Senate Probe's Targets Give to Campaigns
Friday, August 1, 2008
Bank officials named in an unfolding Senate investigation have directed more than $2 million into this year's congressional and presidential campaigns, some of it arriving just as investigators finished a report accusing the bank of helping clients hide billions of taxable dollars from the Internal Revenue Service.
At the heart of the probe is UBS of Switzerland, one of the world's largest banks, which in June alone distributed $98,000 to members of Congress through its political action committee. In July, the Senate Permanent Subcommittee on Investigations completed its report on UBS's role in helping wealthy investors shield money from federal taxes.
Bank spokeswoman Rohini Pragasam said the donations were "categorically not connected" to the Senate inquiry. The bank also is under scrutiny by the IRS and the Justice Department.
But campaign finance records show that expanded political giving is an approach shared by UBS and other key figures in the Senate's probe of offshore tax shelters that are costing the government $100 billion a year.
Experts say that political contributions may offer an effective strategy for dealing with legal, regulatory and financial problems. Before the Senate inquiry began, UBS faced trouble with investors over financial losses that left its shares at a 10-year low.
"Corporations use PACs for different purposes at different times," said Brett G. Kappel, a campaign finance lawyer. "When they need congressional assistance, they use the PAC to build relationships to work towards achieving a legislative goal. Other times, when they have involuntarily become the object of congressional interest, they use the PAC to build relationships in an effort to avoid negative legislation."
UBS always has been a major donor in Washington, in addition to spending close to $1 million a year on lobbying. The bank has spent more on the 2008 elections, which are still more than three months away, than during the entire 2006 cycle. The UBS political committee distributed $2.21 million to politicians and political groups over the past 18 months. The chairman of UBS Americas, Robert Wolf, helped raise more than $250,000 for Sen. Barack Obama's Democratic presidential bid. And another top executive at UBS, former senator Phil Gramm, was until recently a close adviser to Sen. John McCain's Republican campaign.
Pragasam noted that Wolf's role in the Obama campaign predates the Senate investigation by more than a year, and that Wolf oversees the bank's American operations, while the Senate probe is focused on the activities of UBS offices in Switzerland.
"He was a very early supporter of Senator Obama, and began that support long before the Senate investigation into tax havens," she said.
In addition to their focus on UBS, Senate investigators also have asserted that billionaire Peter Lowy hid $68 million in LGT Bank, a Liechtenstein institution. Last week, Lowy invoked his Fifth Amendment right against self-incrimination rather than tell the Senate panel about his financial activities.
The son of an Australian shopping mall mogul, Lowy is a prolific political donor who has doled out $92,000 to members of Congress from both parties, including $53,500 to Democratic Party committees. Lowy and his wife also have given $8,400 to McCain's presidential campaign committees.
Executives from Westfield, the mall company he helps run from his Los Angeles office, have given an additional $7,300 to McCain and $6,300 to Obama, according to public records.
Lowy's attorney, Robert S. Bennett, said he had no idea what motivated his client's contributions. "Why does anybody give?" Bennett said. "He's very interested in politics. And he gives to both sides."
Bennett called the Senate hearing a "typical Washington show," noting that the committee's report was finished by the time Lowy was asked to testify.
"Peter Lowy never took any action to hide his ownership in anything," Bennett said. "Peter Lowy did not do anything improper or illegal or unethical."
Political contributions have not shielded UBS or Lowy from intense Senate scrutiny or from the public embarrassment that followed the release of the July 17 report detailing the lengths to which they went to shield money from the IRS. In one instance, a UBS banker described purchasing diamonds abroad and then concealing them in a toothpaste tube to smuggle them to his American client.
"The iron ring of secrecy around tax haven banks and their deceptive banking practices enable and encourage tax cheats to hide assets from the United States," Sen. Carl Levin (D-Mich.), chairman of the investigations subcommittee, said in a statement issued upon release of the report. "Congress needs to enact strong penalties on tax haven banks that help U.S. taxpayers avoid paying taxes to Uncle Sam."