UBS and the Diamond Smuggler
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Why UBS's Wealth Management Should Stand Alone
UBS’s case was similar to LGT’s only in that it involved U.S. citizens who had evaded taxes. Heinrich Kieber, the LGT whistleblower, had the goods on almost all the bank’s clients and had not been involved in any of the wrongdoing. Per I.R.S. policy, he stood to receive up to 30 percent of whatever the agency recouped from the tax cheats he named. On the other hand, Birkenfeld had been complicit in tax fraud committed through one of the world’s largest banks and was cooperating with the government to save his skin and reduce his jail sentence.
The Senate had much more evidence on the LGT clients, but because LGT has no meaningful U.S. presence, it chose not to appear before the committee. This put UBS front and center. With a parade of witnesses invoking their right against self-incrimination all morning, the first nongovernment witness to say anything was Mark Branson, UBS’s chief financial officer of global wealth management and business banking.
Levin had been building a case against UBS throughout the hearing. At one point, he announced that the investigation had “managed to pierce some of the layers of Swiss secrecy that for too long have made Switzerland the place to bank for people with something to hide.”
At other times, he quoted Birkenfeld to paint the picture of a well-oiled tax-evading operation. The bank gave clients secret foreign credit cards, encrypted client information on laptops, and trained bankers on how to evade F.B.I. and customs inquiries. “UBS efforts targeting U.S. clients to open Swiss accounts were, in the words of Mr. Birkenfeld, a ‘massive machine,’ ” Levin thundered.
In a strong turn, Branson apologized for “any compliance failures that may have occurred.” UBS would no longer provide offshore banking services to U.S. citizens, he said, and he revealed that the bank was working with the U.S. and Swiss governments to identify clients who had committed tax fraud. “We will fully support and assist that process,” he said. In the minutes it took Branson to read his opening statement, he had knocked the wind out of Senator Levin.
As much of a headache as Birkenfeld had been for UBS, whatever he had told or was promising to tell the U.S. government was a much bigger problem for Liechti, the company’s private-banking czar. Liechti had been detained on April 23 when he tried to change planes in Miami for a business trip to Latin America. At the time of the Levin hearing, the father of five had already been held as a material witness for nearly three months without being charged with anything.
Brought in front of Levin’s committee, Liechti was nervous, but tan—he was reputedly holed up at the Four Seasons in Miami because the U.S. had confiscated his passport—and he invoked his right against self-incrimination in halting English that seemed to belie his reputation as one of the world’s top private bankers.
After the hearing, a UBS spokesperson said, “Martin Liechti’s decision to take the Fifth Amendment follows legal advice from his counsel. The decision to take the Fifth is his own entirely. Pleading the Fifth while there is an ongoing federal investigation whose outcome is undecided is certainly not unprecedented.”
Glowing support, this was not. It could be read as an indication of the precarious nature of Liechti’s situation. While detained, he remained fully employed by UBS, but his future was very uncertain.
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