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November 3, 2014


Ex-UBS Banker Testifies Against Former UBS Chief Executive

The former head of UBS AG (UBSN)’s global wealth-management business, Raoul Weil, referred to accounts hidden by U.S. clients from the Internal Revenue Service as “toxic waste,” at his tax-conspiracy trial.

Martin Liechti, a former UBS banker cooperating with prosecutors, told federal jurors in Fort Lauderdale, Florida, that Weil became aware in 2002 that thousands of accounts opened at the Swiss bank by U.S. clients failed to comply with tax laws.

“Mr. Weil said, ‘The North American business is toxic waste,'” Liechti told jurors yesterday.

Liechti, who signed an immunity agreement with the U.S. in 2008, is the former UBS head of banking in the Americas and the latest in a series of ex-bankers to testify against his former boss. His testimony provides the most direct evidence that Weil knew the firm was helping clients evade the IRS. Weil’s lawyer suggests the U.S. case has been loaded with “rogue” bankers testifying against him in an attempt to save themselves from further prosecution.

Weil, 54, is the highest-ranking official among three dozen foreign bankers, advisers and attorneys charged in a seven-year U.S. investigation into offshore tax evasion. He was arrested last year in Bologna, Italy after being indicted in 2008 on charges of conspiring to help as many as 117,000 U.S. taxpayers hide $20 billion from the IRS.

According to Liechti’s testimony, he and Weil had discussions as early as 2002 regarding how UBS, the largest Swiss bank, could guarantee the accounts were declared to the IRS. Upon discovering the bank would be unable to do so, it looked into ways it might force U.S. clients to either leave the firm or report their accounts to the government. UBS also considered selling the business.

One of the options considered was for UBS to buy a small bank, transfer the undeclared accounts to it and then sell the acquisition. However, Weil thought that method would be too expensive. UBS managed to avoid prosecution in February 2009 by making a deal with the U.S. government.

Liechti wept as he expressed his disbelief upon his realization on Feb. 6, 2008 that the top UBS executive would attempt to pin the tax conspiracy on him.

“I had spent 29 years for this organization,” he said. “Everything I had fought for to tell the bank we should change could suddenly be imputed to my mistake.”

He said he then went and spoke to Weil, who had at one time been a close friend. Weil’s unusually quiet nature throughout the discussion was concerning. Liechti went back to his office and began preparing his defense.

“I wanted to make sure to have all the documents to basically defend myself,” he said.

Source: Voreacos, David, & Nesmith, Susannah, “Ex-UBS Banker Called Accounts ‘Toxic Waste,’ Jury Told,” The Wall Street Journal, October 23rd, 2014


Offshore Accounts/International Tax Disputes