Praetorian Trust

Swiss lawmakers on Tuesday (June 8th, 2010) rejected a deal to hand over to United States authorities data on more than 4,000 wealthy Americans suspected of evading taxes with the help of the Swiss bank UBS, a move that could bring the bank a step closer to indictment, according to people briefed on the matter.

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Swiss lawmakers in the lower house, the National Council, rejected the deal by a vote of 104 to 76, with 16 abstentions. They also voted to send the measure to a national referendum, if necessary. The upper house, the Council of States, approved the deal last week. Both sides will begin on Wednesday to try to reach a compromise.

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If the entire Swiss Parliament does not approve the deal by June 18, the Justice Department, on behalf of the Internal Revenue Service, will revive a legal case against UBS in a Florida court that seeks to force the bank to turn over 52,000 names of American clients, a person briefed on the matter said. The Justice Department dropped the civil lawsuit, known as a John Doe summons, when Switzerland agreed last August to turn over 4,450 names.

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The showdown over UBS, which once centered on wealthy client gatherings in Miami and Geneva, has highlighted a cultural difference between the two countries: unlike the United States, Switzerland does not view tax evasion as a crime.

The case gained ground in recent years when Bradley C. Birkenfeld, a former UBS private banker, spilled secrets to prosecutors and described tax-evasion planning that included some of the highest executives of the bank. Mr. Birkenfeld, an American who is serving a 40-month prison sentence in the United States, is the only UBS banker or executive to go to jail, a fact that has infuriated his lawyers.

Full text of this NY Times article.

Ex-client of UBS gets house arrest for tax fraud

Wed Oct 28, 2009 12:31pm EDT

By Tom Brown

MIAMI (Reuters) - A former client of UBS AG who cooperated in a U.S. probe of the Swiss bank’s ties with wealthy Americans hiding money overseas was sentenced to one year house arrest and a fine on Wednesday for a multimillion-dollar tax evasion scheme.

Steven Michael Rubinstein, 55, was the first former customer of UBS to be sentenced for tax fraud following a protracted U.S. legal battle with the bank that ended in August with an agreement to crack open Switzerland’s long tradition of bank secrecy.

Rubinstein, a Florida accountant who pleaded guilty to a single count of tax evasion in June, was sentenced to a total of three years of probation including 12 months of house arrest. He was also ordered to pay a $40,000 fine.

<…> Rubinstein’s sentence, handed down by a federal court judge in Miami, was in line with the Justice Department’s recent request for leniency for Rubinstein due to what it described as his substantial cooperation in a probe centering on Americans with undisclosed offshore accounts at UBS.

The U.S. government had alleged that Rubinstein, who worked for a company in the yacht business, evaded taxes on $3 million by stashing funds in a British Virgin Islands corporation set up through a UBS account that was active from 2001 to 2008.

He had faced a maximum sentence of three years in prison, but the Justice Department called for no more than a 12-month sentence in a court filing last Friday.<…>

For full text article refer to: Reuters

Wegelin & Co Private bankers: Farewell America

We live at a time of shifting power and influence in the world. Asia is on the rise, and Brazil too, probably. Australia will catch on to their coattails, and Europe may once more be able to position itself within these countries’ recoveries. The USA will remain the unquestioned military power and also an enormous repository of debt and other problems. Because they are painful, and there is always an inclination to shift the blame for them onto third parties, re-dimensioning processes always harbour the potential for aggression. Switzerland is currently experiencing just this. But it won’t end there. Potential aggression and economic progress are mutually exclusive. Which is why we are well advised to take a general farewell of America. This will be painful, for the USA was once the most vital market economy in the world.

But for now, it’s time to say goodbye.

(Wegelin & Co Private bankers, Investment commentary No.265, 24.08.2009)

(Full text article here)

Dear Sirs:

We are dismayed by your unsubstantiated assertion that “International tax evasion has become a major threat to government finances in countries big and small…” (Views 24.08.09 “ IF SWITZERLAND CAN…Providing the names on UBS secret accounts…end of International tax cheating”)

This is clearly untrue.

Surely it is not popular to defend those who choose to avoid paying taxes: all citizens should pay taxes according to the law. In fact,in the US and most European nations ( save perhaps in Italy where tax avoidence seems to be a national sport) most people pay their taxes. Many people in Europe, and particularly those that can afford it in the US, attempt to minimize there taxes by government approved and legal tax planning. In the western countries and Japan, tax evasion is hardly the norm, however,tax avoidence is a legal an acceptable practice for all citizens, both businesses and individuals.

Tax havens exist because tax laws vary from country to country and tax paying citizens the world over , just as multinational corporations, like to keep there hard earned money in their own pockets, and out of the hands of spendthrift politicians and governments. To suggest Switzerland exists and gains substantial benefit from the ill gotten wealth of tax cheats is both an unfair characterization and out right wrong. Indeed, the country does benefit from the fact that other nations tax may not have business friendly tax regimes, but this may have more to do with the Swiss notions that the state serves the individual and not the other way around.

The fact is, that even if the US government could recover all of the estimated 18 billion dollars of assets hidden by wealthy Americans abroad, it would not be enough to fund just one month of the wars in Iraq and Afghanistan. ( Congressional Budget Office report 2009). To state that the tax cheats, and those with secret accounts, have somehow placed government finances at risk in the face of this one simple fact about US government spending, let alone the current policy of fiscal easing, is quite disingenuous.

Perhaps the real threat to government finances are not the few individuals with secret bank accounts, and they are not to blame for the either the implosion of the financial system or the explosion of government spending. Rather, it is the government printing press and the many ways that our elected officials choose to spend our tax dollars, that is destroying both value and government finances in countries both large and small.