Bradley Birkenfeld

Second Florida Yachting Exec Charged In UBS Tax Shelter Probe

Moe Tkacik | April 15, 2009, 12:07PM

Another rich client of UBS has been charged with using Swiss banking secrecy laws to evade taxes: it's Robert Moran, who failed to declare a $3.7 million account with the bank on his 2007 tax return.

Like Steven Michael Rubinstein, who earlier this month became the first UBS client charged in the investigation, Moran is a Florida yacht dealer charged with a single count of tax fraud. The Times specifies that the two are "not connected" except inasmuch as theirs were two of the 285 names the ailing Swiss bank, which today announced it would cut another 7,500 jobs after posting a $1.8 billion loss, handed over to the IRS earlier this year as part of a $780 million settlement into its tax evasion business.

Yachts were a "fertile recruiting ground" for UBS, according to Bradley Birkenfeld, the former UBS private banker whose "statement of facts" in the criminal probe of his role in the bank's tax evasion business provided the basis for much of the larger investigation. And Moran is a resident of Lighthouse Point, Florida -- also an address used by Birkenfeld's most famous client Igor Olenicoff, the billionaire real estate developer for whom Birkenfeld once laundered cash by traveling to the United States with a toothpaste tube full of diamonds. Birkenfeld's statement confesses to "numerous overt acts [of tax fraud] in Broward County," where both Rubinstein and Moran reside. Both men appear to be cooperating in the investigation.

So who boarded those fancy yachts, one of which can be chartered for the reasonable price of a million dollars a week plus expenses?

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UBS

Rich People Sobbing In Fear As UBS Bars Swiss Bankers From Leaving The Country

Moe Tkacik | April 8, 2009, 2:51PM

Steven Michael Rubinstein, the Art Basel-going yacht builder's accountant from Boca Raton who last week became first American prosecuted in a sweeping probe of tax shelters since the Swiss government ordered the bank to hand over the names of some 300 of its clients to the IRS, was released today on $12 million bail, the latest development in the intensifying probe of tax shelters. But not everyone involved in the investigation of what UBS itself called a "scheme to defraud the American government" is enjoying freedom of movement: also today the Wall Street Journal reports the bank has barred its "client facing" bankers from traveling overseas -- a move "aimed at avoiding further trouble" of the sort UBS bankers like Brad Birkenfeld flirted in the good old days before the crackdown:

Brad Birkenfeld was a frequent trans-­Atlantic flier. He lived and worked in Switzerland, dividing his time between an apartment in Geneva and a house in Zermatt, an Alpine village at the base of the Matterhorn. But his biggest client was in California, and however grueling the trip through nine time zones was, it was worth it...He was willing to go the extra mile for his clients, so he didn't blink when one of them asked him to do something that was blatantly illegal by any country's standard: Buy diamonds with secret Swiss funds and bring them into the U.S. undeclared and undetected.To get them into the country, Birkenfeld had only one option. He had to smuggle them in...So Brad Birkenfeld, a banker at one of the most prestigious institutions in global finance, began jamming his clients' loose diamonds into a tube of toothpaste.

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Wall Street

UBS To Pay Fine, Give Up List Of Clients On Whose Behalf It Schemed

Zachary Roth | February 18, 2009, 6:27PM

The New York Times reports:

Tearing a hole in the veil of secrecy surrounding Swiss banking, UBS agreed on Wednesday to pay $780 million to settle federal claims that it helped wealthy Americans evade taxes and to disclose the names of up to 19,000 clients.

...

Under the agreement, UBS admitted to conspiracy to defraud the Internal Revenue Service.

It's that agreement to give up the names of its wealthy clients that's the big deal here. The bank had been refusing to disclose the names, but appeared to cave with the threat of indictments hanging over its head.

Prosecutors allege that UBS helped clients evade $300 million a year in taxes.

Last fall, Raoul Weil, who ran the firm's global wealth management and business banking division, was indicted in connection with the scheme. And a few months earlier, a former UBS exec, Bradley Birkenfeld, pleaded guilty to helping a client evade millions of dollars in federal income taxes while with the firm.

Barack Obama

Obama Advisory Board Member Is Senior Exec With Firm Under Federal Investigation For Tax Scam

Zachary Roth | February 10, 2009, 7:30PM

Last week, President Obama announced the members of his new Economic Recovery Advisory Board.

