UBS could face $6 billion in fines as tax-fraud trial ends

Bloomberg

In the middle of UBS Group AG’s six-week tax trial in Paris, Presiding Judge Christine Mee’s tone changed. And that may have given a sign of what the bank can expect in a case that could cost it as much as $6 billion.
The hearings, which have ended, started well for the Zurich-based bank. A team of 20 high-powered French attorneys, executives and communications staff hammered on the weaknesses in the case and denied the bank ever helped French citizens hide funds from tax authorities in Swiss accounts.
For the first three weeks, all seemed to be going to plan. Testimony was consistent and in favour of UBS, with few biting questions from judges or prosecutors. The mood could be quite relaxed, and there were times when some of the executives’ answers drew laughter in the courtroom. The attorneys were relentless in questioning the truthfulness of whistle-blowers who helped trigger the probe.
Then, mid-trial, Mee started telling defendants she didn’t buy their explanations and her remarks became more sarcastic. The judge cut off a UBS executive for lecturing her. “I understand, there’s no problem. We’re totally qualified to understand,” she said. Mee even yelled at UBS’s main counsel for squabbling with a plaintiff lawyer in open court during a defendant’s testimony.
UBS has been dealing with the French probe for seven years, and will get a verdict on February 20. And there’s a lot at stake: Prosecutors asked the court to impose a record fine of 3.7 billion euros ($4.2 billion) on UBS, while the French state is seeking 1.6 billion euros in damages.

FRENCH TAX DODGING
While it’s no secret that thousands of French citizens dodged taxes by placing money in undeclared Swiss accounts, the court will have to decide whether there is clear evidence that shows UBS laundered such fraudulent funds.
Stephane Bonifassi, a Paris criminal lawyer, says a conviction is likely but the penalty will be smaller than what is being demanded. In France, just helping clients to conceal undeclared funds is considered money laundering, says the lawyer who isn’t involved in the case but is familiar with the indictment.
“That’s what this is all about, with trusts and numbered accounts,” Bonifassi said by phone, in reference to evidence investigators say shows UBS was offering to set up offshore structures. “The moment you get involved in setting up companies that can hide the economic beneficiary’s identity, that’s laundering.”
The prosecution had less of a presence than UBS, and not just because there were only two officials from the Parquet National Financier in court. They made some questionable choices, including not calling a single witness to back their case.

PROSECUTION PLAN
Instead, they tried to corner or even ridicule some of the defendants, such as UBS France’s former general manager and an ex-Lille office chief, who both pulled back on overreaching statements made in questioning. But prosecutors were oddly silent when it came to quiz the second-highest ranking former UBS banker on trial, Dieter Kiefer.
In the end, the duo of prosecutors asked for a harsh punishment against UBS due to the “systematic nature” of the wrongdoing, yet strangely requested much more leniency with those accused of being responsible for carrying it out, Paris lawyer Bonifassi said. The prosecution only sought suspended sentences for the six defendants and fines between 50,000 and half a million euros.
“If it’s that serious and deserves a 3.7 billion-euro fine, maybe that’s a bit problematic vis-a-vis the poor guy who’s sent immediately to jail for robbing a handbag,” Bonifassi said.
Not one UBS client testified about being encouraged to hide assets, nor did French tax officials take the stand. The whistle-blowers were also absent, and unable to respond when two top UBS France executives said one had “lied” and accused the rest of “blackmail.”