UBS’s Elaborate Program to Defraud the United States

June 9th, 2009

If ever there was doubt about the role that banks actively play in tax evasion, the following article has laid it to rest.  An article published by Bloomberg this week shares the thoughts of Bradley Birkenfeld, a former UBS private banker and admitted felon.  From Bloomberg:

“This was a massive machine,” Birkenfeld told Senate investigators on Oct. 11, 2007. He said UBS bankers crisscrossed the U.S. — without required licensing from the Securities and Exchange Commission — to find wealthy American customers…

As many as 60 UBS private bankers trolled for clients at UBS-sponsored art shows, yachting regattas, and golf and tennis tournaments, Birkenfeld said.

He toted customer checks to deposit in European banks and bought diamonds for one client, smuggling them to the U.S. in a toothpaste tube, he said in pleading guilty to conspiracy in federal court in Fort Lauderdale, Florida, in June 2008.

By serving as couriers, the UBS bankers enabled clients to sidestep a U.S. surveillance system that reviews large cash transfers. That program is intended to prevent fraud, money laundering and the movement of funds by terrorists.

And there’s more:

The bank had extensive schemes to avoid getting caught by U.S. regulators, Birkenfeld told Senate investigators. UBS bankers carried encrypted laptop computers, and the Swiss bank trained its staff to dodge detection by U.S. authorities.

The bankers falsely said on customs forms that they were traveling for pleasure, not business, and told clients to destroy offshore records that could be tied to UBS, Birkenfeld said in his guilty plea.

“Very few people would have imagined the level of complicity of the UBS bankers and executives,” says Josh Ungerman, a tax lawyer at Meadows, Collier, Reed, Cousins & Blau LLP in Dallas. “It’s almost unbelievable that a major worldwide bank that was as well respected would have employees engage in that type of behavior.”

These are clearly not the acts of an innocent bank, harmlessly accepting money that they didn’t know violated the law.  UBS actively sought out wealthy Americans – in a James Bond-esque fashion nonetheless – and persuaded them to place their money in tax shelters.  Indeed the actions of UBS almost make the tax evaders themselves look like victims (I said, almost… it would take an exceptionally thick individual to assume that their banker was acting legally after he’s offered to transport their diamonds via toothpaste container!).

While some people may argue that lower tax rates are good for business, nobody can argue that smuggling diamonds in toothpaste containers, lying on customs declaration forms, and destroying evidence are legitimate actions.

Written by Clark Gascoigne

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