Anxious Days for Tax Dodgers

If Raoul Weil was your private banker, the Internal Revenue Service would like to have a word with you.

Weil, a top executive at UBS, the Swiss banking behemoth, was charged with one count of conspiring with other executives, managers, private bankers and clients to defraud the United States, according to a criminal indictment filed today.

The Justice Department and the I.R.S. have been investigating the private banking services that UBS provided to some 20,000 wealthy Americans who reportedly concealed as much as $20 billion in assets to avoid taxes.

Federal prosecutors say Weil, who was in charge of the Swiss bank's cross-border private banking business in Zurich, ordered UBS bankers to pursue the offshore business even knowing that it could violate American law.

U.S. tax officials have sought for years to shut down Swiss banks as a secret haven for American cash. But the Swiss have a fundamentally different approach to banking and taxes. It is not a crime under Swiss law to evade taxes, as it is in the U.S.

Weil pursued what he called "toxic waste," according to the indictment, because it was highly profitable. It generated some $200 million a year in revenues over the period between 2005 and 2007, according to the federal investigation.

The indictment was filed Nov. 6 in Fort Lauderdale, Fla., and released today. Weil could face up to five years in prison, and a $250,000 fine if convicted.

Weil and others used encrypted laptops and numbered accounts and set up other entities to help clients conceal their identities and their UBS assets, the indictment said.

And they didn't wait for business to come across the transom. Swiss bankers allegedly traveled routinely to the United States to market the virtues of the country's historic bank secrecy -- anonymous bank accounts identified only by number, and not by name.

Weil's team is alleged to have made some 3,800 trips to the United States in one year alone -- 2004 -- to talk to clients about their offshore accounts. Wealthy clients allegedly filed tax returns which omitted the income earned on their monies stashed abroad, and hid the existence of those accounts from the I.R.S.

"Professionals, including bankers, who promote fraudulent offshore tax schemes against the United States, will be held accountable," said John A. Marella, Deputy Assistant Attorney General of the Justice Department's tax division. "These individuals face severe consequences including imprisonment and substantial fines."

Last June former UBS private banker Bradley Birkenfeld pleaded guilty to charges that he aided an American billionaire to evade taxes.

And U.S. citizens who evaded taxes also can't rest easy, the I.R.S. warned. The agency's commissioner, Doug Shulman, warned that it is "aggressively pursuing anyone who helps wealth individuals hide their assets offshore and dodge the tax system" -- a trail that inevitably leads to those who stashed their funds abroad.

The news is another blow to UBS, which is weighed down with heavy losses from subprime bets, and has been thrown a $60 billion lifeline from the government.

by Elizabeth Olson