And one of the names piqued our interest:

Robert Wolf, Chairman & CEO, UBS Group Americas

That's because UBS isn't exactly the kind of company you'd expect Obama might want to associate with just at the moment. It's the subject of a widening federal investigation, being conducted by both DOJ and the IRS, into its offshore private banking services, focused on allegations that it helped an estimated 19,000 wealthy clients evade billions in taxes.

Last fall, Raoul Weil, who ran the firm's global wealth management and business banking division, was indicted in connection with the alleged scheme.

A few months earlier, a former UBS exec, Bradley Birkenfeld, pleaded guilty to helping a client evade millions of dollars in federal income taxes while with the firm.

Of course, there's no indication that Wolf had any connection to the alleged scheme. But it's worth noting that he and Weil did serve together on UBS's Group Executive Board. So it's not like they don't know each other, it appears. (Weil stepped down from the board temporarily after his indictment.)

You'd think President Obama could have rounded out his advisory board with someone from a firm that's not under federal investigation for helping rich people cheat on their taxes -- especially given the current financial climate. Guess not.

UBS

UBS Exec Indicted For Alleged Tax Scheme

Zachary Roth | November 12, 2008, 1:18PM

Federal prosecutors have filed charges against a senior executive with the Swiss banking giant UBS, for conspiring with fellow bankers and wealthy clients to evade U.S. taxes. The news was announced by the Department of Justice today in a press release which did not mention UBS by name.

According to the indcitment, filed in U.S. District Court in Miami, Raoul Weil, a top wealth management executive with the company, mandated that bankers under his supervision take various steps to conceal from the IRS assets worth about $20 billion, belonging to about 20,000 U.S. clients.

The Wall Street Journal adds an interesting note:

U.S. authorities are negotiating with the Swiss government to gain access to the names of UBS's American clients, a move that could puncture centuries of secrecy surrounding Swiss banking.

UBS

Judge Orders UBS to Give Up Client List

Kate Klonick | July 2, 2008, 9:40AM

As we reported yesterday, the Justice Department sought a court order against UBS, to force the Swiss banking giant to give up the identify of its U.S. shareholders. A long court battle was predicted, and now it has begun.

From the International Herald Tribune:

An order signed by Judge Joan A. Lenard of U.S. District Court in Miami gives investigators the authority to request the information from UBS. A spokesman for the Internal Revenue Service said the agency, which was working with U.S. prosecutors, was expected to serve UBS with a summons for names within several days. The bank can either turn the names over -- an unprecedented move for a Swiss bank under secrecy laws -- or appeal the judge's ruling.

Must Read

Today's Must Read

Kate Klonick | July 1, 2008, 10:00AM

A former senior executive at UBS, who pleaded guilty to conspiring to assist a wealthy client in hiding millions of dollars from taxes, is aiding the Justice Department in their fight to force the Swiss banking giant to give up their ultra-secret client list.

As the Wall Street Journal reports today, the former UBS executive, Bradley Birkenfeld, has shed light on the shady dealings of UBS with its wealthiest clients. Birkenfeld explained how the Zurich-based banking giant coached its executives to conceal assets, from lying on customs forms to smuggling jewels in toothpaste tubes:

Mr. Birkenfeld told U.S. prosecutors that UBS holds an estimated $20 billion in assets for U.S. clients in undeclared accounts. These accounts generated $200 million a year in revenues for the bank, prosecutors said.

. . . UBS trained private bankers in techniques to avoid detection by U.S. law enforcement, including instructing them to indicate on customs forms that they were coming to the U.S. on vacation instead of business, according to court documents.

Prosecutors say Mr. Birkenfeld also explained how bankers advised clients to hide their wealth by purchasing artwork and jewels with funds from Swiss accounts. For one client, Mr. Birkenfeld told prosecutors he smuggled diamonds into the U.S. inside a toothpaste tube.

After weeks of talking with UBS and Swiss banking authorities on divulging the identity of U.S. account holders, the DOJ has finally sought a court order. The so-called "John Doe" summons is usually used by the government to investigate tax fraud "by people whose identities are unknown." It has never been used before against a non-U.S. bank.

