Did UBS Help Rich Americans Hide Billions Of Dollars In Liechtenstein?

Following up on yesterday’s story about a disgruntled computer technician who turned over the bank records from the LGT Bank of Liechtenstein, ABC News says that UBS Bank may have helped set up the secret accounts and been responsible for hiding as much as $20 billion dollars of U.S. money.

From ABCNews:

In court documents, federal prosecutors say UBS bankers helped set up many of the secret accounts in Liechtenstein and, overall, hid as much $20 billion belonging to US citizens.

“Sums are enormous and UBS appears to have been particularly aggressive in the way they marketed their activities in the US and elsewhere,” said Christensen. “So UBS is extremely vulnerable to losing their license in the US.”

One UBS banker, Bradley Birkenfield, pleaded guilty last month and admitted to smuggling cash and diamonds for Americans trying to hide their wealth from the IRS.

In federal court documents obtained by ABC News, federal prosecutors allege that Birkenfield’s bank trained bankers traveling to the US in “techniques to avoid detection” by law enforcement authorities, “including training bankers to falsely state on customs forms that they were traveling into the United States for pleasure and not business”.

There will be Senate committee hearing tomorrow and ABC says that “among those called to testify are foreign bank account holders, including one of the wealthiest men in Los Angeles,” and that the tax dodgers could face criminal prosecution.

Hundreds of Super Rich Under Investigation [ABCNews]

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  1. sikantis says:

    It’s always the best to wait before judging, perhaps we’ll get more information.

  2. speedwell (propagandist and secular snarkist) says:

    Wow, the taxes on that money might pay for a whole day and a half of the war in Iraq.

  3. jst07 says:

    Wow. It would be nice to see all this money taxed finally. I hate when people that avoid taxing when they wouldn’t even notice a drop in their life style had they paid it.

  4. ConsumptionJunkie says:

    This is just the tip of the iceberg. The Cayman islands and Switzerland have secrecy laws so we’ll never know how much money is hidden.

  5. Silversmok3 says:

    If I have to pay almost 20% of my paycheck on taxes for stuff Ill never be able to collect ( social security), so should the wealthy who feel the need to hide their wealth ni foreign banks.

    Matter of fact, make the sentence a restitution fee + 29.999% late fee payable to the government.

  6. katylostherart says:

    yes, yes they did. the job of ubs is to find tax loopholes and make their clients money. that’s all. my dad recently got laid off from them. they lost a ton of money in the mortgage crash and my dad’s actually pretty glad after hearing about this. thinks he got out just in time.

  7. malcs says:

    40% tax on me here in the UK :(

    taxed on absolutely everything that moves in this country all to support a lot of losers on welfare.

  8. mac-phisto says:

    1) losing their license is not enough. “back in the day” violations of this nature resulted in a seizure of any & all bank assets within the u.s. let’s go back to that time.

    2) ubs is not the only bank rumored to do this – supposedly most large banks have unofficial methods of helping you hide their money.

    3) if this doesn’t bother you A LOT, it should. there was a time when foreign banks were not legally allowed to operate in the u.s. & benefit from fdic insurance. today, they can, which essentially means we, as americans, are subsidizing foreign corporations. the least they could do while they operate here is follow the law.

  9. mac-phisto says:

    @mac-phisto: sorry, #2 is helping you hide your money.

  10. bohemian says:

    @ConsumptionJunkie: I believe there were govt. secrecy laws involved in the country the whistle blower worked in too. All it would take is another fed up banker or IT guy to get enough of the right data to do the same thing in other places used as tax havens.

    I hope the IRS makes an example out of the people involved in this in as harsh and as public a way possible. It makes me sick that the uber rich have been getting away with this for so long while the IRS goes after small fish cases where people owe a few thousand dollars or less.

  11. mpacuk says:

    @katylostherart: Just curious. I (still) work at UBS in the IT department which is based in New Jersey. We’ve been hit by some pretty bad layoffs, and have been offered “Voluntary Severance Packages”. Was your dad in the same area? Or in another area that’s getting hit just as hard?

  12. azntg says:

    And the plot thickens… I wonder how this will all go down?

  13. Crymson_77 says:

    @katylostherart: Hope the don’t roll over him in the federal courts…innocent bystanders mean nothing there as it is typically a scorched earth policy.

    @mpacuk: were I you, I would exit with that money in a hurry. Go find a job with Wells Fargo, BofA, WaMu…whoever, just get out of there quick.

  14. Crymson_77 says:

    @Crymson_77: the = they

    sorry

  15. P41 says:

    Uh oh, criminal conspiracy means anybody furthering* the conspiracy is vulnerable. I can imagine how many people are reading up on RICO Racketeering laws. And if anybody lived in New York, look out, Cuomo’s only dialed it back a notch from Spitzer.

