Wegelin Shuns US Court Hearing, Legal Fight On Tax Evasion Charges Continues

Nick Parmée

24 May 2012

Wegelin & Co declined to attend a New York court hearing this week relating to allegations by the US authorities that the Swiss private bank helped US clients evade taxes.

Wegelin maintains that the Swiss law that the US attempted to use to serve Wegelin is “not effective to begin the legal process for a US court case, as the Swiss law explicitly states that ‘ hoever accepts a summons to appear before a foreign authority shall be under no obligation to comply.’"

The bank declined to attend partly, it said in a statement, because of the fear that the US court might issue an order that could require it to violate Swiss law.

Wegelin was at pains to stress that, together with its lawyers, it is willing to cooperate with the US authorities and to “resolve the matter within the boundaries of Swiss law.”

Indictment

The indictment of Wegelin was the first in which the US accused a foreign bank, rather than individuals, of helping US citizens commit tax fraud. Wegelin was accused of helping clients hide more than $1.2 billion in offshore bank accounts.

At yesterday's hearing, Judge Jed Rakoff conceded, according to a report by Reuters, that it is "rather hard to arrest a corporation" but asked why US prosecutors had not sought a warrant to arrest individual Wegelin partners.

There is "some reason to believe the Swiss authorities would not execute the warrant," Levy responded, but said he would continue to consider that as a possible option. No Wegelin partner has been charged, Levy said.

Following the accusations against it earlier this year, Wegelin & Co – founded in 1741 – broke up, selling its non-US operations into Notenstein Private Bank, a structure created by Swiss-based Raiffeisen, in a move described by the partners of Wegelin as “extremely painful.” The sale is the most dramatic example yet of how the US authorities’ reach is forcing foreign firms to make significant moves to avoid falling foul of US law.