In May 2011, a scared employee from Swiss bank UBS was summoned without warning or explanation to meet French government officials outside the Louis Vuitton store on the Champs-Elysées in Paris.
From there she was shuttled to the back of a large department store and given her mission: to help the French government try to catch Swiss bankers illegally soliciting French clients at the French Open tennis tournament.
“They said we are going to follow you for two weeks at Roland-Garros . . . They said they would follow me for the two weeks with a camera,” said Stéphanie Gibaud in an interview with the Financial Times days after UBS was hit with a €4.5 billion (CHF5.1 billion) penalty for recruiting clients in France and helping them evade taxes.
Gibaud, a relatively junior marketing manager who organised client events during her more than ten years at the bank, spent the following days at Roland-Garros in fear, trying to behave normally in front of her colleagues before being interrogated for hours by the French officials.
“I just thought that my life is like a thriller,” she said, remembering how she felt standing in front of the customs agents. “I found out at the ground floor of Fnac [department store] that I had no choice. They could have taken me into custody.”
Gibaud, 53, was a vital part of a case that featured encrypted hard drives, shadow accounting systems, bankers chasing clients through French high society and, once the charges had been brought, a huge gamble for UBS over whether or not to settle.
‘Worthy of James Bond’
The court judgment in Paris last week came at the end of a multiyear investigation and trial that saw a witness describe the tactics of the Swiss bankers in France – some of whom were labelled “hunters” – as “worthy of James Bond”.
One person quoted in the 217-page judgment said the aim was “to steal as many accounts as possible and bring them back to Switzerland, whether they are declared or not”.
The “hunting” of prospective wealthy clients, says the judgment, took place at literal hunts in the French countryside, at top-end restaurants in central Paris, over games of golf, at the opera in Nantes and Lyon, rugby tournaments and in an €80,000 box overlooking the main court at Roland-Garros.
‘This practice of ‘carnets du lait’ was a way of keep illegal activities related to money transfer operations under the radar’
Former UBS employeeEnd of quote
UBS has consistently denied wrongdoing and said in a statement issued after the verdict that “the conviction is not supported by any concrete evidence”. The bank plans to appeal against the verdict, a process that could take several years.
“As we pointed out at the trial and before it, the circumstances surrounding Ms Gibaud’s leaving the bank put her accounts and allegations into serious question,” the Swiss bank said.
It added that the verdict was “based on the unfounded allegations of former employees who were not even heard at the trial”. Gibaud, who says she has been approached to run as a candidate in the European elections with controversial rightwing politician Nicolas Dupont-Aignan, personifies the tensions at the centre of the trial.
UBS is accusing her of defamation and has broadly rejected her testimony as “without factual basis and used out of context”. The bank stresses that even at Roland-Garros no proof of any actual solicitation was found despite investigators trailing clients back to their houses.
However, UBS’s denials were not believed and the French court found the bank guilty. According to the judgment, the Swiss bankers found business by travelling through France using encrypted hard-drive and business cards without a logo. They were also given a “security risk governance” manual that provided guidelines about how to limit the risk of discovery while they moved about.
The manual told employees not to keep clients’ names on them, to get rid of sensitive data if needed or when crossing the border, to use different hotels to other UBS employees, and to be unpredictable in their movements, including which taxis they took and restaurants they ate in.
In order to keep track of the money raised by the bankers, prosecutors say a “double accounting system” – called “carnets du lait”, or milk tickets – was used. According to former employees, “the ‘carnets du lait’ were in the form of hand-written notes on a Clairefontaine type grid paper” which were eventually centralised in an Excel file called the “vache”, or cow.
“This practice of ‘carnets du lait’ was a way of keep illegal activities related to money transfer operations under the radar. The origin of the money wasn’t that important,” said one former employee quoted by the court.
“It’s super easy to understand, since: Complex = declared, Simple = not declared to the tax authorities,” wrote a UBS banker in an email quoted by the report, after being asked about the difference.
As part of a 2015 tax amnesty deal with the French authorities, almost 4,000 clients of UBS agreed to pay back taxes on the almost €3.8 billion they had in their Swiss accounts.
It is not the first time that UBS has been hit with a fine for tax evasion. It was ordered to pay $780 million (CHF780 million) in the US in 2009 to settle similar charges under a deferred prosecution agreement (DPA).
This was a route UBS could have also taken in France since a new law allowing similar settlements to a DPA was passed in 2016 as Paris sought to extend its capacity to punish financial crimes. France had been stung by its own banks, such as BNP Paribas, being punished abroad.
But attempts to settle foundered when French investigators proved unwilling to let the bank away with a fine of less than €1.1 billion, the same amount UBS had put up as a bond during the investigation.
That failure has now proved costly, with UBS ordered to pay more than ten times the €300 million HSBC handed over to French authorities in 2017 to settle allegations that it helped clients of its Swiss private bank evade taxes. Five former UBS bankers were also found guilty by the court and handed suspended sentences.
“We knew the floor [of a potential fine]. We thought that if we go to trial, we will never receive a penalty at this level,” said a lawyer for UBS. “That we’re a Swiss bank didn’t help.”
Gibaud, who was made redundant by UBS in 2012 and is now an author and public speaker, received only €3,000 after suing the government for much more in compensation. She was also awarded €30,000 by a court after suing UBS for harassment, again seeking a much bigger sum.
Even after writing a book about the experience, The woman who knew too much, she is still shaken by her time spent undercover: “They have made me play the role of the agent, but an agent is being covered, an agent is someone with protection.”
Copyright The Financial Times Limited 2019