Swiss Bank UBS Could Face a Record-Breaking Tax-Evasion Fine

When the U.S. fined Credit Suisse Group $2.6 billion in May, the Justice Department said it was the biggest penalty ever in a criminal tax-evasion case. That record could soon be shattered. France could impose a fine of €4.9 billion ($6.2 billion) on another Swiss bank, UBS, for allegedly helping its French clients hide money in offshore accounts.

French investigating judges have determined that UBS helped its French clients conceal about €9.8 billion from tax authorities, Bloomberg News reports today, citing a person with knowledge of the case. The potential penalty for such an offense is half the amount concealed, the person said. Shares in UBS, Switzerland’s biggest bank, slumped as much as 3.2 percent on the news.

Swiss newspaper Le Temps offered additional details on the case today, reporting that it had seen a copy of a report by the French judges, who concluded that the “business model of UBS Switzerland was to offer its clients bank secrecy, in contradiction to fiscal authorities.”

In a statement today, Zurich-based UBS said: “The base for any calculations in this matter are completely artificial, speculative, and not based on facts. This matter is currently still in the stage of a formal investigation, and we will continue to defend ourselves strongly.”

UBS on Sept. 22 lost a French court appeal of an order to pay €1.1 billion bail against potential penalties in the case. Bloomberg, citing a person familiar with the situation, says the bail was posted on Sept. 30.

The bank has vehemently protested France’s handling of the case. Chief Executive Sergio Ermotti told Bloomberg Television on July 29 that French authorities had demanded the €1.1 billion bail when they were in “advanced discussions” with UBS about a “double-digit million” settlement. UBS officials also have criticized the leaking of French investigative documents.

The potential French penalties dwarf earlier payments made by UBS to settle tax-evasion investigations. In 2009, the bank paid $780 million to the U.S. to avoid prosecution, after admitting it helped thousands of Americans evade taxes and agreeing to turn over information on their accounts. It paid about €300 million earlier this year to settle a tax-evasion probe in the German state of North Rhine-Westphalia. UBS also is under investigation in Belgium on suspicions of money laundering.

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