France Take UBS to Court on Cross-Border Evasion for French Taxpayers (10/9/18)

The much anticipated French trial of UBS for its cross-border tax evasion scheme for the French has started.  Cross-border evasion is basically the same as U.S. offshore evasion through Swiss banks.  Here are some articles and excerpts:

Inti Landauro and Emmanuel Jarry, Swiss bank UBS on trial in France over alleged tax fraud (Reuters 10/8/18), here.  Excerpts:

Swiss bank UBS Group AG (UBSG.S), its French unit and six executives faced charges of aggravated tax fraud and money laundering on Monday, the first day of a trial into allegations they helped wealthy clients avoid taxes in France. 

After seven years of investigation and aborted settlement negotiations, UBS will also answer allegations that it illegally solicited clients in France. It risks being fined up to 5 billion euros ($5.76 billion) plus potential damages to the French taxman for the missing revenue. 

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UBS’s lawyer Jean Veil said the French state was asking for 1.6 billion euros in damages, which he told the court was excessive. 

“They are asking crazy amounts,” he told the court. 

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UBS’s trial in France follows a similar judicial process in the United States, where the bank in 2009 accepted to pay $780 million in a settlement. In Germany, UBS agreed to a 300 million euro fine in 2014. 

During the French investigation, UBS turned down a settlement offer of 1.1 billion euros made by the authorities. The amount corresponded to what the Swiss bank had already paid as a court bond, according to judicial sources.

Gaspard Sebag  and Patrick Winters, UBS Accused of Bond Movie Tactics in Paris Tax-Dodging Trial (Bloomberg 10/7/18; 10/8/18), here.  Excerpts:

Eric Dezeuze, a lawyer for UBS France SA, revealed the amount on day one of a trial where the Swiss lender is accused of deploying tactics “worthy of James Bond” to help customers launder money they hadn’t declared to French authorities. He said the French state’s lawyer cited the amount in recent written submissions. 

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Zurich-based UBS dispatched bankers across the border to seek out new clients even though they lacked the paperwork -- a banking license or European passport -- to offer such services in France, the lead investigator wrote in the indictment ahead of the trial which got underway on Monday afternoon. 

When they came over from Switzerland to France UBS bankers allegedly took several steps, described in the prosecution’s opinion on the case as akin to 007 techniques and listed in a “security risk governance” manual, to avoid detection by authorities. They used encrypted computers, had business cards without the lender’s logo and were told to switch hotels regularly, according to prosecutors. The bank has consistently denied any wrongdoing. 

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Dezeuze said that the bank is accused of facts that could be prosecuted either as laundering undeclared money or aiding and abetting prospective clients commit tax fraud. The lawyer said this raises a problem: UBS could be prosecuted in two different ways and be liable for two different sets of penalties for the same set of facts. He asked for the matter to be clarified by France’s constitutional court. 

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To calculate the basis for any fine in the French case, authorities set out to estimate the depth of the tax fraud. In one estimation, investigators say French citizens may have stashed 9.8 billion euros in undeclared offshore funds under the Swiss bank’s management -- putting the maximum fine at half that amount or 4.9 billion euros.
Kepler Cheuvreux analyst Jacques-Henri Gaulard says the HSBC precedent -- where the amount of concealed assets was more than five times smaller than in the UBS case -- suggests the fine could reach 2.2 billion Swiss francs ($2.2 billion). 

Still, other analysts have pointed to a smaller sum. A settlement "in the same range" as HSBC would be taken well by the market, JPMorgan Chase & Co. analysts led by Kian Abouhossein wrote in a note to clients. 

UBS had 567 million Swiss francs of provisions for litigation and other regulatory matters at its wealth management unit as of the end of June. The bank doesn’t break out how much of that number is dedicated to Monday’s case.