BERN, SWITZERLAND – Journalists have been hounding the Swiss government for months about the number of US clients of Credit Suisse targeted by the US Justice department and Wednesday evening the information came out, but through a back door: it was tucked into a budget note from the Federal Council. The number of clients whose data the bank turned over to Swiss authorities in order for the government to share them with US authorities is 650, and the expected cost is CHF4.7 million, a tab the government expects the bank to pick up
In addition, the council is requesting CHF1.1m to cover the end of the work linked to a 2009 agreement between Switzerland and the US concerning tax evaders who were clients of UBS.
What isn’t clear from the budget message is where the US and Switzerland are with a political agreement that would cover all Swiss banks, but it appears that the deadline to review the Credit Suisse cases, which is not provided, is linked to the larger discussion.
The information was part of a request by the Federal Council (cabinet) to parliament to approve 13 additional credits, beyond the basic budget, for CHF90 million. Two of the largest projects are CHF14 million for European research organizations including CHF12.2m for Cern, and CHF60 million to encourage technology and innovation in the face of the strong franc. CHF7 million is earmarked for a new alarm system to alert the population and, last item on the list, CHF5.8 million to “cover the cost of the additional work done for the administrative assistance request from the United States, an extra burden linked notably to the Credit Suisse affair.”
The discreet budget item: a request for CHF5.8m to cover the cost of office space, specialists and other expenses linked to the Credit Suisse affair with the US Justice Department
The budget request notes that the US request for administrative assistance was made 26 September 2011 but that work had already begun a year earlier to prepare for such requests to enable Swiss authorities to move more quickly on grouped requests, based on the experience with UBS.
The federal Service d’échange d’informations en matière fiscale (SEI), the office within the tax department which handles information requested by other governments, “was reinforced by taking on temporary staff, lawyers and administrative staff, as well as external collaborators (who had already been hired for the [UBS case]. Additional office space had to be hired and the IT infrastructure had to be adapted to handle the new situation. The additional credits requested (CHF4.7m) must cover the extra costs incurred by the administrative assistance request and concern for the most part (CHF2m) the cost of consultants.”
Credit Suisse will be billed for the total cost, says the Federal Council.
GENEVA, SWITZERLAND – Civil rights leaders and community residents in Florida, USA, are pressing authorities to arrest a community watch volunteer who has admitted shooting a African-American teenager in Florida in self-defense.
George Zimmermann, who shot 17-year-old Trayvor Martin on February 28 as he returned to his father’s girlfriend’s house, has not been charged in the shooting. Zimmermann has identified himself as white, while his family says he is hispanic.
Leaders of the NAACP, American Civil Rights Union and the Nation of Islam called for the arrest at a town hall meeting in Sanford, a small community near Orlando, where the shooting took place. Benjamin Jealous, president of the NAACP said, “The rules of justice in this nation have failed when an innocent teenage boy can be shot to death by a vigilante and no arrest is made for weeks.”
The case has gained national attention as audio recording of calls to the police from Zimmerman and panicked neighbors became public.
The US Justice Department opened Monday an investigation into the case in its Civil Rights Division.
Links to other sources: Huffington Post, New York Times, Los Angeles Times
ZURICH, SWITZERLAND – US pressure on the Swiss banking world appears to have claimed one more victim, with the announcement by St Gallen-based Wegelin, generally considered the country’s oldest bank, to sell most of its wealth management business to Raiffeisen in an effort to protect its employees and clients.
Wegelin one of 11 banks investigated by US, 2 countries finance ministers set deadline
The news comes just a day after Swiss President Eveline Widmer-Schlumpf told reporters in Davos that the US and Switzerland hope to conclude tax treaty talks by the end of 2012. She made her remarks after meeting with US Treasury Secretary Timothy Geithner at the World Economic Forum.
The discussions have been the subject of much media speculation, both for their timeline and a likely financial settlement, with some reports in late 2011 that Switzerland had proposed amounts, information denied by the Swiss Tax Office to GenevaLunch. Bloomberg/Business Week quotes the president as saying that “I have expressed that we’ve been in talks for a year, that we’ve invested a lot of time and energy to propose a fair solution,” adding that the two have discussed amounts and that “our aim, and he agreed, is to find a solution where we won’t be confronted with a question about the past every year.”
Reuters noted that the amounts are “possible fines [Switzerland's] banking industry will have to secure a global civil settlement with US authorities” and that Switzerland “is also trying to get the U.S. Department of Justice to drop criminal probes of 11 banks, including Credit Suisse and Julius Baer. “‘I assume we will be able to sort it out for these 11 banks as well as for the banking sector as a whole,’ she said.”
