Prosecutors accused three Swiss bankers on Tuesday of conspiring with wealthy U.S. taxpayers to hide more than $1.2 billion in assets from tax authorities, and sources briefed on the matter said the three worked for Wegelin & Co, one of Switzerland's oldest private banks.
The office of the Manhattan U.S. Attorney said in a statement that the indictment charges the bankers with trying to "capture business lost by UBS and another large international Swiss bank in the wake of widespread news reports that the Internal Revenue Service was investigating UBS" in 2008 and 2009.
The charges signal that U.S. authorities are moving closer to criminal charges against some Swiss and Swiss-style banks that sold tax evasion services to rich Americans, according to the sources.
Wegelin was not identified in the single indictment filed against Michael Berlinka, Urs Frei and Roger Keller. The three men, who reside in Switzerland, worked for the unnamed between 2005 and 2010 and sold tax evasion services from the bank's Zurich office, the indictment said.
Wegelin, a small bank owned by its managing partners, does not have a United States presence, and the bank carried out its work for approximately 100 U.S. clients through a Stamford, Connecticut, branch of UBS, the giant Swiss bank, according to the indictment. Wegelin "directly accessed the U.S. banking system through a correspondent bank account held at UBS," which the indictment said was in Stamford, Connecticut.
Wegelin could not immediately be reached for comment.
If convicted, the bankers face a maximum prison term of five years under the conspiracy charge.
Pressure On Swiss Banks
U.S. authorities, who suspect that tens of thousands of Americans have been using Swiss banks to avoid paying billions of dollars in taxes, are investigating scores of Swiss banks and international banks with Swiss operations.
Separately, the U.S. Department of Justice is conducting criminal probes of 11 banks, either Swiss or global with major Swiss operations.
The investigations, an outgrowth of scrutiny of UBS, are focused on Credit Suisse AG, HSBC Holdings and Basler Kantonalbank, among others. In 2009, UBS paid $780 million to settle Justice Department criminal charges that the bank helped thousands of U.S. clients hide $20 billion in their accounts.
Swiss authorities want a global civil settlement with U.S. authorities in which the entire Swiss banking industry would pay a fine and shutter their undisclosed private banking services for Americans. That settlement would be handled by the IRS.
"We usually see a charging instrument against senior bankers and managers before there's a charging instrument against a bank," said Jeffrey Neiman, a former federal prosecutor now in private practice. Neiman was involved in the criminal case against UBS as a federal prosecutor in Fort Lauderdale, Florida.
Robert Katzberg, a white-collar criminal defense lawyer in New York with U.S. clients of Swiss banks, said that "this indictment represents additional pressure not only on Wegelin, but all of the 11 banks, to fully cooperate with the United States, and they surely will."
Senior Wegelin Management
The indictment of the three bankers said that members of Wegelin's "senior management" were involved in selling tax evasion services to Americans, and that they did so even after the highly public crackdown on UBS.
Senior managers, including managing partners, the document said, participated in these sales pitches to U.S. taxpayer-clients who were fleeing UBS. The three bankers, along with an unindicted co-conspirator who was a managing partner at the bank, "affirmatively decided to take advantage of the flight of U.S. taxpayer-clients from UBS by opening new undeclared accounts for these U.S. taxpayers" at Wegelin, the indictment said.
The bankers, according to the indictment, "had a long tradition of bank secrecy and, unlike UBS, did not have offices outside Switzerland, thereby making" it "less vulnerable to United States law enforcement pressure."
Still, the Wegelin bankers employed such maneuvers as communicating by personal email, mailing documents through FedEx rather than the U.S. Postal Service, and using sham companies and foundations in Liechtenstein, Panama and Hong Kong to conceal the true owners of the Wegelin bank accounts behind them, the indictment said.