The New York Times has reported:
Switzerland's oldest private bank on Thursday admitted to helping Americans evade United States taxes, the first time a foreign financial institution has pleaded guilty to tax law violations.
Representatives for Wegelin & Company, a Swiss bank founded in 1741, appeared in Federal District Court in Manhattan and acknowledged that for nearly a decade the firm helped dozens of wealthy American customers dodge taxes by hiding more than $1.2 billion in secret accounts.
As part of guilty plea, Wegelin agreed to pay $74 million in fines, restitution and forfeiture proceeds to the United States government. Several Wegelin executives appeared at the hearing before Judge Jed S. Rakoff, including one of its managing partners, Konrad Hummler, a well-known figure in the Swiss private banking industry.
Why is this important? For three reasons.
First, because it proves the criminality of a Swiss bank, and notes that the procedures used by it were commonplace throughout the sector, in the process indicting the industry as a whole.
Second, because it reveals the reality of those behind the Swiss Private Bankers' Association. Hummler was its chair.
Third, because from January 2013 Swiss banks are now operating a part of the UK tax system under the terms of the UK - Swiss tax deal. We have no way of knowing if they will do it properly and have no right to ask. George Osborne is happy with that. And on the basis of this evidence that's like being happy with a bunch of bank robbers running the Bank of England.
How did this man get to be Chancellor?
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It looks like the usual coercive manipulation known in the US as plea bargaining.
You mean you think they weren’t guilty?
Swiss banking law says you have to preserve a certain level of confidentiality.
US law says you have to do what the US says, even if you’re not American, and in this case the US wants you to disclose the names of your clients.
So Wegelin was faced with having to break one law or the other. Which law you think is a better one is a matter of judgement, and I can see why people are unhappy with the level of confidentiality (or secrecy, if you prefer to call it that) in the Swiss system. But I’m rather unhappy with the idea that a non-US entity can be prosecuted in the US simply because its clients were US citzens who failed to comply with their tax obligations.
In my view a Swiss company should only be subject to Swiss rules, and if the US wants to lean on anyone it should be either the US citzens (who are avoiding the tax in the first place), or else it should be the Swiss government (to get it to change the rules that the US doesn’t like).
In your view a law that encourages crime is therefore acceptable
That’s also why your comments are being deleted from now on on this blog
I just can’t accept a guilty plea in a US court on face value because the US bullies people into making such pleas to avoid being crushed.
I think there are very few people that wouldn’t enter a guilty plea if targetted by the US government.
So you’d prefer to ignore the evidence of tax evasion instead?
I would prefer to see a system whereby genuine cases are taken and proven in a court of law, rather than a system under which 98% of people enter a plea because they are threatened with life in prison etc.
Of course we are talking about a country that views water boarding as reasonable, so you can’t expect very much.
This was a genuine case
They did what was alleged
Only tax cheats deny it
I find it quite funny that r-wing neo-liberals get v upset when the US uses its rather draconian laws against bankers & accountants, while being thoroughly supportive when they only use them “as they should be used” i.e against black & hispanic youths.
In this case, from what the FT said, the US passed legislation & various Swiss banks responded by getting out of the market saying it was no longer worth their while providing ACs for US citizens that were, plainly, evading US taxes. Wegerlin stepped inyto that breach, saying they were only too happy to open acs in any false name the depositor liked (Elvis being, apparently, a popular choice).
I find it hard to summon any sympathy for an institution that so deliberately facilitated fraud for its own enreichment.
I can help wondering if someone tried to get at the illegal funds stashed in Delaware, whether the USA would be quite as moral and upstanding. They are surely right to root out corruption in other countries, but I wish they could set an example to others themselves. As it is, while US citizens won’t be evading taxes in Delaware, it will be liberty hall for foreign nationals to do so, and indeed the secrecy and security is marketed. It’s that old factor, American exceptionalism again.
two points
1 Re Pellinor, I do not like Richard to censor him, and I do prefer to hear the other side, even if it represents quasi-criminality. Then you get people like commenter William above who deals with the point.
The trouble is that dealing with tax avoision IS difficult and it often turns on exactly the question – just how do you do it? The GAAP is one such weapon and we should all unite to make this a BIG issue.
2 I love the name of the Swiss banker – a Mr. Rakoff
Daniel
I thought you would know better than use the word censor
It’s actually called editorial freedom
I run this site. I can decide what goes on it.
That’s a fundamental part of freedom
Libertarians ignore that when it suits them
I’m sorry you did
And the reality is I have a lot better things to do in life than read the drivel right wing trolls write
Richard
I visited one of the crown dependencies last year to catch up with friends. Went out for a drink or two with an old friend who works in ‘wealth management’ for a local branch of a large Swiss financial institution. With little prompting from me [ I don’t preach when I’m over there – many people work in the local finance industry and feel uncomfortable about it…but its the only game in town], she told tales of how terrified senior managers are of taking on new business from American clients despite ever increasing ‘financial targets’ …. I was left with the impression that the ‘big stick’ approach by the US IRS was working and that they would not touch American clients with a barge pole. I personally have no gripe against the Swiss [lovely scenery] and wish them all the best with the coffee bean harvest this summer…