Gulliver’s Panamanian Route to Swiss Account Baffles Tax Lawyers

This content was published on February 23, 2015 - 18:58

(Bloomberg) -- The decision by Stuart Gulliver, the chief executive officer of HSBC Holdings Plc, to park money in Switzerland through a Panamanian company puzzled lawyers who didn’t see a clear tax benefit from the move.

Gulliver said he set up the account with HSBC’s Swiss unit while living and working in Hong Kong for reasons of confidentiality, so that colleagues wouldn’t be able to see how much he earned. He told reporters on a conference call Monday that he closed that account in 2009.

“A Swiss account held in the name of a Panamanian company was not an uncommon structure for some wealthy individuals,” said Mark Summers, a Geneva-based lawyer with the firm of Charles Russell Speechlys. “In this case, it doesn’t look like a structure that a Hong Kong resident, or U.K. non-domiciled resident would have needed. There isn’t an obvious tax advantage.”

The Swiss account, first reported by The Guardian newspaper on Sunday, is the latest revelation to engulf HSBC. The biggest U.K. lender has been criticized by politicians across the country after a report by the International Consortium of Investigative Journalists alleged its Swiss unit handled accounts for tax evaders and criminals.

Gulliver took out full-page ads in British newspapers last week to apologize for the bank’s actions and Chairman Douglas Flint will appear before a committee of the U.K. Parliament on Wednesday to answer questions about the Swiss subsidiary.

Gulliver, 55, could have chosen less complicated ways of depositing his earnings discreetly, lawyers said.

Panama Company

Choosing another bank would have prevented colleagues from prying into his compensation. Moreover, Swiss financial secrecy laws would have prohibited any of the country’s banks from sharing account data without his permission or a formal legal procedure. Any Swiss banker doing so risks a prison sentence.

Gulliver’s account was set up in the name of Panama- registered Worcester Equities Ltd., The Guardian reported. That would mean that far fewer employees within the bank would know it was his account, said Markus Meinzer, a senior analyst in Marburg, Germany, with the Tax Justice Network, a group that advocates for greater transparency in tax matters.

The Tax Justice Network ranked Panama 11th in its global financial secrecy index of more than 80 jurisdictions. Switzerland topped the ranking with Hong Kong in third place.

“It’s not unknown, but I wouldn’t imagine a large number of senior executives would be doing this,” said Ray McCann, a partner with the law firm of Pinsent Masons LLC in London. McCann, a former senior inspector with the U.K. tax authority, said Gulliver may have felt safer with this level of anonymity.

On a conference call with journalists on Monday, Gulliver defended his actions.

More Protection

In Hong Kong in the 1990s, HSBC’s computer system in the trading room allowed employees to access co-worker’s bank accounts, Gulliver said. He and colleagues opened Swiss accounts to prevent one another from seeing the size of their bonuses. Opening it through the Panamanian shell company provided further privacy, he said.

“Being in Switzerland protects me from the Hong Kong staff,” he said. “Having a Panamanian company protects me from the Swiss staff because people are interested in what their colleagues are paid. Why is it Panamanian? That’s the structure that the private bank was putting people into in those days.”

His concern about privacy was especially acute because he was the highest paid person in the group for many years, he said. He declined to comment on whether he has a Swiss account.

“There’s nothing Stuart has done that’s not totally legal and transparent,” Flint, 59, told reporters on the call.

HSBC didn’t specify when Gulliver first declared that he had a Swiss account to the U.K. tax authorities, saying only that since 2003 he “has paid full U.K. tax.”

U.K. Record

Gulliver, who became CEO of the British bank in 2011, “voluntarily declared his Swiss account to U.K. tax authorities for a number of years,” HSBC said in an e-mailed statement, without being more specific.

“If he has nothing to hide, it shouldn’t be hard to be forthcoming on that point,” said Meinzer. “There are at least some questions to be answered, especially when one looks at the record” of the U.K. tax authority in investigating HSBC, he said.

U.K. authorities should have used evidence in the government’s possession to open an “urgent and sustained criminal investigation” and establish whether HSBC in the U.K. was complicit with wrongdoing at its Swiss unit, Ken Macdonald, a former head of the U.K. Crown Prosecution Service, said in a legal opinion prepared for SumOfUs, an international consumer group based in Washington.

Only one British client of HSBC has been convicted for tax evasion after failing to disclosed funds held offshore in Switzerland.

--With assistance from David Scheer in Seattle.

To contact the reporters on this story: Hugo Miller in Geneva at; Giles Broom in Geneva at To contact the editors responsible for this story: Heather Smith at Frank Connelly, Jon Menon

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