US Tax Investigation Into UBS Could Lead To Indictments - Report

Tom Burroughes

11 November 2008

A US federal investigation into UBS concerning its sale of offshore private banking services to US citizens is concentrating on senior and mid-level executives and bankers, and could result in one or more indictments, people briefed on the matter said yesterday, according to the New York Times.

Investigators are sifting through more than 70 names and related account details of US clients provided by UBS over the last few months to the Justice Department, which has passed the details to the Internal Revenue Service for further scrutiny. The Justice Department and the IRS plan to build both civil and criminal tax-evasion cases against some of the clients, the sources said.

The developments put new pressure on UBS, the Swiss banking giant, which is struggling under heavy subprime losses, and on Switzerland’s centuries-old tradition of banking secrecy. The tradition is being intensely scrutinized by the US and Europe to determine if it helps clients evade taxes illegally.

Prosecutors suspect that UBS illegally helped US clients hide $20 billion in secret offshore accounts, thereby evading $300 million a year in taxes from 2000 to 2007.

In a shift, both the Justice Department and the IRS are pursuing audits of the US clients while the criminal investigation into UBS unfolds. While the agencies recently acquired the power to do both simultaneously, they have not traditionally done so. The IRS and Justice Department declined to comment.