What next for Wegelin clients, staff
A statement issued by Wegelin and Raiffeisen says that “a substantial majority of clients and staff will be transferred to Notenstein Private Bank Ltd, which will become a 100% subsidiary of Raiffeisen for an undisclosed sum. This transaction enables Raiffeisen to substantially strengthen its position in wealth management. Wegelin & Co. Private Bankers will remain in existence to finalize the closure of all remaining US client relationships and to continue the negotiations with the US justice authorities.”
Swiss president says concern over legality of UK, German deals is EC’s “internal” problem
Swiss President Micheline Calmy-Rey in Geneva 28 November
GENEVA, SWITZERLAND – Switzerland is looking for an agreement with the US that will draw a line on the past, where banks and US tax fraud or evasion is concerned, Swiss President Micheline Calmy-Rey said Monday 28 November. It should include an agreed method for the US to collect tax money in the future while Swiss banking secrecy laws are respected.
“We don’t want to be a place for people who are trying to evade taxes. But we want to sort out past issues, once and for all, and put some order into [things],” she said, referring to ongoing problems between Swiss banks and the US tax arm, the IRS.
“And in the same agreement, we want to deal with the future,” for example through the kind of withholding tax agreement Switzerland struck in August with German and the UK.
“That, in essence, is our position, and it’s the same as it was with the UK and Germany.”
Her remarks were made at a press conference in Geneva Monday afternoon, 28 November where the president was presenting an overview of International Geneva, and its growth in size and importance in the past decade. She earlier attended the opening of the International Conference of the Red Cross and Red Crescent in Geneva.
EU tax commissioner suggests to UK paper the EU might sue Britain
Switzerland, under the UK and German agreements, which have yet to be ratified, is to collect withholding taxes on transactions by financial institutions, then turn over the money to the other countries without divulging the name of the account owners.
But European Union Tax Commissioner Algirdas Semeta told the Financial Times in an interview published Monday morning that he believes Britain and Germany went too far in signing their own bilateral tax agreements with Switzerland. The FT writes that:
“Brussels is threatening to sue Britain unless ministers significantly alter a landmark tax deal with Switzerland, in a dispute that will cast doubt over the £4bn to £7bn of expected proceeds for the Treasury. European Commission lawyers concluded that the bilateral deal, which recovers billions of unpaid taxes in return for protecting the prized secrecy of the Swiss banking system, is in breach of European Union laws that are tougher on tax evasion.”
Micheline Calmy-Rey, Swiss president
Calmy-Rey says this is an internal matter for the European Union, and it’s not for Switzerland to comment on who is competent in this area, the EU or its member states.
Switzerland and the European Union have a tax agreement covering “taxation of savings income in the form of interest payments”, signed in 2004 and revised in 2008 and again in January of this year.
The FT reports indicates that the EU’s pressure on Britain and Germany to renegotiate their deals with Switzerland is causing some friction.
Whether or not Switzerland would be open to new negotiations remains unclear, although the Swiss Bankers Association CEO Claude-Alain Margelisch said last week that “our view is that there can be no renegotiation” and the organization’s priority is to see that all parties are convinced that the agreements are true and fair compromises.
US talks could create new agreement, but form is still unclear
The US-Swiss talks are widely expected to be completed within weeks if not days, but the ultimate form an agreement might take is not yet clear, Mario Tuor, spokesperson for the Swiss Federal Tax Office told GenevaLunch Monday evening. The two countries have a treaty dating back to 1996 that covers tax fraud, still in place, and a new treaty covering tax evasion, which goes before the Swiss parliament in December 2011.
Tuor repeated Calmy-Rey’s assertion that Switzerland also wants an agreement which covers the banks not currently being investigated by the US Justice Department for helping Americans evade US taxes. “The form [it would take] is not yet clear. But it is clear now that we will not need a parliamentary agreement,” which a treaty would require. “We won’t need an agreement that calls for a treaty because it will be based on existing law.”
Switzerland and the US signed a treaty in 2009 that covered an American request for assistance with UBS 4,450 bank accounts, whose owners had not been identified, thus putting the demand outside the existing legal framework.
The talks are raising questions among many Americans who live overseas and who are grappling with the implications for them of tax reporting changes that were designed to prevent fraud by wealthy Americans who live in the US and have offshore accounts.
Lausanne, Switzerland (GenevaLunch) – Monday 20 September is a holiday in much of Switzerland, the Jeûne Fédéral. GenevaLunch, based in Vaud, will be providing limited news coverage. Swiss weekend news highlights include:
SOCIETY – Four people are dead and 17 injured after a woman went on a shooting spree in Loerrach, Germany, near Basel, in a family dispute, setting off an explosion that provoked a fire. Media reports are contradictory, but it appears that the woman shot her former companion, their child and shot at others in a nearby hospital before she was shot dead by police in a shootout (Reuters).
