UBS seeks to pay below US$317 million in French tax case

Bloomberg

UBS Group AG is pushing to settle a French tax fraud investigation for less than the 300 million euros ($317 million) it paid to resolve a similar issue in Germany, people familiar with the matter said. That’s significantly below the 1.1 billion-euro bond the bank posted to cover potential penalties.
UBS has been in talks since late 2016 with France’s financial prosecutor to reach a settlement similar to a deferred prosecution agreement that would include a fine, but no admission of guilt, said the people, who asked not to be identified because the talks are confidential. The amount could be a stumbling block to any accord, according to the people.
The Swiss bank is looking to pay less than what it cost to resolve the German case as the French wealth-management market is much smaller, two of the people said. UBS declined to comment on any settlement talks, as did French prosecutors.
In 2009, UBS paid $780 million, including disgorgement of profit, fines, interest and restitution, to the U.S. to avoid prosecution, admitting it helped thousands of Americans evade taxes and agreeing to turn over information on their accounts. Five years later, the bank reached its settlement with German
authorities.

Civil Procedure
French lawmakers last year approved a new civil settlement procedure requiring that fines be based on the advantage derived from the wrongdoing, within a limit of 30 percent of average revenue over the past three years.
The implementing acts, required to interpret the law, could be published as soon as the end of March.
They may give guidance on any multiplier that could apply to the advantage gained or leave it open to interpretation for greater latitude in negotiations.
French investigative judges in February 2016 completed their five-year probe into allegations UBS conspired to help clients evade taxes in the country and laundered the proceeds. While the investigative judges are in position to order a trial or dismiss the case, no action has been taken. Ordering a trial would have the effect of terminating the settlement talks.
Investigators accuse UBS bankers of
organizing clients events in France, including golf tournaments and art exhibitions, to encourage residents to move assets offshore to Switzerland, according to prosecutors’ recommendations issued last year, which were seen by Bloomberg.
UBS, which wasn’t allowed to solicit clients in France, took steps “worthy of James Bond” to avoid detection, former employee of the firm’s French unit said in the prosecutors’ document. UBS employees in France used encrypted computers, had business cards without the lender’s logo and were told
to switch hotels regularly, according to the
document.
If the case goes to trial, UBS could be fined as much as 4.9 billion euros, or half of the 9.8 billion euros that investigative judges estimate French citizens have stashed in undeclared offshore funds managed by UBS. Based on that estimate, the Swiss bank was required in 2014 to post bond of 1.1 billion euros to cover potential penalties.
Switzerland has tried to shed its reputation as a tax haven by weakening banking secrecy laws and cooperating with other governments seeking to recoup undeclared assets. A few years ago, UBS sought to reach a deal with French authorities before the new settlement procedure was approved, but talks broke down in July 2014 after the lender balked at entering a guilty plea.
UBS General Counsel Markus Diethelm praised France’s new civil settlement procedure in an interview last month.
“In the U.S., settlements shorten investigations, protecting public resources and
removing risks linked with trials,” Diethelm
told French newspaper Le Figaro.
“They have a beneficial effect on companies behavior and fix the prejudice to the victims and the community.”