The U.S. Justice Department dismissed a landmark criminal case against UBS AG that prompted the bank to admit it helped Americans evade taxes.
Prosecutors said today that Zurich-based UBS, the largest Swiss bank, complied with an 18-month agreement signed in February 2009 to defer prosecution on a charge of conspiring to defraud the U.S. by helping 17,000 Americans hide accounts from the Internal Revenue Service.
As part of the agreement, UBS paid $780 million, admitted fostering tax evasion from 2000 to 2007 and handed over account data on more than 250 U.S. clients, piercing the veil of Swiss bank secrecy. UBS later turned over information on 4,450 more accounts. Prosecutors said UBS honored its pledge to end its cross-border business and cooperate with the government.
“The United States agreed that if UBS AG fully complied with all of its obligations,” the case would be dismissed, Justice Department lawyers said in a motion in federal court in Fort Lauderdale, Florida. “The United State believes that dismissal is appropriate.”
Karina Byrne, a UBS spokeswoman, declined to comment.
The UBS case has been a centerpiece in a U.S. crackdown on offshore tax evasion. Since the deferred-prosecution agreement, the Justice Department has filed criminal charges against 17 UBS clients in the U.S., two UBS bankers and three others accused of aiding tax evasion. At least 150 other people are under criminal investigation, the Justice Department has said.
‘End of Secrecy’
“This case was the end of bank secrecy in Switzerland,” said tax attorney Robert Fink of Kostelanetz & Fink LLP in New York. “It was the most significant tax case as far as revenues are concerned in U.S. history.”
One day after signing the deferred-prosecution agreement, the U.S. sued the bank, seeking data on 52,000 Swiss accounts. UBS settled that case in August 2009, agreeing to hand over as many as 4,500 names to the Swiss government to review before passing them to the IRS.
About 15,000 Americans also voluntarily reported secret offshore bank accounts to the IRS last year, after the tax agency offered to reduce certain penalties and not seek criminal charges.
The criminal probe of UBS gained steamed in 2007 when a former private banker, Bradley Birkenfeld, told U.S. authorities how he and his colleagues came to the U.S. to woo rich Americans, managed $20 billion of their assets, and helped them cheat the IRS. Birkenfeld, who pleaded guilty after being indicted, is serving a 40-month prison term.
In settling the criminal probe, UBS paid $380 million to disgorge profits from its cross-border business from 2001 to 2008, and $400 million in interest, penalties and restitution for unpaid taxes.
Prosecutors said UBS earned $200 million a year managing $20 billion a year in assets for American customers. UBS admitted that as many as 60 Swiss-based private bankers came to the U.S. annually to seek clients and help them set up sham offshore companies in tax havens including Panama, Hong Kong and the British Virgin Islands.
When the deferred-prosecution agreement was announced, then-Chairman Peter Kurer said UBS “sincerely regrets” the compliance failures.
“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,” he said.
The case is U.S. v. UBS AG, 09-cr-60033, U.S. District Court, Southern District of Florida (Fort Lauderdale).