SPORTS – Skier Didier Defago, on crutches Sunday 19 September after surgery for torn knee ligaments Friday, told journalists he has no intention of quitting. The 32-year-old Olympic downhill champion crashed last Wednesday during training in Zermatt, when the tips of his skis touched as he was going 110 kph.
PEOPLE – Russian billionnaire’s Geneva divorce battle now includes one of Florida’s most colourful pieces of property, reports Forbes magazine. Dmitri Rybolovlev, number 79 on Forbes’s list of the world’s wealthiest people, was sued for divorce in Geneva by his wife Elena in 2008. She has now asked the Swiss court to enforce a March court order, according to Forbes, to freeze an 18-bedroom, $48 million (assessed price) home she claims her fertilizer businessman husband is trying to hide behind business structures. The house was sold, reportedly to the couple, by Donald Trump who bought it from another magnate, Abe Gossman, who later went bankrupt.
POLITICS – Switzerland’s efforts to free two Swiss businessmen, Rachid Hamdani and Max Goeldi, have been shrouded in secrecy, but 19 September NZZ newspaper in Zurich reported that a Swiss soldier made a reconnaissance mission to Libya at one point. The newspaper bases its report on a confidential government memo it obtained. The two men were were imprisoned for 1.5 and 2 years respectively by Libya, with Hamdani freed in February 2010 and Goeldi in June 2010. The soldier reportedly traveled as a civilian, with a valid visa.
GENEVA RENTS – Geneva is regularly cited as one of the most expensive cities, with high rent playing a key role, but too much is too much, the president of the finance commission told the Tribune de Geneve, which reports that the justice department is paying CHF196,000 a month rent for a 2,226m2 building on the rue de l’Athenée in central Geneva. It houses, among others, the tribunal for rents and leases.
POLITICS – The US Justice Department announced Friday 17 September that one of the seven people charged with using UBS accounts for tax fraud had been sentenced to the longest prison term yet for such an offense. It also noted that he has been fined $4.4 million for not filing his FBAR forms, “an amount equal to 50 percent of the highest value of his UBS accounts as of December 31 for the years in which he failed to file FBAR.” The lengthy Justice Department news release notes: “Federico Hernandez, a Manhattan-based financial adviser, was sentenced today to 12 months’ imprisonment for hiding $8.8 million from the IRS by using sham companies to conceal his ownership of secret Swiss bank accounts held at UBS AG. Hernandez was one of seven US taxpayers charged on April 15, 2010, with filing false tax returns and related crimes for hiding Swiss bank accounts from the IRS. Hernandez pled guilty that same day to filing five false tax returns. In addition to the sentence of imprisonment, US District Judge Denny Chin imposed a sentence of six months’ home confinement. Hernandez also agreed to pay a civil penalty of $4.4 million. The sentence imposed on Hernandez is the longest term of imprisonment to date for hiding a UBS bank account from the IRS.
Alexandria, Virginia, USA (GenevaLunch) - Details are emerging of the case of Dr Andrew Silva, who pleaded guilty 16 February in US District Court in Virginia to “conspiring to impede the United States” and to making false statements. Silva inherited $250,000 from him mother in 1997. The money, never declared to the US tax authorities, the IRS, was in a British-owned bank in Switzerland. The money grew to $268,000 by the time he tried to take the money out in 2009 when the bank said it was closing his account, a time when a number of banks in Switzerland began to close accounts held by US citizens both outside and in Switzerland. to avoid problems with US authorities.
The US Justice Department Tuesday issued a press release on his case, noting that Silva, a nose and throat specialist and surgeon, could face up to 10 years in prison and a maximum fine of $500,000. He was released on his own recognizance.
“We are capable of thwarting offshore banking schemes because of the increased cooperation among ICE, Postal Service, and the IRS,” says Neil MacBride, US Attorney for the Eastern District of Virginia says in the Justice Department release. “The tax charges in this case came to light because agents caught Mr Silva structuring cash to avoid reporting requirements, and that kind of coordination is making it possible for us to discover Americans who conceal their wealth overseas and make them pay for their actions.” Structuring cash is a term that describes bundling a large amount into several smaller ones, all under $10,000, to slip them into the US to avoid detection or without having to declare the money to customs authorities.
The Justice Department points out that “United States law prohibits individuals from structuring mailings of US currency into the United States in amounts less than $10,000 if the purpose of the structuring was to evade the requirement to file a CMIR.” The CMIR form’s longer name is: FinCen Form 105, Report of International Transportation of Currency or Monetary Instruments, and it must be filed with the US Bureau of Customs and Border Protection.
