UBS fined $780 million in tax evasion scandal

Feb 19, 2009 @ 1:15 pm

By Sara Hansard

UBS AG, Switzerland’s largest bank, will pay a total of $780 million in fines, interest and restitution to avoid U.S. prosecution on charges that it helped thousands of wealthy Americans evade taxes.

The Zurich-based bank will also disclose the names of some secret bank account holders.

The agreement was accepted by U.S. District Judge James I. Cohn in Fort Lauderdale, Fla., the Department of Justice announced today.

UBS “has agreed to immediately provide the United States government with the identities of, and account information for, certain United States customers of UBS’s cross-border business,” the Justice Department said in a release. UBS has also agreed to “expeditiously exit the business of providing banking services to United States clients with undeclared accounts,” according to the release.

The Justice Department brought criminal charges against UBS for conspiring to defraud the United States by impeding the Internal Revenue Service. In 2000, after UBS bought brokerage firm Paine Webber Group Inc. of New York, the bank entered into an agreement with the IRS that required it to disclose information for its U.S. clients holding U.S. securities in their accounts.

To evade those reporting requirements, UBS executives helped U.S. taxpayers open accounts in the names of sham entities, the Justice Department said.

“UBS sincerely regrets the compliance failures in its U.S. cross-border business that have been identified by the various government investigations in Switzerland and the U.S. as well as [by] our own internal review,” Peter Kurer, chairman of UBS AG, said in a statement. “We accept full responsibility for these improper activities,” he said, adding that client confidentiality, a hallmark of the Swiss banking system, “was never designed to protect fraudulent acts.”

UBS will implement a program of internal controls as well. The Justice Department has agreed to defer prosecution of the company for at least 18 months to see if UBS satisfies its obligations under the agreement.

In an action announced yesterday by the Securities and Exchange Commission, UBS agreed to settle civil securities charges that it acted as an unregistered broker-dealer and investment adviser to thousands of U.S. citizens and offshore entities from at least 1999 through 2008. UBS agreed to stop violating U.S. securities laws.

The SEC said in a release that UBS conducted business through advisers located primarily in Switzerland who were not associated with a registered broker-dealer or investment adviser. The advisers traveled to the United States two to three times per year, attending exclusive events such as yachting events that were often sponsored by UBS in order to solicit American clients.

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