By David S. Hilzenrath
Washington Post Staff Writer
Thursday, November 13, 2008
A senior Swiss banker has been indicted on charges of conspiring to defraud the U.S. government by helping about 20,000 U.S. clients hide $20 billion in assets from the Internal Revenue Service.
The indictment of Raoul Weil, a top executive at Swiss banking giant UBS, alleges that he conspired with a host of others at his bank, overseeing a business that used encrypted laptops, numbered accounts and counter-surveillance techniques to help American customers conceal their identities and evade taxes.
The bank marketed secret Swiss accounts to U.S. clients and generated about $200 million a year in revenue from the operation, according to the federal indictment unsealed yesterday. Bank employees claimed "that Swiss bank secrecy was impenetrable," the indictment said.
The indictment is part of a larger clash between the U.S. government and the tradition of secrecy that has been central to Switzerland's lucrative banking industry. It ratchets up the government's pressure on UBS to relinquish client secrets.
The indictment indicated a possible line of attack against the bank itself, alleging that employees based in Switzerland surreptitiously provided banking services and investment advice in the United States without the proper licenses or registrations. Weil, who turns 49 today, and other executives were warned about improprieties in the cross-border business but would not rein it in because it was too profitable, the indictment states.
Weil's attorney, Aaron Marcu, said his client denied wrongdoing.
"Today's indictment is totally unjustified and without any factual basis. Mr. Weil denies any suggestion that he was aware of, engaged in or tolerated any illegal conduct in the operation of UBS's U.S.-cross-border business," Marcu said in a statement.
Justice Department spokeswoman Alicia Valle said that Weil is believed to be in Switzerland and that Switzerland does not extradite its citizens for any crime.
In targeting Weil, the government has reached into UBS's inner sanctum. UBS's Web site said Raoul Weil was head of UBS's wealth management international business from 2002 to 2007. He has since been promoted and is one of a dozen members of a top management committee that answers directly to the UBS board, according to the UBS site.
In a statement, UBS said Weil would give up his duties until the case is resolved. The company, which stopped providing cross-border private banking services to U.S. clients in July, pledged to cooperate with the investigation.
Other bank employees, including executives "at the highest levels of management," are unindicted co-conspirators, the indictment says.
The indictment, handed up by a Fort Lauderdale, Fla., grand jury, alleges that bank managers organized a meeting in Switzerland with outside lawyers and accountants to discuss "the creation of structures and other vehicles" for clients who wanted to conceal their accounts from tax authorities. Employees helped clients prepare IRS forms that falsely stated such "offshore structures" were the owners of their accounts, the indictment adds. The bank allegedly trained employees to conduct business discreetly by using mail that would not show the bank's name, by changing hotels while traveling, and by using encrypted computers when visiting clients in the United States.
UBS, which has extensive legitimate operations in the United States, has been the focus of investigations by the Justice Department, the IRS and the Securities and Exchange Commission.
The government has been pressing the Swiss to turn over the names of an estimated 19,000 Americans who hold accounts with UBS in Switzerland that have not been declared to the U.S. government. Failing to disclose the accounts can be a federal crime, as can failing to pay taxes on income earned by the accounts.
"Every American who pays his or her taxes should be offended that a select few use anonymous offshore accounts to avoid paying their fair share," R. Alexander Acosta, the U.S. attorney for the Southern District of Florida, said in a news release yesterday.
UBS recently gave the IRS, the Justice Department and the Manhattan district attorney's office the names of about 70 American clients who have accounts with UBS in Switzerland and have not filled out so-called W-9 forms authorizing UBS to disclose information about their accounts to the IRS, a source with access to information about the matter said.
The information UBS provided on those clients related to wire transfers from their UBS accounts in the United States to their UBS accounts in Switzerland, the source said. The clients were not given a chance to object to the disclosure -- a right they would have had if the information were coming from Switzerland, the source said. The source spoke on condition of anonymity to avoid potentially adverse consequences of speaking openly.
Asked for comment on the disclosures, a UBS spokesman drew a distinction between information stored in the United States and information kept in Switzerland. "Client data located in Switzerland has not been provided to the U.S. authorities," bank spokesman Michael Willi said.
The disclosure of the money transfers contrasts with assurances UBS gave clients several years ago, when some feared UBS's acquisition of the Paine Webber brokerage firm in the United States would make it more vulnerable to pressure from the U.S. government.
"We are writing to reassure you that your fear is unjustified and wish to outline only some of the reasons why the protection of client data can not possibly be compromised upon," bank executives wrote in a Nov. 4, 2002, "Dear client" letter. Even if a client refused to sign a W-9 form, the executives wrote, "under no circumstances will his/her identity be revealed."
Staff researcher Julie Tate contributed to this report.