The government’s description of how Silva tried to get the money out of Switzerland:
Zurich, Switzerland and Miami, Florida (GenevaLunch) – Bradley Birkenfeld was sentenced Friday in Miami, Florida, USA to three years and four months in prison plus a $30,000 fine and three years on probation following his prison term. He is the former UBS banker whose revelations to the IRS, the US tax authority, set off an investigation that led to bank UBS being taken to court and the US and Switzerland negotiating a treaty whereby the Swiss government will authorize the bank to release details of more than 4,000 client accounts. Full story
Update 21 August Miami, Florida, USA (GenevaLunch) - A banker for NZB (Neue Zürcher Bank), Hansruedi Schumacher, and a Geneva and Zurich lawyer, Matthias Rickenbach, both Swiss, were indicted Thursday 20 August in Miami, Florida on charges of conspiring to defraud the US. The two are accused by the US of helping US residents to evade American taxes, including Jeffrey Chernick of New York and John McCarthy of Pasadena, California, two of four UBS clients who recently have been indicted for tax fraud after their names were given to the IRS in February 2009 by the bank, and who turned themselves in.
The two are accused, among other things, of telling “a New York businessman they paid an unnamed Swiss government official a $45,000 bribe for information on whether the businessman’s account would be revealed to US investigators,” Associated Press reports court documents as stating. AP also says the two are in Switzerland and it is not clear if they have US attorneys to represent them.
The New York Times says the new indictments indicate “that the American authorities are starting to pursue smaller players that may have helped Americans hide their money.”
Updated 17 August Geneva and Zurich, Switzerland (GenevaLunch) – International media are playing merry-go-round, speculating over the number of names of clients Swiss bank UBS will be required to hand to the IRS tax authority in the US, in the absence of any serious information: two Swiss newspapers, NZZ‘s Sunday edition and Sonntag over the weekend calculated that 4,500 to 5,000 names will be turned over, citing their own research – and US media.
The New York Times carried a story Friday 14 August where the number 5,000 was mentioned by a Washington, DC lawyer and former Justice Department official with no explanation for how he arrived at the figure.
Update 2, 23:15 Zurich, Switzerland and Miami, Florida, USA (GenevaLunch) – News agency AWP mistakenly published a report Sunday, which was then widely circulated by world media, saying that UBS has been informed by US district court judge Alan Gold in Miami that he will delay hearings scheduled to start tomorrow morning in Miami. The judge is presiding over the case brought by the IRS against the Swiss bank to obtain the names of 52,000 bank clients.
The bank has clarified that a letter written to the judge jointly by the bank and the US government, asking for a delay, will be presented to the judge Monday when the hearing is scheduled to open. The two parties in the case have agreed to ask for the delay to allow the US Justice Department and UBS more time to try to negotiate an out-of-court settlement. Late Sunday night Swiss time the Swiss Foreign Affairs Department confirmed that it supports the request to delay but notes that the negotiations are confidential and no other information will be forthcoming.
Media reports initially noted that the request was filed today, Sunday, which is not correct. AWP/TSR.
Washington, DC (GenevaLunch) – The US Justice Department, in a document obtained by Swiss wire service ATS, is reported to be insisting that it will not relax its stance on Swiss bank UBS. A US federal court in Miami 13 July will hear a civil case brought by the IRS tax authority against the Swiss bank. The IRS says UBS must hand over the names of owners of 52,000 bank accounts. UBS and the Swiss government say it cannot do so because the bank would be breaking Swiss banking secrecy and data protection laws, and that the demand by the IRS in any event runs counter to the existing US-Swiss treaty that covers demands for assistance in criminal cases.
Zurich, Switzerland (GenevaLunch) – Swiss bank UBS will close or transfer Wednesday 1 July, a month early, all US resident bank accounts that are not declared to US tax authorities, an unnamed official of the bank has told Swiss financial news agency AWP (20 Minutes and romandie.ch). The information could not be confirmed Tuesday evening, 30 June.
The report refers to account-holders who were earlier informed by the bank that it would close their accounts if they did not wish to transfer the money to a dollar-based account in the United States.
Washington, DC (GenevaLunch) - The US Justice Department has e-mailed major US media to deny a story that appeared 23 June in the New York Times, calling the report that the government plans to drop a lawsuit again Swiss bank UBS “simply untrue.”
Updated 12:05 Zurich, Switzerland and Washington, DC, USA (GenevaLunch) – UBS, Switzerland’s largest bank, the US Justice Department and the Securities and Exchange Commission Wednesday 18 February signed an agreement designed to end a dispute over the bank’s offshore business with US clients. The agreement is provoking mixed reactions, with the Wall Street Journal saying that the “settlement puts the Swiss bank on the road to closing an embarrassing period,” while there is concern in Switzerland that the speed with which the bank and national banking authority have moved, under pressure from the US, have resulted in Swiss law not being respected. American citizens in Switzerland are also voicing concerns about a likely negative impact of the agreement in the long run on their ability to manage their finances,
