Top UBS Banker Not Guilty Of Tax Evasion, Big Blow To Offshore Crackdown

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UBS Offices (Photo credit: Wikimedia)

In a big setback to the IRS's juggernaut against tax evasion and offshore accounts, a former top UBS banker has been acquitted of tax evasion. The U.S. charged Raoul Weil with conspiracy to defraud the U.S. government. The former exec was facing five years in prison and a $250,000 fine. He is the highest-ranking Swiss banker prosecuted in the U.S. crackdown.

But now he gets to go home to Switzerland, and the verdict was quick, delivered after only an hour and fifteen minutes of deliberations. Mr. Weil did not take the stand, but several other former UBS bankers did. They said Mr. Weil was deeply involved in hiding $20 billion from the IRS.

Martin Liechti, the former UBS head of banking in the Americas, testified that Mr. Weil knew thousands of accounts didn't comply with U.S. tax law. Some former clients testified too. The government accused Mr. Weil and his subordinates of using sham structures so U.S. clients could sidestep the IRS.

The case has been in the works for seven years. Mr. Weil was indicted in 2008, and was finally arrested in Italy in 2013, courtesy of Interpol. He waived extradition. The indictment claimed that between 2002 and 2007, Mr. Weil's UBS unit helped 20,000 U.S. clients conceal approximately $20 billion in assets from the IRS.

The IRS has indicted and prosecuted other foreign bankers and advisers, sending a chill through advisers everywhere. RenzoGadola, aUBSbanker from 1995 to 2008, got five years' probation after turning over names of fellow bankers enabling Americans. Another was ChristosBagios of Credit Suisse, formerly with UBS. Mr. Bagios was accused of helping U.S. clients hide as much as $500 million from the IRS while at UBS.

Many names and addresses are being added to the mountains of information collected from voluntary disclosures, whistleblowers and FATCA. The granddaddy of disclosure laws, FATCA is a pervasive U.S. law that makes foreign banks and financial institutions everywhere report on Americans. In Switzerland, hundreds of banks are deep in a new program to disclose undeclared American accounts and pay penalties. See Signed Joint Statement and Program.

More than 100 Swiss banks and 43,000 U.S. taxpayers applied to the U.S. to avoid prosecution over offshore accounts. Credit Suisse Group AG's main bank subsidiary pleaded guilty and paid a $2.6 billion penalty. For depositors and banks alike, disclosure and penalties are vastly better than the alternative. And depositors should beware, since closing foreign accounts is not an alternative to coming clean with the IRS. For Americans who fail to step forward, the IRS and Department of Justice warn of their vast resources.

In 2009, the feds brought UBS to its knees with a deferred prosecution agreement and $780 million fine. To this day, it was an unprecedented feat, and the IRS and DOJ haven't missed a beat since. With around 120 prosecutions and tens of thousands of Americans stepping forward to pay taxes, penalties, and interest, the IRS has collected billions and believes there are still many Americans who haven't come clean.

Is any offshore income, account or trust still secret? The only safe assumption is no. Already many countries-soon virtually all-will have broad disclosure policies. Virtually all countries now have singed up, even Russia and China. It has become a kind of global landslide.