UBS Said to Pay $1.4 Billion Bail in France Tax ProbeFabio Benedetti-Valentini and Helene Fouquet
UBS AG is poised to pay a record 1.1 billion-euro ($1.4 billion) security deposit in a French tax-evasion case as it challenges the allegations and bond demand, according to a person with knowledge of the investigation.
UBS is proceeding with the payment due today after a Paris appeals court last week upheld a July order by French prosecutors, said the person, who asked not to be identified because the matter is private. The deposit covers a potential criminal penalty.
“UBS doesn’t comment on procedural steps,” said Dominique Gerster, a UBS spokesman. The bank, based in Zurich, plans to appeal the bond demand at France’s highest court and it’s also challenging the judicial process, including the right to a fair trial, the lender said on Sept. 22.
French President Francois Hollande stepped up efforts to fight tax dodgers after a former budget minister was forced to resign when his secret account was exposed. Finance Minister Michel Sapin toughened the stance against fiscal evasion with a Franco-Swiss tax accord in June. The French bail equals about 42 percent of UBS’s 2013 net income and it exceeds the combined amount of penalties that UBS has paid in the U.S. and Germany to settle separate tax-fraud probes.
“The difference here is that a European country is setting the bar so high,” said Karim Bertoni, who helps manage $3.3 billion at Pury Pictet Turrettini & Cie. in Geneva. “It’s a way to make an example and in the end the impact will depend on the real situation after a possible trial.”
Any further appeal by UBS to France’s highest court, the Cour de Cassation, wouldn’t suspend execution of the bond order, a spokeswoman for the Paris appeals court said by e-mail today.
UBS, Switzerland’s biggest bank, has criticized the investigation as a “highly politicized process” that hasn’t followed “elementary facets of the rule of law.”
Talks for a settlement between the Paris prosecutor and the bank broke down in July because the lender balked at pleading guilty, people familiar with the events said earlier this month. The two parties had discussions over the illicit marketing acts, one person said.
The prosecutor and the bank can still resume settlement negotiations while the investigation is ongoing and no formal charges are brought against the Swiss company, a person familiar said.
The bank paid $780 million to the U.S. five years ago to avoid prosecution, admitting it helped thousands of Americans evade taxes and agreeing to turn over account data. It paid about 300 million euros to settle a probe in the German state of North Rhine- Westphalia this year, and faces another by authorities in Mannheim, Germany.
The stakes are rising for global banks as authorities in Europe and the U.S. impose stiffer penalties for misdeeds. BNP Paribas SA, France’s largest bank, pleaded guilty in the U.S. in June and paid $8.97 billion for violating economic sanctions against countries including Sudan.
Prosecutors in Siena, Italy, have tried to seize 1.8 billion euros from Nomura Holdings Inc. after accusing the Japanese firm of colluding with executives at Banca Monte dei Paschi di Siena SpA to hide losses. The Nomura case is being transferred to Milan, Siena prosecutors said this month.