Banker walks free from $20bn tax evasion charges

| 12/11/2014 | 0 Comments
CNS Business

Raoul Weil

(CNS Business): Former head of UBS Raoul Weil has been acquitted by a US federal jury on all charges of conspiring with as many as 17,000 US taxpayers to abuse Swiss bank secrecy to hide $20 billion in secret offshore accounts. Jurors in a Fort Lauderdale, Florida, federal court reached their verdict after deliberating less than two hours. Prosecutors at the trial, which started on 14 October, had attempted unsuccessfully to convince jurors that the 54-year-old Swiss citizen was aware of and helped US clients with the concealment of $20bn of undeclared assets between 2002 and 2007, despite the testimony of former head of the wealth management division for the Americas at UB, Martin Liechti.

Weil, 54, who faced five years in prison, was indicted in 2008 on the charge and was arrested last year in Bologna, Italy, waiving extradition.

Weil, the former number three at UBS, jumped for joy and kissed his wife at the Florida court after jurors returned the not guilty verdict in 90 minutes, with the prosecution failing to show sufficient evidence that he had aided US citizens in hiding billions from authorities.

During the three week trial, Matthew Menchel, the defense attorney from Kobre & Kim, argued that Weil had no knowledge of the scheme to evade US taxes, noting that several US Government witnesses were testifying after receiving generous plea deals from the prosecution.

“There is no document to prove” any wrongdoing, Menchel, said during closing arguments. “There is no evidence in this case, none, zero, that Mr Weil knew about, much less participated or joined in, any criminal conspiracy in which low to mid-level bankers were violating the bank’s policies and laws and actively assisting customers in committing tax evasion.” He told reporters after the verdict: “This is a case that should never have been brought.”

Several of Weil’s former colleagues had already revealed the lengths to which UBS bankers went to avoid being caught, including using a computerized card game to mask secret, hidden laptop hard drives or handing over to a client thousands of dollar bills in interest, wrapped in a newspaper.

Liechti ended his first day of testimony by telling the jury about the 2002 closings of client booking centers in the Cayman Islands and the Bahamas because both had signed US agreements to exchange bank client information.

He also said the IRS had begun cracking down on credit card companies Visa Inc and MasterCard Inc to reveal the identities of card holders with offshore accounts. “It made the business unsustainable,” Liechti said. “A customer who has not disclosed income could be revealed.”

Liechti said Weil, who oversaw the Caribbean operations, was aware of the problem and signed off on his plan to move client assets out of the islands to Switzerland.

In a gamble that paid off, the defence chose to call no witnesses. Its lawyers cast doubt on the reliability of the government’s co-operating witnesses, accusing them of lying to save their own skins. They claimed that Weil was not aware of the rogue actions of his employees, despite accusations of his full awareness of financial exchanges that were against US law since 2002.

“The verdict shows you the difficulty of going after senior management who can at times blame the bank’s customers and lower-level employees for the bank’s mistakes,” Nathan Hochman, a former assistant attorney general who oversaw the Justice Department’s tax division, said of Weill’s acquittal.

Hochman said the prosecution’s use of cooperators implicated in the US probe may also have hurt its chances. “It’s difficult to prove a historical case beyond a reasonable doubt when the government heavily relies on witnesses who have received very favorable treatment,” he said.

Since 2009, more than 70 US clients and three dozen offshore bankers, lawyers and advisers have been charged with tax crimes. More than 100 Swiss banks and 43,000 US taxpayers applied to the US to avoid prosecution over offshore accounts. Credit Suise Group AG’s main bank subsidiary pleaded guilty and paid a $2.6 billion penalty.

As the former head of Global Wealth Management at UBS AG, Mr Weil is the highest ranking banker charged in a US crackdown on offshore tax evasion in which over 100 bankers, lawyers and advisors have been charged since 2008. According to the Wall Street Journal, “the verdict is being interpreted as a setback for the Justice Department’s crackdown on the aiding of offshore tax evasion in Switzerland. But it remains to be seen whether it will embolden the dozens of other Swiss bankers, lawyers and advisors who have also been indicted in the US in recent years to fight the charges against them.”

The acquittal comes as a second blow in less than a week for the Department of Justice’s pursuit of alleged enablers of tax dodging. Former senior vice-president of Mizrahi Tefahot, an Israeli bank, was cleared on 13 October by a court in Los Angeles of charges of helping Americans to cheat the Internal Revenue Service by preparing false tax returns. That case, too, rested on testimony from co-operating witnesses.

The defeat will unlikely dampen the US Justice Department’s crusade against the tax-shy. A Department of Justice spokeswoman said that the collapse of the case against Weil “will not impact the department’s ongoing commitment to holding offshore tax evaders and those who aid them accountable.”

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Category: Finance, Financial Crime

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