    (*including actions which are themselves legal. If Jack and Jill conspire to defraud the US government, and either of them pulls a list of clients out of a rolodex, checks on airline prices to the US, or pretty much does anything but keel over and die the next day, that’s furtherance.)

  16. mpacuk says:

    @Crymson_77: Oh no no, I’m not silly enough to keep my money at UBS. I just work there (for now).

  17. FilthyHarry says:

    That rich people hid their money to hide taxes: duh.
    That they may get caught at it: EPIC

  18. Zephyr7 says:

    @FilthyHarry: Exactly.

    Tax evasion by the rich, and the resulting strain on the citizenry, was a contributing factor in the fall of the Roman empire, along with over-extension of the military. It’s not hard to find similarities with the present day US.

  19. MercuryPDX says:

    @mpacuk: I think he’s saying take the voluntary severance and find another job, and not expressing concerns over your savings account. ;)

  20. pal003 says:

    I’m thinking Phil Gramm is going to be whining soon – from inside a jail cell, I hope. McCain’s economic advisor was involved in Enron, Mortgage industry, and now UBS. I see a pattern here.

  21. parrotuya says:

    Why do wealthy Americans hate taxes so much? They are the lowest taxed people in the world. No matter how rich these people get, it is never enough.

  22. speedwell (propagandist and secular snarkist) says:

    @parrotuya: Suppose all the wealthy CEOs of large corporations in the USA decided, “We have enough money now and we don’t have to make any more,” paid all their employees a decent severance package, and shuttered their companies? Would you like that better? (Show your reasoning.)

  23. JaguarChick says:

    @parrotuya:

    What American, wealthy or not, likes taxes? I get up every day, go to work, and every 2 weeks I get a paycheck with gibberish on it which hands over a certain percentage of the money that I worked for to the government. Then I go home, driving a car that I paid taxes on, fueled by gas that is also taxed, to a house that I pay property taxes, to eat some food that is either taxed or subsidized, and to read the news on my taxed internet service about how Freddie/Fannie spent 200 million dollars on lobbying and now they are getting bailed out. Add that to all of the government corruption (both R and D) and waste and just utter BS that our government does in ‘our best interest’ and I’m just really disgusted with our country at the moment, which is really very sad.

  24. P_Smith says:

    @bohemian: I hope the IRS makes an example out of the people involved in this in as harsh and as public a way possible. It makes me sick that the uber rich have been getting away with this for so long while the IRS goes after small fish cases where people owe a few thousand dollars or less.

    They should, but they’re a little busy targeting some churches’ tax exempt status after said churches criticized the Bush administration. They’ve gotta keep the dangerous ones in line….

  25. Ryan H says:

    @speedwell:
    There is a small flaw in your reasoning. The CEOs don’t own the companies.
    If one day everyone making seven figures or more a year retired all at once there would be a few months confusion as the board of directors/stockholders promoted people to replace them. There would then be another few months/year of work getting back up to speed. A few companies would go under, but would be replaced quickly by the smaller guys that already exist. All in all it might even turn out well since the clean slate would get rid of many of the little kingdoms and pet obsessions.

    Besides, how many people involved in the actual manufacturing process do you think make seven figures? 90% of the assembly lines would keep on going. The truck drivers would still be moving them to the stores and the sales people would still be selling. We might miss one or two product update cycles. Boo f*ing hoo.

    Yeah, there might be a little more damage among the few large privately owned businesses, but how many large, important to the economy business can you name that aren’t public?

  26. joneyman says:

    @speedwell: Ryan H got you there.

    The fact is, you could create legislation that would tie CEO
    compensation (for companies with say, 500 employees or more) to the
    rate at which the lowest paid employee receives. Say 20 to 1. That way,
    a CEO still has incentive to make as much money as possible, but the
    benefits are shared relative to the employees.

    Yeah, you might lose out on some talent on the global market, but
    hey, $500,000 a year is still going to attract some smart people.

  27. legwork says:

    @mac-phisto: 1) losing their license is not enough. “back in the day” violations of this nature resulted in a seizure of any & all bank assets within the u.s. let’s go back to that time.

    It’s guillotine time, baby.

    @ConsumptionJunkie: This is just the tip of the iceberg. The Cayman islands and Switzerland have secrecy laws so we’ll never know how much money is hidden.

    I believe some of those were rolled back or worked around during the absconded Holocaust heir scandal a few years ago and that Switzerland is no longer the best place. At least not for the somewhat rich. The uber rich likely get around whatever laws wherever, unless some Eliot Ness or angry guy comes along.

    This could get interesting.

    //sharpening my pitchforks

  28. crankymediaguy says:

    “40% tax on me here in the UK :(

    “taxed on absolutely everything that moves in this country all to support a lot of losers on welfare.”

    You refer, I assume, to the Windsors, AKA the “Royal Family.”

