Pictet & Cie, Switzerland’s largest closely held private bank, was used by three Americans charged in a scheme to hide millions of dollars in assets from U.S. tax authorities, prosecutors said.
The three men, indicted Dec. 8 in Phoenix, used Pictet and UBS AG, Switzerland’s largest bank, to set up secret bank accounts not reported to the Internal Revenue Service, according to an April 27 filing. That motion referred to Pictet, which prosecutors called “Swiss Bank A” in the indictment.
Pictet said May 6 that it’s not a target of a U.S. tax-evasion probe after Swiss media suggested the firm may be under investigation. The bank denied that it was a target of U.S. tax authorities, according to a May 6 e-mailed statement.
The case involves Stephen M. Kerr and Michael Quiel, who separately ran venture capital firms, and former San Diego attorney Christopher M. Rusch. In the indictment, prosecutors said Kerr and Quiel, with the help of Rusch, set up secret accounts in 2007 at UBS for entities named Red Rock and Legacy.
In the April 27 filing, prosecutors said Kerr and Quiel “were also the beneficial owners of additional nominee Swiss bank accounts at Pictet & Cie” held in the names of Red Rock and Legacy. In the filing, prosecutors asked a judge to rule that Rusch’s conversations with Kerr and Quiel aren’t subject to the attorney-client privilege because they furthered a crime.
‘Swiss Bank A’
The May 6 statement by Pictet said the bank “wishes to make clear that it is not being accused by U.S. authorities of being in breach of the law of that country. Moreover, we vigorously refute any allegation that Pictet is being targeted by the U.S. tax authorities.”
Charles Miller, a spokesman for the U.S. Justice Department, declined to comment on the case or the bank.
Pictet said the Arizona indictment, “to which we are not party, refers to our bank only as ‘Swiss Bank A,’ thereby confirming that we are not being targeted by these proceedings.”
The accounts “were opened in 2007 by an external asset manager on behalf of two Swiss companies that were set up without any involvement on our part,” according to Pictet.
In 2010, Pictet closed the accounts, according to the bank. In September of that year, U.S. authorities sought documents about the case through a request for “administrative cooperation” to Pictet through the Swiss Federal Tax Administration, according to the bank. Two months later, the bank handed over the file through the SFTA, according to the bank.
Switzerland and the U.S. are holding talks to resolve a Department of Justice investigation involving 11 Swiss financial firms including Credit Suisse Group AG, the nation’s second-biggest bank, Julius Baer Group Ltd. and HSBC Holdings Plc’s Geneva-based wealth unit.
Credit Suisse set aside 295 million Swiss francs ($321 million) for U.S. tax matters in the third quarter of last year. Julius Baer, the wealth manager established in 1890, said the cost of the investigation isn’t “reliably assessable” after the U.S. indicted two employees of the Zurich-based firm. HSBC said last week fines and penalties related to the probe “could be significant.”
Pictet wasn’t on the original list of 11, which also included Wegelin & Co., the first Swiss bank to be indicted by the U.S. on charges of helping Americans evade taxes.
Pictet was overseeing 247 billion Swiss francs for private and institutional clients at the end of 2011, making it Switzerland’s third-largest wealth manager.
Kerr attorney Michael Kimerer said in an interview: “At this point in time, Mr. Kerr is not cooperating in the case. I do not think Mr. Kerr is guilty of what they say. There was nothing wrong with any of the structures he set up, and there was never any intention to evade taxes. Mr. Kerr certainly never intended to cheat the government out of any taxes.”
Rusch was arrested Jan. 29 in Miami after being expelled from Panama at the request of the U.S. government. Rusch attorney Baltazar Iniguez and Quiel attorney Joy Malby Bertrand didn’t immediately return phone calls and e-emails seeking comment.
The case is U.S. v. Kerr, 11-cr-02385, U.S. District Court, District of Arizona (Phoenix).