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(Bloomberg) -- For many Swiss bankers, UBS Group AG’s admission in 2009 that it fostered tax evasion -- and the steep penalty that came with it -- was a reason to purge their U.S. accounts.
Others, such as former Bank Frey & Co. AG executive Stefan Buck, saw it as a business opportunity, federal prosecutors said Monday at the start of his trial on charges he helped customers hide millions of dollars from the Internal Revenue Service.
"Bank Frey welcomed those tax cheats in with open arms, and Buck was part of the welcoming committee," Assistant U.S. Attorney Sarah Elizabeth Paul told jurors during opening statements in Buck’s trial in Manhattan. "Bank Frey was willing to do what other Swiss banks were unwilling to do."
The trial is a rare courtroom showdown in a nearly decade-old federal crackdown on tax evasion aided by Swiss lenders. Buck and a Swiss lawyer, Edgar Paltzer, were indicted in April 2013, accused of opening and maintaining undeclared accounts on behalf of U.S. taxpayers who told them they would be forced to close accounts at other banks. Paltzer pleaded guilty that year and is cooperating with prosecutors.
The pair is among more than three dozen foreign bankers, lawyers and advisers charged in the U.S.’s effort to clamp down on offshore tax evasion since 2008, when the Justice Department began looking at whether UBS, Switzerland’s biggest bank, was helping its clients avoid American taxes. The company discontinued offshore accounts for U.S. citizens, paid a $780 million penalty to settle the probe and handed over information on about 4,700 accounts.
The 2009 UBS settlement led to more than 50,000 voluntary disclosures to the IRS and the repatriation of billions of dollars to the U.S. It also led 80 other Swiss banks to reach non-prosecution agreements with the Justice Department to resolve potential liability in the U.S. for tax-related criminal activity.
But most of the advisers, bankers and lawyers charged in the crackdown live in Switzerland, which doesn’t extradite people for tax crimes, and therefore remain out of the reach of U.S. prosecutors. About two dozen of those charged have yet to answer in court, while a handful, including Paltzer, have pleaded guilty and agreed to cooperate. He is expected to testify in Buck’s trial.
At least two were convicted and two others acquitted - including UBS’S former head of wealth management, Raoul Weil, who was cleared by a jury in Florida in 2014.
Buck’s attorney, Marc Agnifilo, pointed the finger at the government’s witnesses in the case, noting that some of the taxpayers who will testify for the prosecution have been evading taxes since the 1970s, while his client was born in 1980. Agnifilo said Buck was a "lowly relationship manager" who was simply following directions.
"He made precisely one decision that caused him to sit here," Agnifilo said. "He went to work for a bank. He made no decisions. He didn’t do anything."
Buck had asked the court in 2015 to grant him bail without leaving Switzerland, saying that the government had said it wouldn’t allow him to return home after appearing in the U.S. Prosecutors opposed the bid, saying Buck was a fugitive and pointing out that Paltzer voluntarily chose to come to the U.S. and plead guilty without seeking bail first.
A judge in January 2015 denied Buck’s request, and he traveled to New York in November 2016, pleaded not guilty and was released on a $500,000 bail bond. He was ordered to reside in his Manhattan residence and restrict travel to certain areas of New York.
The case is U.S. v Buck, 13-cr-00282, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Chris Dolmetsch in New York State Supreme Court in Manhattan at firstname.lastname@example.org.
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