  29. Snarkysnake says:

    We’ve handed the people that are doing this sort of thing massive tax cuts for the last,oh , 25 years. I guess that is not enough for them. I say that for the people caught doing this, bring the pain. When they have more to fear from being caught than just a fine or “settlement”,then this stuff will stop.

  30. mmstk101 says:

    @crankymediaguy: well played sir, well played.

  31. Wormfather is Wormfather says:

    This is not good. UBS just settled with the IRS for a tax shelter scheme.

  32. vdragonmpc says:

    OH let the IRS hit them with full 70’s debt collector fury…

    I wonder if there is a possibility of some knee breaking too. We have been complaining about people hiding their assets for years. Its great to ‘tax the rich’ but you have to actually GET the money.

    Perhaps the CEO and executive staff will lose their salary and serve some quality prison time in general population. Not sit in the counrty club drinking martinis laughing at the folks prosecuting them.

  33. Veeber says:

    @katylostherart: I think smuggling cash out of the country is not a loophole, it’s blatantly violating the law.

  34. JustThatGuy3 says:

    @mac-phisto:

    #3 Subsidizing foreign corporations? Yeah, you understand how deposit insurance works. Actually, you clearly don’t, but hey, that shouldn’t stop you from posting about it.

    They benefit from deposit insurance because they pay _into_ deposit insurance, just like domestically-owned banks.

  35. lincolnparadox says:

    @bohemian: Perhaps the givernment should be looking for whistleblowers in the Caymans or in Switzerland?

    Man, I would love to see this list. My guess is this case is going to be fast-tracked so that Bush can have his pardon-pen ready, potentially for himself or his own Cabinet…

  36. ASMx4 says:

    I have a hard time getting TOO worked up about all this. Is it wrong and illegal? yes and ubs and the players should face appropriate punishement. One thing I can’t get over though is…it’s far better for private individuals/companies to have/spend that money than for our government to have it…the way they piss it away.

    oh, and spare me the ‘fair share’ bullshit. you and I are NOT paying a nickle more in taxes because some fat cats are stashing some cash. Big Bro isn’t gonna let that little hiccup stop them from spending $$$ like drunkin’ sailors (no offense meant to drunkin’ sailors.)

  37. Doublenix says:

    I’m never surprised at this growing list of ways that people and companies try to hide from their taxes. Sure, limiting the amount of taxes you pay by using completely legal methods is a good thing for everyone. These blatant attempts at dodging taxes they should be rightfully paying is something that needs to corrected. If it isn’t, then more pressure will come down on people and the economy. We all know where that leads.

  38. lonebannana says:

    Well, I am FULLY CONFIDENT that the American Courts will give them their full Punishment.

    God knows that If you are filthy rich, you can pretty much get away with anything–as long as you can afford the Best Lawyers in the Country, and have given a few hundred-thou to the local Politicians campaign…

    Then again… it is the IRS. Capone/Willie Nelson/Snipes…

    However, I am not holding my breath for Justice. I’m just going to try and balance my checkbook and figure out how I am going to pay for gas and all the bailouts for the banks Our Gov’t is helping out.

  39. mac-phisto says:

    @JustThatGuy3: actually, i clearly do, but thanks for playing!

    if ubs were to fail, their premiums would only be a drop in the bucket compared to what the u.s. government (via the fdic, a government agency) would pay out. look at indymac, which experts estimate will cost the fdic (& in turn, the federal government) $4-8 billion.

    do investments owned by the fdic & premiums paid by member banks pay for when banks fail? yes. for now, anyway. but the fdic’s $49 billion in assets =/= the $3 trillion it insures in member banks. so, a strict definition of “backed by the full faith & credit of the u.s. government” means that if all banks fail tomorrow, joe taxpayer foots the bill.

    hell, it doesn’t even take every bank. 10 more indymacs would sap every cent from the fdic’s balance sheets & then some. but don’t worry – there’s only about 92 banks on the watch list (funny, last i remember reading about this back in march, there were 76).

    regardless, foreign banks benefit from this securitization of their business operations. it’s not as if every country offers deposit insurance & even those that do are not backing it by (arguably) the world’s greatest economy. the very presence of that “backed by full faith & credit” pledge allows companies to benefit from the appearance of security.

    & now they’re pilfering our tax dollars. thanks guys!

  40. xsmasher says:

    @speedwell: I suppose wealthy CEOs and large corporations should be permitted to benefit from highways, an educated populace, a stable business environment, the patent and copyright systems, the court system, and the police*; all while handing the bill to the common man and hiding their portion of the tab? The services of the DOJ, Treasury, DOT, and DOE don’t come for free.

    I pay my taxes – everything that I owe – and I’m proud to do it. If I can do it, they can do it.

    (*Education, police, fire are locally managed, but they get federal money.)

  41. xsmasher says:

    @speedwell: PS, The Fountainhead is pure fantasy. The factory owner makes money *because* of his employees, not in spite of them; and the artist lives and eats at the pleasure of his audience, and would starve without them.