Daily Archives: January 8, 2013

Bank Secrecy: Wegelin

image from wikipedia

Wegelin & Co, the oldest Swiss private bank, said on Thursday it would shut its doors permanently after more than 2 1/2 centuries, following its guilty plea to charges of helping wealthy Americans evade taxes through secret accounts.  The plea, in U.S. District Court in Manhattan, marks the death knell for one of Switzerland’s most storied banks, whose original European clients pre-date the American Revolution. It is also potentially a major turning point in a battle by U.S. authorities against Swiss bank secrecy.  A major question was left hanging by the plea: Has the bank turned over, or does it plan to disclose, names of American clients to U.S. authorities?.. Wegelin admitted to charges of conspiracy in helping Americans evade taxes on at least $1.2 billion for nearly a decade. Wegelin agreed to pay $57.8 million to the United States in restitution and fines. Otto Bruderer, a managing partner at the bank, said in court that “Wegelin was aware that this conduct was wrong.”  He said that “from about 2002 through about 2010, Wegelin agreed with certain U.S. taxpayers to evade the U.S. tax obligations of these U.S. taxpayer clients, who filed false tax returns with the IRS.”..

The surprise plea effectively ended the U.S. case against Wegelin, one of the most aggressive bank crackdowns in U.S. history.  “Once the matter is finally concluded, Wegelin will cease to operate as a bank,” Wegelin said in a statement on Thursday from its headquarters in the remote, small town of St. Gallen next to the Appenzell Alps near the German-Austrian border.  But the fate of three Wegelin bankers, indicted in January 2012 on charges later modified to include the bank, remains up in the air. Under criminal procedural rules, the cases of the three bankers – Michael Berlinka, Urs Frei and Roger Keller – are still pending.,

Although Wegelin had about a dozen branches, all in Switzerland, at the time of its indictment, it moved quickly to wind down its business, partly through a sale of its non-U.S. assets to regional Swiss bank Raiffeisen Gruppe.….Wegelin, a partnership of Swiss private bankers, was already a shadow of its former self – it effectively broke itself up following the indictment last year by selling the non-U.S. portion of its business.

Dozens of Swiss bankers and their clients have been indicted in recent years, following a 2009 agreement by UBS AG (UBSN.VX), the largest Swiss bank, to enter into a deferred-prosecution agreement, turn over 4,450 client names and pay a $780 million fine after admitting to criminal wrongdoing in selling tax-evasion services to wealthy Americans…Banks under U.S. criminal investigation in the wider probe include Credit Suisse, which disclosed last July it had received a target letter saying it was under a grand jury investigation…Zurich-based Julius Baer and some cantonal, or regional, banks are also under scrutiny, sources familiar with the probes previously told Reuters. So are UK-based HSBC Holdings (HSBA.L) and three Israeli banks, Hapoalim, Mizrahi-Tefahot Bank Ltd and Bank Leumi (LUMI.TA), sources also said previously.

Under its plea, Wegelin agreed to pay the $20 million in restitution to the IRS as well a civil forfeiture of $15.8 million, the Justice Department said.  Wegelin also agreed to pay an additional $22.05 million fine, the Justice Department said. U.S. District Judge Jed Rakoff, who must approve the monetary penalties, set a hearing in the case for March 4 for sentencing.  Last year, the U.S. government separately seized more than $16 million of Wegelin funds in a UBS AG account in Stamford, Connecticut, via a civil forfeiture complaint.  Since Wegelin has no branches outside Switzerland, it used UBS for correspondent banking services, a standard industry practice, to handle money for U.S.-based clients.  n court papers, Bruderer said that Wegelin “believed it would not be prosecuted in the United States for this conduct because it had no branches or offices in the United States and because of its understanding that it acted in accordance with, and not in violation of, Swiss law and that such conduct was common in the Swiss banking industry.”

The case is U.S. v. Wegelin & Co et al, U.S. District Court, Southern District of New York, No. 12-cr-00002.

Excerpts, Nate Raymond and Lynnley Browning, Swiss bank Wegelin to close after guilty plea, Reuters, Jan. 4, 2013

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