is scheduled to be sentenced Jan. 20.
The three bankers conspired with two other Swiss financial advisers already under indictment, Gian Gisler and Beda Singenberger, according to the charges filed yesterday.
“Some bankers are cooperating with the Justice Department and turning over the names of their customers, and it’s possible that these bankers may do the same,” Skarlatos said.
The case is U.S. v. Berlinka, 12-cr-00002, U.S. District Court, Southern District of New York (Manhattan).
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