Raoul Weil, once a powerful UBS AG executive, will return today to a U.S. courthouse where prosecutors said last month he ran a business that used Swiss bank secrecy to help Americans cheat on their taxes.
Weil, 54, will plead not guilty in Fort Lauderdale, Florida, his lawyer said Jan. 5 in an interview. The banker first appeared there Dec. 16, five years after he was indicted for conspiracy and declared a fugitive.
Bail was set at $10.5 million. Weil, a Swiss citizen, was arrested Oct. 2 after checking into a hotel in Bologna, Italy, and was extradited to Florida. As ex-head of Zurich-based UBS’s global wealth-management business, he is the highest-ranking banker charged in a U.S. crackdown on offshore tax evasion.
If he doesn’t cooperate with the probe, prosecutors must prove he oversaw 60 private bankers who helped UBS make $200 million a year by managing $20 billion in assets not declared to the Internal Revenue Service.
“It is a pyramid conspiracy involving the executives, managers, bankers at UBS and the customers,” a Justice Department trial attorney, Mark Daly, told a judge at Weil’s hearing last month. “Weil stands at the very top of that pyramid as a man who oversaw the private bank at UBS. The weight of the evidence is substantially in favor of the government.”
Prosecutors will rely on “substantially” the same evidence that led UBS, the biggest Swiss bank, to pay $780 million in February 2009 to avoid prosecution, Daly said. The bank admitted then that it helped defraud the U.S. by setting up accounts that taxpayers hid from the IRS.
Weil’s attorney Aaron Marcu countered by saying his client didn’t know about a rogue division of bankers because he had far bigger concerns.
Weil spent 25 years at UBS and its predecessor before he became chairman and chief executive officer in 2007 of the wealth management division, the bank’s largest, making him the third-ranking executive, Marcu said. In the five previous years, he headed the wealth management international unit.
“He was at a much, much bigger apex of essentially two thirds of UBS, and he oversaw $4 trillion in assets,” Marcu told the judge.
Swiss regulators concluded that “Weil was not involved and was not aware of any wrongdoing by any of these underlings who were multiple levels below him,” Marcu said. “The weight of the evidence at the very best, very best, is equivocal.”
The regulators said in a report that “a few individual clients advisers” and “their direct supervisors were responsible for this severe misconduct.” The advisers “failed to inform the top management of UBS,” according to the report by the Swiss Financial Market Supervisory Authority, or Finma, released on Feb. 18, 2009.
UBS that day signed its deferred-prosecution agreement with the Justice Department. It admitted that its private bankers created undeclared accounts in the names of offshore companies, met with clients in the U.S. even though they weren’t registered to do so, used encrypted laptop computers, and trained on how to avoid detection by authorities while traveling in the U.S.
The accord followed disclosures to the U.S. about how the scheme worked from a former UBS banker, Bradley Birkenfeld. He pleaded guilty and went to prison -- and won a $104 million whistle-blower award from the IRS.
One of his superiors, Martin Liechti, gave evidence to the U.S. after his detention in Florida for several months as a material witness.
At the Dec. 16 hearing, Daly said two former UBS bankers who pleaded guilty and were sentenced to probation, Christos Bagios and Renzo Gadola, “are required to cooperate with the U.S. in any ongoing investigations.”
Daly also cited the 2011 indictment of another former UBS banker, Martin Lack. He turned himself in to U.S. marshals on Oct. 14, was released on bond, and returned to Switzerland with consent of the U.S.
UBS must cooperate on “any matter related to the government’s criminal investigation” of its cross-border business, according to the deferred-prosecution agreement.
If Weil cooperates with prosecutors, they can urge a judge to give him a shorter sentence. He faces as long as five years in prison.
Weil is accused of conspiring with senior executives at UBS, employees who ran the cross-border business, bankers who serviced U.S. clients and the clients.
At the initial appearance, Marcu said that although Weil never went to the U.S., he also “didn’t go to some exotic African country where he set up a new life” to avoid arrest.
“He didn’t take any steps to avoid detection or arrest,” traveling around Europe and the Middle East under his own name, the lawyer said.
Weil was caught because Italy started requiring hotels to provide guest registers with passports to police every night, Daly said at the hearing. Italian police ran his passport against outstanding warrants and discovered he was wanted in the U.S., Marcu said.
Weil is under house arrest with an unidentified elderly couple in central New Jersey, according to terms of his bail. A global positioning system is monitoring his movements.
Last year, Weil became the CEO of Reuss Private Group AG, which manages more than 4 billion Swiss francs ($4.4 billion) in assets. He was previously an adviser to the company, according to an April statement on the Swiss firm’s website.
Marcu, of Freshfields Bruckhaus Deringer LLP in New York, declined to comment Jan. 5 beyond saying his client intends to plead not guilty.
The case is U.S. v. Weil, 08-cr-60322, U.S. District Court, Southern District of Florida (Fort Lauderdale).