America’s Most-Wanted Swiss Bankers Aren’t Hard to Find
With its tan marble floors and leather-clad reception desk, the staid Zurich offices of the Julius Baer Group, one of Switzerland’s largest private banks, are an unlikely place to find an alleged fugitive from American justice. And yet it’s here that I meet Fabio Frazzetto. Almost four years ago a federal grand jury in Manhattan indicted Frazzetto, a longtime client adviser for the bank, charging him with conspiring to help dozens of wealthy Americans conceal hundreds of millions of dollars from the Internal Revenue Service by using undeclared accounts, code names, and foreign relatives.
When I pay an unannounced visit to Julius Baer in February, it takes only a few minutes before Frazzetto comes out and greets me, wearing a well-tailored pinstripe suit. He is polite but declines to speak at length. His legal status is “certainly uncomfortable,” he says, and he can’t leave Switzerland without risking arrest. His office has become something of a gilded cage. “I have a very pleasant employer,” he vaguely explains. “That’s what I always say.” (Julius Baer declined to comment on Frazzetto’s indictment.)
For decades, Switzerland has occupied an outsize role in the world of shady international finance. The country’s strict secrecy laws have made it the offshore banking destination of choice for U.S. tax evaders, Russian oligarchs, Nigerian kleptocrats, and Brazilian money launderers. According to research by Gabriel Zucman, an assistant professor at the London School of Economics, Swiss banks still hold at least $2 trillion that customers haven’t declared to tax authorities in their home countries. “You’re not a self-respecting Swiss bank if you don’t have some dodgy money floating around your system,” says Martin Kenney, an attorney in the British Virgin Islands who specializes in international fraud.
Since 2008 the U.S. Department of Justice and the IRS have been waging an uneasy war against Swiss banks that enable tax evasion. UBS Group and Credit Suisse Group have paid a combined $3.4 billion in U.S. fines, penalties, and restitution. Wegelin, the country’s oldest bank, closed its doors entirely in 2013 after pleading guilty to conspiracy to evade taxes. In a break from long-standing policy, the government of Switzerland has pledged in recent years to share bank information with tax authorities around the world. But it gets to choose the countries with which it will exchange that data—sort of the financial equivalent of the dating site Tinder, says Andres Knobel, an attorney at the Tax Justice Network, a nonprofit. “There is no way to guarantee they will exchange information,” he says.
Some of the biggest Swiss banks, such as Credit Suisse, have turned over few names of customers with undeclared accounts. And they’re equally reluctant to take action against their employees. Credit Suisse—which in 2014 pleaded guilty to conspiracy to help Americans file false tax returns and agreed to pay the U.S. and New York state $2.6 billion—kept three indicted bankers on its payroll for almost three years after they were charged, despite their failure to respond in court. That ended last May when the New York State Department of Financial Services required the three bankers’ employment be terminated as part of a settlement.
Swiss authorities, however, have refused to hand over any bankers—and the U.S. hasn’t asked for them. At least 21 financial advisers in Switzerland under U.S. indictment remain at large, making them fugitives in the eyes of the American government. Their acts aren’t considered crimes under Swiss law, so the country won’t extradite or prosecute them. Several still work in the Swiss financial industry, offering tax advice and other services. Some still have U.S. clients.
The only Swiss adviser to receive a significant U.S. prison sentence? Bradley Birkenfeld, the former UBS banker who first revealed the widespread practice of Swiss banks setting up undeclared offshore accounts for wealthy Americans. None of the other Swiss bankers and lawyers who pleaded guilty have been sentenced to prison time.
I recently traveled around Switzerland, following the trail of indicted advisers and their colleagues. Some expect to spend the rest of their lives in the country, fearing arrest if they leave. Many complain that their superiors got off while they’re stuck in a state of Roman Polanski-type legal limbo. Still others hide behind locked doors.
At least four I talked to have decided to face the music: pleading guilty in the U.S. and cooperating with prosecutors. What persists is an indignation about being targeted for just following orders—and a sense that, despite their indictments, the Swiss banking system remains dirty.
The drab suburb of Dietikon is a 15-minute train ride from Zurich. Across from the station sits a utilitarian cement building with a COOP supermarket on the ground floor. Emanuel Agustoni, a former Credit Suisse banker indicted in 2011, runs a tiny investment advisory firm on the third floor. Behind his desk, the wall is lined with clocks with the times in New York, Singapore, London, and other financial capitals. A flatscreen TV mounted above an espresso machine is tuned to Bloomberg Television.
