US fight against UBS intensifies


UBS says it has done all that it can do and will not provide the names of any more American clients to the United States authorities in a fight over tax avoidance.

This content was published on March 5, 2009

Appearing before a Senate subcommittee on Wednesday, UBS senior wealth management executive Mark Branson said a lawsuit filed by the Internal Revenue Service only hindered efforts to resolve the row.

"We respectfully submit that the IRS is attempting to resolve this diplomatic dispute in a courtroom, which is neither productive nor appropriate," he said. "UBS cannot disclose information to the IRS that would put its employees at serious risk of criminal prosecution under Swiss law."

Switzerland's biggest bank has accepted responsibility for helping thousands of Americans hide assets from the US government but has rejected requests to divulge the names of all US citizens who maintain secret accounts with the bank.

During Wednesday's hearing Branson apologised for the way the bank had conducted itself in the matter, saying that "a very small part of our business ... went badly wrong" and that it was not representative of the bank's business culture.

Senator Carl Levin, a Michigan Democrat who last year helped spearhead anti-tax haven legislation, accused Branson of being evasive.

"The Swiss hold out banking secrecy as a national value in the way Americans prize freedom and democracy," said the chairman of the subcommittee in his grilling of Branson. He added that such secrecy in this case was not a value to be treasured.

"It is part and parcel of a conspiracy to commit a crime under our law," he said.

Criminal prosecutions?

The appeal to solve the matter diplomatically, however, could fall on deaf ears in Washington. At the hearing a top Justice Department official did not rule out the possibility of pursuing criminal prosecutions.

John DiCicco, the acting assistant attorney general for the Justice Department's tax office, testified that UBS executives "certainly knew what was going on" and that the matter was between the American government and UBS. He added that the US was not "going head to head with the Swiss government" and that the Swiss authorities had been cooperative.

American authorities have said that UBS executives travelled to the US with code names for clients and employed counter surveillance techniques in efforts to enable Americans to hide assets in Switzerland.

UBS has already paid $780 million in fines and turned over the names of about 250 US clients to the IRS, which is now demanding that Switzerland's biggest bank divulge the names of 52,000 wealthy Americans who maintain secret accounts with the it. UBS says the number of accounts involved is 48,000.

Branson testified that the bank has already closed roughly 14,000 offshore investment accounts held by Americans. Wednesday was the second time he had appeared before the subcommittee in less than eight months. In July 2008 he told the committee the bank would no longer offer Switzerland-based accounts to wealthy Americans.

International implications

European governments are watching what unfolds in Washington with great interest as officials here prepare for a summit among 20 nations with the strongest economies on the globe.

Levin minced no words when speaking out against Switzerland's tax-haven status, which could soon land it on a G20 blacklist. Were that to happen, Swiss business leaders say the country's image would be deeply tarnished and competitive practices that lure businesses here would begin to unravel.

"The rest of the world is fed up with tax havens," Levin said. The British Prime Minister Gordon Brown told a joint session of Congress on Wednesday that the next G20 summit would indeed tackle the issue of tax havens.

As countries around the world tip into recession, Levin said that the US could no longer allow "this type of fiscal gain".

"We are determined to respond to abuse inflicted on the United States by tax havens," he said. "Even if the IRS wins its case against UBS, the battle against tax havens will not be over."

swissinfo with agencies and Marie-Christine Bonzom in Washington

UBS on the ropes

UBS's dramatic fall from grace started in July 2007, when chief executive Peter Wuffli stepped down following the collapse of the bank's hedge fund Dillon Read Capital Management.

In October 2007, UBS said it would cut 1,500 jobs in its investment-banking arm, including that of its head, Huw Jenkins. Chief Financial Officer Clive Standish left at the same time. Chairman Marcel Ospel stepped down in April 2008.

In October last year, the Swiss National Bank (SNB) was forced to inject SFr6 billion ($5.29 billion) into UBS. A facility was also set up to allow the bank to bin up to $60 billion of toxic assets.

This bailout did not prevent the bank from posting a SFr20 billion loss for 2008. Wealthy clients pulled out $58 billion from the bank in the last quarter alone.

UBS has also been haunted by a US investigation that accused the bank of helping wealthy Americans illegally evade $200 billion in taxes. Last week, it was forced to pay $780 million in fines and hand over some confidential client data.

Last month, UBS chief executive Marcel Rohner announced he would step down, to be replaced by former Credit Suisse CEO Oswald Grübel.

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Top level shuffle

Kaspar Villiger was named the top candidate for the UBS chairmanship yesterday, shortly after Oswald Grübel became CEO.

Villiger was born on February 5, 1941, into a manufacturing family, which produced cigars and bicycles.

After studying engineering at Zurich's Federal Institute of Technology, he joined the family firm, Villiger and Sons, which he managed together with his brother Heinrich.

He entered local politics in 1972 in the cantonal parliament of Lucerne. Ten years later, Villiger entered the federal House of Representatives and moved onto the Senate in 1987.

In 1989 he was named defence minister and switched to finance minister in 1985, a position he held until 2003. He held the rotating Swiss presidency in 1995 and 2002.

After leaving politics, Villiger joined the boards of Nestlé, Swiss Re and the Zurich newspaper NZZ. He will stand down from these posts if elected to UBS. His annual salary would be SFr850,000 ($723,960).

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