A. For American Clients, U Be Screwed!
The announcement yesterday, by what was once known as Union Bank of Switzerland (UBS), that the bank unilaterally is closing the accounts of 19,000 Americans, is yet another scandal in this tarnished financial institution's faltering recent history.
One of our Swiss advisors in Zurich with whom I spoke today called the UBS action "a high handed violation of trust" and a "crude attempt at their clients’ expense to get ride of a political hot potato."
It is also another stark confirmation of the advice the Sovereign Society and its editors have repeated since our founding more than a decade ago -- "Don't bank with UBS or Credit Suisse" -- the two monster-size Swiss banks that cared more about their own expansion and money making then they did about their own clients.
In the case of UBS, it has lost at least US$60 billions or more in subprime in mortgages and questionable securities -- and now they're dumping their own U.S. customers.
Decade Old Warning
Based on our long experience, we always have recommended against UBS and Credit Suisse, preferring accounts with sound private Swiss banks that have not been "Americanized" -- that, unlike UBS, still honor the strict Swiss bank secrecy law that until now has protected financial privacy.
A decade ago we denounced a previous UBS surrender to demands of the U.S. Federal Reserve System. Official U.S. acceptance of the 1998 merger of Swiss Bank Corp. and Union Bank of Switzerland creating UBS AG was not approved by the Federal Reserve until UBS agreed to provide U.S. regulators all information "necessary to determine and enforce compliance with [U.S.] federal law." No doubt, that meant (and still means) U.S. tax laws too.
U.S. regulators had threatened to shut down the bank's extensive U.S. operations, (an unstated threat that still hangs over UBS now). Rather than defend their client’s privacy rights then, as now, the bank compromised.
Caving in to the IRS
UBS already is reeling as one of Europe's worst hit banks in the world credit crisis, due to its poor investments. Since last year it has been under investigation by the U.S. Internal Revenue Service based on charges the bank helped wealthy Americans dodge taxes by hiding their cash in Switzerland.
A senior UBS executiv, Raoul Weil, chief executive officer of a UBS division handling cross-border business and private banking, was charged with conspiring to defraud the U.S. through income tax evasion. The indictment also said other UBS executives at high levels of the company took part in the conspiracy.
A Limited Number?
But this latest betrayal of 19,000 American customers calls into serious question claims made by the UBS chairman only three months ago.
In November 2008, the bank’s chairman, Peter Kurer, insisted UBS had discovered only a "small number" of tax-fraud cases as part of an investigation into whether the bank helped clients dodge American taxes.
"Our investigations have uncovered a limited number of cases of tax fraud under both U.S. and Swiss law," Mr. Kurer told shareholders at a special meeting in Lucerne, Switzerland. He asserted that Swiss bank-client confidentiality agreements had not been broken in an unfolding investigation of the bank’s activities. That's what he told angry shareholders
At that time the U.S. Justice Department argued that UBS helped as many as 17,000 of its American clients evade $300 million a year in taxes through hidden offshore accounts. Mr. Kurer’s November remarks contained no specifics about whether he disputed the American estimate, nor did he clarify what number of fraud cases he would regard as "limited."
UBS Dumps Americans
But now, under pressure from U.S. authorities, UBS is closing the offshore accounts of its American clients, potentially allowing their information to become public. In a step that would have once been unthinkable in the once conservative world of Swiss banking, UBS summarily close down about 19,000 accounts, some of which U.S. prosecutors suspect haven't been declared to the IRS.
UBS says it will transfer the assets to other banks or other divisions within UBS, or will mail checks directly to the account holders, creating paper trails for U.S. prosecutors who are examining whether UBS clients used such accounts to evade taxes.
Stark Choices
The American clients who may have violated the law by failing to report their UBS accounts suddenly face stark choices brutally forced on them by the bank they trusted: a) they can cash their checks and thereby alert the IRS to any potential wrongdoing, or; b) not cash them, effectively losing their money, or; c) they can transfer the money to new banks, a procedure which requires U.S. depositors of more than $10,000 to report the new account to the U.S. Treasury Department.
I can assure you, based on our authoritative Swiss contacts and advisors, that no other Swiss bank now will accept these soon-to-be ex-UBS clients -- those folks are left our in the Alpine cold.
Unfortunately, this summary proceeding, without due process, leaves 19,000 Americans, innocent of wrong doing or not, tarred with a UBS-applied stigma of possible tax evasion. And it leaves them all with almost no easy way to protect their cash and their reputations.
Thank you, UBS.
Don't Despair - Join Us
There are still solid Swiss banks we can recommend that have not, and will not, betray their clients -- banks where Americans are still welcome.
We can also direct you to proper Swiss investment, insurance and annuity experts. All those prerogatives come instantly with Sovereign Society membership.
You might also want to order a copy of my book, Swiss Money Secrets – an authoritative 300 page description of everything financial in Switzerland – and much more.
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