When I show up, Agustoni is happy to discuss his case and talks for more than two hours. U.S. prosecutors say he helped American clients set up secret accounts while he was working for Credit Suisse. They allege he later helped them move their money to other, smaller Swiss banks to avoid detection by the Department of Justice. A round man with thick, graying hair, the 54-year-old Agustoni sits on a black faux-leather couch. His black shoes are fading. He complains that he’s a scapegoat, noting that few at the bank’s upper reaches have had legal trouble. He chuckles over how outgoing Credit Suisse Chief Executive Officer Brady Dougan blamed the bad behavior on “a small group” of bankers.
“Of course they knew,” Agustoni says of top executives. “It wasn’t just the U.S., it was all markets—South America, Asia.” Blaming the banks’ conduct on a handful of employees is “a cheap excuse. It’s a lot of money.” The bank declined to comment on that contention. (For the record, Credit Suisse is paying Agustoni’s legal bills—$1.5 million so far.) He says he had a “don’t ask, don’t tell” policy with clients. “I never asked, ‘Do you pay taxes or not?’ ” he says. Pressed further, he acknowledges he “could guess” those clients weren’t reporting the income on their tax returns. He worries he can’t defend himself in the U.S. without violating Swiss bank secrecy laws. “I didn’t do anything wrong,” he says.
Agustoni’s former Credit Suisse boss, Markus Walder, who ran the company’s North American offshore banking business, approved his actions, he says. Walder, charged in the same indictment as Agustoni, also hasn’t responded in court. He’s an independent business consultant in Zurich, according to his LinkedIn page. He declined to comment.
Since he was indicted, Agustoni has lost most of his business, he says, and is down to nine customers. He used to earn about 300,000 Swiss francs a year; now his annual income is about 65,000 Swiss francs—roughly $66,000. He drives a 2006 Citroën and says he lives in a small apartment. He’s tried, and failed, to get the Swiss government to intervene on his behalf. Now he feels left out in the cold. The biggest Swiss banks have cut deals with the U.S., saved their top executives from prosecution, and “I am still on my own.”
Hans Thomann, a former UBS client adviser, was indicted in 2012. The U.S. alleges Thomann, 65, conspired with UBS and Wegelin to hide bank accounts for wealthy Americans, transporting bundles of cash—as much as $140,000 at a time. “We were never told you can’t do this, you can’t do that,” says Thomann of his former bosses at UBS. “I was not a tax expert.” (UBS declined to comment on Thomann’s case.)
Thomann says he can’t afford a lawyer, and UBS won’t pay his bills. “The indictment has ruined my life,” he says in a thick Swiss-German accent. “I lost my job, my reputation, and my health.” Ruddy-faced, with a shock of gray hair, he’s recovering from multiple hip operations. He takes eight medications a day and says he’s losing his memory. He lives on a pension of about 40,000 Swiss francs a year—down from about 150,000 a year in earnings when he was an adviser.
Like Agustoni, Thomann insists he’s a tiny part of a larger system. The only top UBS executive to face criminal charges was Raoul Weil, whom a Florida jury acquitted after barely an hour of deliberations late last year. (Weil was a fugitive for almost five years before his arrest in Bologna, Italy, in 2013.)
Asked about the numerous occasions on which he handled bundles of cash, Thomann’s explanation grows cloudy. He starts talking about friends owning restaurants and dry cleaners with access to lots of cash. He “just wanted to help” his clients, he says. But what possible reason was there to transport bundles of cash? He eventually concedes: “This was a mistake I made.”
Edgar Paltzer was once one of Switzerland’s best-known lawyers, receiving the top ranking in legal magazines for helping rich clients minimize taxes when transferring wealth to their heirs. What was not as well known was that Paltzer was helping U.S. citizens stash money in undeclared Swiss accounts, allegedly using a web of corporations in Panama and foundations in Liechtenstein to disguise their ownership and illegally dodge U.S. taxes.
In early 2009, UBS announced a $780 million deferred prosecution agreement with the U.S., and numerous Swiss banks began kicking out American customers holding undeclared funds, fearing the wrath of U.S. law enforcement. Paltzer saw a business opportunity. He encouraged these clients to move their accounts to Bank Frey, founded by one of his law partners. Paltzer’s alleged accomplice handling this stream of customers was a young banker named Stefan Buck.
In April 2013 a U.S. grand jury indicted both men. Born and raised in Switzerland, Paltzer also holds U.S. citizenship. That eliminated the fugitive option, because Switzerland would be more likely to extradite him. Paltzer, also accused of years of other misdeeds, pleaded guilty to conspiracy to commit tax fraud and agreed to cooperate with prosecutors. He was released in New York after he signed a $2 million bond in August of that year. He put up a $500,000 19th century French painting, La Gardeuse de Chèvres (The Goat Herder), by Charles-François Daubigny, to secure his bail.
