UBS arch-nemesis Bradley Birkenfeld could again hurt his former employers by testifying in a French tax evasion probe, according to one tax lawyer. The whistleblower who brought down UBS in the United States will give evidence in Paris on February 27.
UBS was indicted in France last year on charges of aiding and abetting French tax cheats. The bank was ordered to pay a €1.1 billion (CHF1.16 billion) bond, which gives a hint at the size of fine it may eventually have to pay if found guilty.
Zurich-based tax lawyer Milan Patel believes that Birkenfeld’s testimony could turn up the heat on UBS in France, despite the whistleblower being more closely connected to the US during his time as a client relationship manager at the bank.
“This is a fairly significant development given the fact that Birkenfeld brought down UBS in the US,” Patel told swissinfo.ch. “He was based in Geneva so he must have had some familiarity with the bank’s cross-border business in France. His focus was on the US but I doubt that this was his exclusive territory.”
“I’m fairly certain the bank would have used the same procedures and codes in France as in the US,” Patel added. “This operation was a well-oiled machine, so I doubt they would have used one method in France and a completely different one in the US.”
“Birkenfeld would certainly have some insight into how that operation was constructed, even indirectly.”
The previous testimony of Birkenfeld was crucial in prosecuting the bank in the US in 2009. Birkenfeld’s revelations famously included an account of how he smuggled a client’s diamonds hidden in a toothpaste tube.
UBS’s $780 million fine sparked a chain of events that saw other Swiss banks plead guilty to similar charges - most notably Credit Suisse and Wegelin - with yet more still under criminal investigation in the US. Bank staff, lawyers and numerous clients have also been indicted or prosecuted, while Swiss banking secrecy has been laid to waste.
On February 3, Birkenfeld was subpoenaed by French investigative judge Guillaume Daieff to give evidence during a hearing to be held this month at the District Court of Paris. The probe will determine whether UBS also conspired with French tax cheats to commit fraud.
UBS contested the order to pay a €1.1 billion bond, condemning the legal process as being “highly politicised”. But a Paris court rejected the bank’s legal appeal against the payment in September of last year. “The matter remains in a formal investigation phase, there is nothing more to add at this point,” the bank said in an emailed statement to swissinfo.ch.
Birkenfeld was awarded $104 million by the Internal Revenue Service for the part his whistleblowing played in the 2009 prosecution of UBS. But he was also sentenced to a 40-month jail term for failing to reveal everything about his role in the bank’s tax evasion scam – a punishment that he bitterly contested.
The United States citizen was released early from jail but was placed under a supervised release scheme until November of this year that restricts his movements. As a result, Birkenfeld had to ask the Florida court to temporarily lift such restrictions to allow him to attend the Paris hearing.
His Florida court application stated that the Department of Justice had given him the green light to travel to Paris whilst his parole officer had taken “no position” on the request.
The Paris case will arrive at the worst possible time for the reputation of the Swiss financial centre. International attention is still focused on Switzerland following the Swiss Leaks revelations that were taken from HSBC’s Swiss private banking arm by whistleblower Hervé Falciani.
The US, along with France, Belgium and Argentina, has also launched a criminal probe into HSBC Switzerland’s past behaviour.
France stepped up its attack on tax evasion in 2013 after former budget minister Jérôme Cahuzac was forced to resign after admitting that he had held a secret Swiss bank account. In the course of their investigations into UBS, the French authorities have raided bank offices in France and questioned executives.
Switzerland is desperate to clean up the image of its banks after being dragged though the mire in the last seven years. Following the 2009 UBS debacle, US probes have completely destroyed banks Wegelin and Frey whilst Credit Suisse was handed a $2.8 billion fine only last year.
Switzerland has taken several steps to put a stop to such antics and has promised to introduce an automatic exchange of tax information scheme by 2018.
Three ex-UBS employees face arrest warrants
According to the AFP news agency on Tuesday, a French court has issued arrest warrants against three former UBS employees currently based in Switzerland. The warrants were supposedly issued in January after the ex-UBS staff failed to respond to summons from the court. The summons are said to be connection to the French probe against UBS last summer for money laundering.end of infobox