UBS Suffers Setback in Bid to Thwart French Tax Evasion CaseBy
French judges issue non-public ruling on UBS France bid
UBS France sought to become plaintiff in exec’s plea process
UBS Group AG suffered a setback in a long-running French tax probe as a court rejected its bid to stop a former executive from striking a plea deal in the case.
UBS France lost a request to be treated as a victim in deliberations over Patrick de Fayet’s guilty plea, according to a person familiar with the non-public ruling at the Paris appeals court, who spoke on condition of anonymity. Had the French unit been granted the role of a plaintiff, it could have been in a position to thwart the process.
While the French bank said it would appeal to France’s highest court, prosecutors are one step closer to being able to rely on statements from de Fayet to bolster their main case against the bank, which risks a fine of as much as 4.9 billion euros ($5.8 billion).
UBS and its French unit were ordered in March to stand trial for tax fraud after settlement talks broke down over the size of the penalty. Authorities are unlikely to set a date for the trial until the issues over the unit’s request to be a plaintiff are settled.
Zurich-based UBS, which didn’t benefit from a so-called European passport or have a French banking license, is accused of illicitly soliciting clients on French territory and laundering the proceeds of tax fraud, according to a person familiar with the indictment. The bank’s French unit as well as several former employees will have to respond to charges in court that they assisted UBS in the wrongdoing, the person said in March.
The French ruling is the latest twist in a prosecution that has seen UBS post a 1.1 billion-euro bond to cover any potential penalties three years ago and de Fayet make a deal in 2016 with French prosecutors to plead guilty. The plea process still needs the approval of a judge and the consent of any plaintiffs.
French financial prosecutors didn’t immediately respond to requests for comment.
UBS is expanding its operations in France even as it faces trial. The French unit is seeking to accelerate growth in the country by allying with a Parisian private-equity firm, counting on Serge Dassault’s family and former Lazard Chairman Michel David-Weill among investors. Over the past five years, UBS’s French private bank has doubled in size, with 15 billion euros under management.
In the tax case, French investigators accuse UBS bankers of organizing clients events in the country, including golf tournaments and art exhibitions, to encourage residents to move assets to Switzerland, according to prosecutors’ recommendations issued last year, which were seen by Bloomberg.
Switzerland-based UBS bankers, who weren’t allowed to solicit clients in France, took steps “worthy of James Bond” to avoid detection, a former employee of the firm’s French unit said in the prosecutors’ document. The bankers used encrypted computers, had business cards without the lender’s logo and were told to switch hotels regularly, according to the document.
— With assistance by Fabio Benedetti Valentini