Paltzer, 58, still has a law practice, with an office on a prime stretch of Zurich’s main shopping drag, the Bahnhofstrasse, across the street from UBS and Credit Suisse. He still specializes in inheritance law and uses Liechtenstein foundations. But he says he’s been flattened. “What’s your reaction when a tsunami hits you?” he asks. “It’s simply a catastrophic period.” Leaning over a meeting table complete with a vase of white, pink, and purple tulips, he wears gold-rim glasses and elegant, albeit slightly worn, attire: a slate-gray suit, a pink Hermès tie, and gold cuff links. His gray hair is thinning. As we talk, he often stares ruefully out the window at the top of nearby Fraumünster Church, rubbing his long fingers together.
Paltzer’s key to his former law firm’s offices was taken away the day after his indictment. He sold a vacation home and has lost 80 percent of his clients, including all the Americans. “Lawyers didn’t want to come to my office for fear the office was wiretapped,” he says. Accepting payment is difficult, because several banks refuse to transfer money to his account. “If the s--- hits the fan, you simply have to deal,” he says with a joyless laugh. The date for his sentencing hasn’t been set.
Buck, Paltzer’s former collaborator, has refused to go to the U.S. to face the charges. He works for a number of ventures, including one seeking investors in uranium mines in Mongolia, and operates out of at least two offices: one in Zurich and another outside St. Moritz, the picturesque ski mountain resort popular with Russian oligarchs. A few months after his indictment, Buck says he spent several days meeting with federal prosecutors and IRS agents at the U.S. Embassy in Vienna. He says prosecutors offered him a deal: If he pleaded guilty, they would recommend no fine or prison time. “I’m definitely not going to plead guilty to something I didn’t do,” he says. He fears that going to the U.S. without an agreed-upon bail could mean months behind bars awaiting a trial. His lawyers recently proposed a $500,000 bail package. But U.S. prosecutors rejected the overture, refusing to negotiate with Buck as long as he stays outside the country, calling him a fugitive.
Buck, 34, claims to have documentation that would disprove U.S. allegations. But “the problem with Swiss banking secrecy is I don’t know if I can use that documentation for a trial,” he says. “It doesn’t make sense if I clear my case in the U.S. and come home and have a second case in Switzerland.”
Asked if he ever travels outside Switzerland, he says obliquely: “I shouldn’t. I will definitely never enter a plane.” He declines to discuss his current business but says the indictment makes it impossible to work in financial services. “I’m happy that I’m in my early 30s and not 50 or 60. I’m in a better situation than most others.”
Zurich has come to resemble an oversize college dorm for indicted Swiss financial professionals. I unexpectedly found one confessed tax-dodge adviser in the offices of another who also pleaded guilty. Most are wary of outsiders. Their lives go on, but they’re looking over their shoulders.
Josef Dörig, a Swiss financial adviser who last year pleaded guilty to helping U.S. clients of Credit Suisse to evade taxes, agreed to cooperate with the government. His firm’s offices are in a high-rise office building in Zurich’s center—three floors below those of Credit Suisse’s trust company. That proximity “exemplified the symbiotic relationship between” the two businesses, according to a court filing agreed to by Dörig and U.S. prosecutors.
Dörig was in his office when I visited. He’s 73 years old and at high risk of a heart attack, according to a letter from his physician filed in court. Dörig, who’s been permitted to travel to Italy for family vacations in Venice, Genoa, and Sardinia, wouldn’t talk to me, citing his indictment. “I kindly ask you not to exist,” he said. In late March he was sentenced to probation and fined $125,000.
My last encounter offered a glimpse into the paranoia that’s the undercurrent of everyday life for some of these men. Matthias Rickenbach is a Swiss lawyer with a master’s degree from the University of San Diego. Federal prosecutors say he conspired with a UBS banker to help Americans evade taxes. In 2009 a U.S. District Court judge declared him a fugitive.
Rickenbach still has his law practice, offering tax advice from a house in the tony suburb of Zollikon, just outside the Zurich city limits. The giant picture window in his corner office offers a gorgeous view of Lake Zurich. Asian art decorates the entryway. When I knock on the front door, an elderly woman, apparently Rickenbach’s secretary, opens it. After I introduce myself, she retreats. A moment later, the door opens again and she hands me his business card. She then disappears once more.
Through the windows beside the door, I can see a man in a dark suit. He’s pressed up against the wall on the opposite side of me, trying to avoid being seen. I can’t tell if it’s Rickenbach.
The woman returns a moment later and says “one of our lawyers” told her she isn’t permitted to hand out the business card. After a brief tussle, she snatches it from my hand and dashes back indoors.
—With David Voreacos and Corinne Gretler