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Banks Trusts UBS tax evasion offshore switzerland department justice Senior UBS Executive Indicted in Offshore Tax-Shelter Probe

(Nov. 13, 2008--Chicago, IL) -- A joint IRS-Department of Justice probe into taxpayers with offshore trusts and other financial accounts has resulted in the indictment of the head of UBS Global Wealth Management. Insiders say the government probe is ongoing and more indictments are expected. Neither the Swiss-based bank or its U.S. subsidiary have been named as defendants.

Raoul Weil, who oversaw UBS's lucrative cross-border wealth management operations, was indicted yesterday in federal court for allegedly moving some $20 billion in assets, belonging to U.S. citizens, out of the country to evade income taxes. The U.S. Department of Justice (DOJ) asserts that Weil, along with other UBS executives, moved the funds, held in over 17,000 accounts, to UBS offices overseas knowing that they were violating U.S. law.

Weil's attorney, in a statement, calls the charges "totally unjustified and without any factual basis." If found guilty, Weil faces up to 5 years in prison.

The indictment follows an a June 2008 guilty plea by Bradley Birkenfeld, a UBS private banking manager, that he "routinely" helped wealthy Americans conceal their ownership in assets held offshore and evade the payment of taxes on the income generated from those assets. As part of his plea arrangement, Birkenfeld agreed to assist federal prosecutors.

According to the DOJ, Birkenfeld says that sheltering assets for wealthy clients earned UBS $200 million per year in revenues.

UBS, in a statement released late yesterday, says that as of July 17, 2008, it had cease providing cross-border banking services to US-domiciled clients.

In a related matter, the IRS and DOJ in March 2008 initiated enforcement action against 100 U.S. taxpayers who have trusts in the tiny European principality of Liechtenstein. That action followed investigations by 13 other governments acting on leads believed to have been obtained from Heinrich Kieber, a former employee of the Liechtenstein Global Trust Bank (LGT Bank). Kieber allegedly stole the information while employed by an LGT Bank subsidiary specializing in foundations and sold it to various governments.

IRS sources acknowledge that information about U.S. taxpayers with Liechtenstein accounts came from “an informant,” but will not confirm the individual's identity and deny paying for the information.

"The IRS does not pay upfront for [such] information," according to an IRS spokesman. However, the agency annually receives some 5,000 Form 211 complaints, information on potential tax evaders. Informants are paid a portion of what the IRS successfully recovers.

For more on this topic, see the upcoming issue of Trust Regulatory News.

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