Julius Baer Tells American Clients of Information Request

Julius Baer Group Ltd. (BAER), Switzerland’s third-largest wealth manager, informed some American clients that their accounts meet the criteria of a U.S. request for data amid a Justice Department offshore tax-evasion probe.

The U.S. Internal Revenue Service is seeking information on accounts of Americans “owned through a domiciliary company” and held at any time between the beginning of 2002 and the end of last year, the Zurich-based bank wrote in a letter obtained by Bloomberg News and dated May 16.

Julius Baer is working on a request for information from Switzerland’s tax authority under a 1996 tax treaty with the U.S., Sabine Jaenecke, a spokeswoman for the bank, said today. She declined to comment on a report in Neue Zuercher Zeitung that more than 100 Julius Baer clients were affected.

Julius Baer is one of at least 14 Swiss financial firms under investigation by the Department of Justice for allegedly helping Americans hide money from the IRS. A Swiss court ruled in March that Switzerland could hand over account data under the 1996 tax deal, paving the way for information transfers by banks and raising the possibility of a breakthrough in two-year-old Swiss-U.S. talks to resolve the probe.

Photographer: Valentin Flauraud/Bloomberg

Julius Baer is one of at least 14 Swiss financial firms, including Credit Suisse Group AG, under investigation by the Department of Justice for allegedly helping Americans hide money from the Internal Revenue Service. Close

Julius Baer is one of at least 14 Swiss financial firms, including Credit Suisse Group... Read More

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Photographer: Valentin Flauraud/Bloomberg

Julius Baer is one of at least 14 Swiss financial firms, including Credit Suisse Group AG, under investigation by the Department of Justice for allegedly helping Americans hide money from the Internal Revenue Service.

“The Swiss government is taking a broad interpretation of the treaty to allow the handover of data in cases involving offshore structures,” said Milan Patel, a former IRS trial attorney who is now a partner at Zurich-based law firm Anaford AG. “The banks seem willing to oblige to show they are cooperating with the U.S. once the Swiss government approves the turnover to avoid any violation under Swiss banking secrecy.”

Information Request

Julius Baer rose 0.9 percent to 38.72 Swiss francs as of 2:06 p.m. in Zurich, valuing the company at 8.7 billion francs ($9 billion) and extending this year’s advance to 20 percent.

“We confirm the receipt of a request for information from the Federal Tax Administration in Switzerland based on the effective double-taxation agreement between Switzerland and the U.S.,” Jaenecke said in an e-mailed statement. “We are currently working on the request from the Swiss authority.”

Switzerland, the biggest haven for offshore wealth, wants to prevent another bank being indicted after Wegelin & Co. pleaded guilty in a Manhattan federal court in January to conspiring to help conceal more than $1.2 billion from the IRS.

While Julius Baer has said the size of a potential fine remains unclear, legal and accounting costs related to the U.S. matter totaled 38 million francs in 2012. The bank said last year that it exited the U.S. private client business between 2009 and 2011.

Avoiding Prosecution

UBS AG (UBSN), the biggest Swiss bank, avoided prosecution in 2009 by paying $780 million, admitting it fostered tax evasion and giving the IRS data on more than 250 accounts. That deferred prosecution agreement and the handover by UBS of a further 4,450 accounts set a precedent for current negotiations between the two governments and for cooperation between the U.S. and the individual companies.

Julius Baer approached U.S. officials in a bid to clinch an agreement similar to that secured by UBS to shield it from prosecution, Tages-Anzeiger reported today, citing “several independent sources.” Swiss Finance Minister Eveline Widmer-Schlumpf wanted a political agreement with the U.S. to cover all Swiss banks and barred Julius Baer from pursuing talks, the newspaper reported.

The Swiss Federal Administrative Court in April last year ruled that a U.S. request for information under the 1996 treaty wasn’t precise enough, blocking the proposed handover of client data by Credit Suisse Group AG. The court reversed that ruling in March after a more detailed request from the IRS, Tages-Anzeiger reported that month.

Negotiator Quits

Widmer-Schlumpf said that the signing of an agreement to resolve the offshore tax dispute with the U.S. was imminent, Tages-Anzeiger reported last week. Michael Ambuehl, Switzerland’s top negotiator with the U.S. on the tax deal, will step down at the end of August.

Julius Baer is investing in onshore businesses in Europe and in faster-growing emerging markets while it tries to resolve issues with former U.S. customers. Raymond Baer, honorary chairman of the firm, has led a special committee overseeing the company’s cooperation with U.S. authorities after standing down from the board of directors in April last year.

That’s allowed Chief Executive Officer Boris Collardi to spend more time integrating Merrill Lynch’s non-U.S. wealth management units acquired from Bank of America Corp. in August.

Julius Baer started transferring Merrill Lynch’s Hong Kong and Singapore businesses to double the firm’s managed assets in Asia, the bank said today. Julius Baer has already added 24 billion francs of Merrill assets, including units in Switzerland, Uruguay, Chile, Monaco and Luxembourg. The deal may boost assets by as much as 72 billion francs by 2015, the bank said.

To contact the reporters on this story: Giles Broom in Geneva at gbroom@bloomberg.net; Catherine Bosley in Zurich at cbosley1@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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