Raoul Weil, the UBS bank chair and CEO of global wealth management, has been indicted on charges relating to tax evasion. He is accused of helping US taxpayers hide nearly $20 billion (yes, with a b) in assets from the IRS. After the indictment was made public, Weil, not surprisingly, agreed to step down from his position at the bank.

In his capacity at UBS, Weil had worked with 20,000 U.S. clients. Weil and his management team allegedly referred to the UBS cross-border business as “toxic waste” because they knew that it is not in compliance with US law. The bank has since ceased operations in the $200 million cross-border business.

That feels like an admission that something was wrong.

But does that mean anything will actually happen to Weil? Perhaps not.

The charges that Weil faces are punishable in prison. However, Weil, a Swiss citizen, would have to be extradited to the US to face the charges. Switzerland does not extradite its citizens to the United States and Weil is not likely to voluntarily submit to trial in the US. Throughout the investigation, Weil has maintained his innocence.

Weil is accused of promising clients that their names would not be revealed to the IRS despite the fact that foreign banks have agreed to disclose lists of their American clients. A January 2003 letter to US clients from UBS claims that the bank had been avoiding disclosure since 1939 and would not bow to pressure from the US. The IRS, however, is betting on public pressure to end the practice of overseas banking in order to hide assets. A spokesman has said,

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.

Even more damaging is that the US has been successful in identifying those hoping to conceal assets. The feds claim that they now know the identities of 17,000 – about 85% – of US account holders at UBS.

Much of the allegations has been confirmed by Bradley Birkenfield, another former UBS chair, who is now cooperating with authorities. Birkenfeld has acknowledged advising clients how to conceal their UBS bank accounts.

UBS has indicated that it will work with the US authorities during the investigation. They’d better. There are rumors that the feds may name the bank directly in an additional indictment if top executives like Weil do not cooperate. This could mean more bad news for bank, which is already suffering as a result of the subprime crisis. Bad decisions all around.

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Author

Kelly Erb is a tax attorney, tax writer and podcaster.

Comments

  1. Serves them right. If all people paid their taxes legitimately and on the entire amount required, you can bet your sweet bippy that the USA would be in better straights than it is now!

  2. Oh yeah, if everyone paid everything that they were supposed to that would fix the problem. Not. I think you should send them what is due and I am totally and absolutely against evasion or fraud or anything even approaching that – but the fact still remains that if you send those whiz kids in Washington one single dollar they will spend five. They are busily spending some 790 billion now with no one in charge of where it goes and how it gets there – it seems they can’t decide on who to put in charge – perhaps before they started giving the money away would have been a good time to do that. And I’m almost willing to bet the hold up is because they can’t decide whether a Democrat or a Republican should be in charge…..and we consistently vote for these very same people over and over and over again.

    Skip McQuaid

  3. Demitri Paicos Reply

    The US constitution gaurenties that private papers of individuals be kept private, however the constitution is a worthless piece of paper that is a historical record of a nation that at one time was not a totalitarian state.

    Raul in Spain who has never set foot in the United States, attended schools in Spain and has never left Spain, has no financial interests in the United States because his birth mother was an American. Under Article 14 of the equal protection clause under the law, he is not a criminal because he failed to report his bank account in Spain…
    He is an American Citizen by proxy, but did not know it and while taking a trip to Disney in Florida, he is promptly arrested.

    That is now where the tax law stands.

    Not to worry, China, Russia and whoever else can now play the same game and now with the help of the Justice Deparment, can contrive whatever law suits them and seize U.S. Assets..

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