Revealing client lists would be a huge blow to UBS and all Swiss banks, who pride themselves on the secrecy and privacy for its clients. The DOJ's filing is likely to spark a long and tedious legal battle-- something not unfamiliar to UBS:

In a 2002 memorandum to clients following UBS's acquisition of PaineWebber, UBS bankers tried to assuage clients' worries that their secrets might be breached as a result of the bank's new connection to a U.S. firm. The memo, filed in court by prosecutors, reads in part: "information relative to your Swiss banking relationship is as safe as ever..."

The memo went on to point out that UBS has been doing business in the U.S. since 1939, without having U.S. authorities gaining "jurisdiction over assets booked abroad....Please note that our bank has a successful track record of challenging such attempts."

And perhaps being caught in the DOJ bear trap has convinced UBS to gnaw off its U.S. brokerage arm, leave the U.S. and head for the safety of the Alps. As the International Herald Tribune reported, UBS is currently in talks to sell off its U.S. wealth management base, PaineWebber.

Brad Birkenfeld

Former UBS Banker Pleas Guilty to Tax Evasion

Kate Klonick | June 19, 2008, 2:02PM

Besides the sub-prime mortgage crisis, UBS has an entirely different set of problems to worry about: the criminal prosecution of their former employees and the possible public exposure of their massive wealth management business.

Bradley Birkenfeld, a former UBS banker in Geneva, pled guilty in a Florida court today, for conspiring to hide $200 million in client assets in order to avoid paying U.S. taxes. The plea is the latest in bad news for the bank, who has its wealthiest clients running for cover as authorities pressure bank officials to give up the names of over 20,000 of their high-net- worth clients.

And it's all because no one wanted to pay their taxes. Birkenfeld and colleague Mario Staggl, currently at large, helped billionaire American real estate developer and owner of Olen Properties Corp., Igor Olenicoff avoid almost $7.2 million in taxes between 2001 and 2006. Olenicoff was sentenced on April 14, 2008 and agreed to pay $52 million in back taxes.

In his statement today in U.S. District Court in Fort Lauderdale, Birkenfeld detailed how he, Staggl and other managers and bankers at UBS had concealed client assets.

From a Department of Justice press release earlier today:

Birkenfeld, managers and bankers at the Swiss bank, and U.S. clients prepared false and misleading IRS forms that claimed that the owners of the accounts were sham off-shore entities' and failed to prepare and file IRS forms that should have identified the true U.S. owner of the accounts.

To further assist U.S. clients of the bank in concealing their offshore accounts, Birkenfeld admitted that he, Mario Staggl, additional private bankers and managers at the Swiss bank, and others advised U.S. clients to place cash and valuables in Swiss safety deposit boxes, and purchase jewels, artwork and luxury items using the funds in their Swiss bank account while overseas. Additionally, they advised the clients to misrepresent the receipt of funds from the Swiss bank account in the United States as loans from the bank; destroy all off-shore banking records existing in the United States; utilize Swiss bank credit cards that they claimed could not be discovered by U.S. authorities; and file false U.S. individual income tax returns that omitted income earned by the clients and fraudulently misrepresented that the clients did not have an interest in and signature authority over accounts held offshore.

. . . To circumvent the requirements of the agreement between the bank and the IRS, Birkenfeld and others conspired to conceal the American real estate developer's ownership and control of the $200 million of assets hidden offshore by creating and utilizing nominee and sham entities, including Bahamian corporations, Liechtenstein trusts and Danish corporations.

According to the DOJ, Birkenfeld and his co-conspirators actions were in direct violation of a 2001 agreement between UBS and the American government, which stated that the Swiss bank would "identify and document any customers who received reportable U.S. source income or would withhold and anonymously pay a 28 percent withholding tax."

The guilty plea is the latest in what has been an ongoing and dramatic investigation of UBS and its Geneva bankers. In April of 2008, Martin Liechti, head of UBS' international wealth management business for the America's was briefly detained while passing through Miami airport. Birkenfeld, who has been talking to prosecutors for over a year regarding this matter, was arrested on May 7 upon entering the U.S. at Logan Airport for a high school reunion.

Staggl, co-founder of New Haven Trust Company Ltd. in Liechtenstein is considered a fugitive and is still at large.