Wegelin & Co., the 270-year-old Swiss bank charged with helping U.S. taxpayers hide more than $1.2 billion from the Internal Revenue Service, failed to appear for an arraignment in federal court in Manhattan.
The bank was indicted Feb. 2, becoming the first Swiss lender charged in a U.S. crackdown on offshore firms suspected of helping Americans evade taxes. That began procedural wrangling, with Wegelin failing to appear in court on Feb. 10. Wegelin said it hadn’t been properly served then with a criminal summons to appear, according to a May 16 statement.
After U.S. authorities served a new summons on May 2 on Konrad Hummler, a bank partner in Switzerland, St. Gallen-based Wegelin said the “attempted service” is “invalid for a variety of reasons” and challenged it in a Swiss court, according to the statement. The next step is unclear.
“They are a fugitive,” U.S. District Judge Jed Rakoff said at a hearing yesterday. “What about arresting the partners?” He said “the case law is, if the government doesn’t take reasonable efforts to apprehend a fugitive, the indictment gets dismissed.”
Prosecutors said that from 2002 to 2011, more than 100 U.S. taxpayers conspired with Wegelin, Zurich bankers Michael Berlinka, Urs Frei and Roger Keller, and others. The bank held more than $1.2 billion in assets not declared to the IRS, according to the indictment.
Rakoff said he “doesn’t understand” why the government hasn’t prepared a warrant for him to sign. Assistant U.S. Attorney Daniel Levy said that while the government has “considered” asking for a bench warrant, it has decided “at this point” not to ask for one.
The judge said he’s “always disappointed” when a party “fails to show up.”
“At a minimum it shows a disrespect for the processes of American government,” Rakoff said. While he said he believes the U.S. and Swiss governments would agree, he added that “these are no more than musings.”
Prosecutors said that Wegelin and the three bankers wooed U.S. clients fleeing UBS AG (UBSN), the largest Swiss bank. UBS avoided U.S. prosecution in 2009 by admitting it aided tax evasion, paying $780 million and handing over data on 250 accounts. It later disclosed information on about 4,450 more accounts.
By attracting clients leaving UBS, Wegelin opened new undeclared accounts for at least 70 U.S. taxpayers, according to the indictment. Most of those accounts were given an internal code of “BNQ,” indicating the accounts were undeclared.
The effort to woo UBS clients was backed by Wegelin’s senior management, according to the indictment.
The case is U.S. v. Wegelin, 12-00002, U.S. District Court, Southern District of New York (Manhattan).
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