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November 12, 2008 2:01 PM

DOJ Charges UBS Wealth Management Head With Aiding Tax Fraud

Posted by Brian Baxter

UPDATE: This story has been updated with statements from Weil's lawyer and UBS.

The Justice Department announced on Wednesday a federal grand jury indictment of Raoul Weil, the chairman and CEO of the global wealth management and business banking division at Swiss banking giant UBS, on charges that the 48-year-old executive helped U.S. taxpayers avoid income taxes on assets in overseas accounts.

Weil, who is not a lawyer, headed UBS's international wealth management unit between 2002 and 2007 and was appointed to the bank's group executive board in July 2005. According to a bio posted on UBS's Web site, Weil held various positions in the bank's private banking division, working in Basel, Zurich, Monaco, and New York.

According to a copy of the 13-page indictment, Weil and other UBS bankers used encrypted laptops and other counter-surveillance techniques to assist U.S. clients in concealing their identities and nearly $200 billion in offshore assets from the IRS. The indictment claims that Swiss bankers who reported to Weil routinely traveled to the U.S. to discuss Swiss bank accounts with current and prospective clients. Between 2002 and 2007, these activities allegedly generated nearly $200 million in cross-border business for UBS.

The Am Law Daily has learned that Weil is being represented by Aaron Marcu, the head of the white-collar defense and investigations practice at Covington & Burling in New York.

"Today's indictment is totally unjustified and without any factual basis," said Marcu in a statement to The Am Law Daily. "[Weil] denies any suggestion that he was aware of, engaged in, or tolerated any illegal conduct in the operation of UBS's U.S. cross-border business. That business represented only a tiny percentage of the global wealth management business for which [Weil] is responsible."

The charges against Weil have their origin in a 12-page indictment that the Justice Department unveiled in May against former UBS private banker Bradley Birkenfeld and the cofounder of a Liechtenstein-based bank. Prosecutors accused the two of aiding American real estate developer Igor Olenicoff in evading income taxes on $200 million in assets that he allegedly stashed in offshore accounts. (A Russian émigré, Olenicoff sued UBS in September, accusing the bank and several high-ranking executives of deceiving him on the legality of his offshore accounts; Portfolio wrote about Birkenfeld's plight in an October 2008 feature story.)

Birkenfeld pled guilty in June to charges that while at UBS he helped wealthy Americans hide assets in overseas accounts to avoid paying income taxes. Prosecutors have asked that Birkenfeld's sentencing be delayed so as to ensure his continued cooperation with investigators. According to court documents, Birkenfeld is scheduled to be sentenced on January 8.

As a result of Birkenfeld's guilty plea, the Justice Department stated that it would broaden its investigation into UBS, later asking that the Zurich-based bank turn over the names of some 20,000 U.S. clients. In the Weil indictment, prosecutors consider those individuals unindicted coconspirators.

UBS said in a statement that Weil will relinquish his current duties at the company in order to defend himself. As previously announced in July, UBS entities based outside the U.S. will discontinue offering cross-border private banking services to U.S. clients. The bank, Switzerland's largest, said that it will continue cooperating in a "responsible manner" with law enforcement authorities in the U.S. with the hope of resolving the tax evasion investigation.

"Every American who pays his or her taxes should be offended that a select few use anonymous offshore accounts to avoid paying their fair share," said a statement by R. Alexander Acosta, U.S. Attorney for the Southern District of Florida where the charges against Birkenfeld and Weil were filed. "We owe it to every American taxpayer to use all lawful means to identify and prosecute both those who evade their taxes, and those who assist them in evading their tax obligations."

Senior trial attorney Kevin Downing, who famously helped prosecute 18 individuals involved in the KPMG tax shelter criminal case in federal court in Manhattan, is leading the team prosecuting Weil. Trial attorney Michael Ben'Ary of the Justice Department's tax division and assistant U.S. attorney Jeffrey Neiman in Fort Lauderdale are also involved in the ongoing investigation.

Weil's lawyers are already promising a vigorous defense.

"Mr. Weil is a highly respected banking executive in Switzerland with an unblemished record for integrity," added Marcu in his statement. "We fully intend to fight this indictment and look forward to vindicating [his] good name."

Nonetheless, the timing of the indictment is an unfortunate one for Weil. He turns 49 on Thursday.

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UBS execs should be tried in the UN International Criminal Court for aiding money launderers who are often perpetrators of crimes against humanity e.g.human smuggling, corruption, genocide, etc.

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