When you think it couldn’t get any worse …. In recent years, UBS, a Swiss bank, helped engineer blatant tax evasion by an estimated 52,000 US taxpayers who, with UBS’s help, hid an estimated $14.8 billion of unreported taxable income in confidential Swiss bank accounts and evaded US tax. Last fall, USB agreed to pay the US $780 million in fines for its promotion of this tax evasion but it continues to refuse to turn over the identity of the tax-evading taxpayers. It turns out that US taxpayers are paying UBS’s fine for its promotion of and complicity in this blatant and widespread tax evasion, which has cost the US Treasury millions of dollars of unpaid taxes by wealthy taxpayers. (As a result of this case, Switzerland has agreed to new treaty provisions that will significantly erode its historic bank secrecy laws.)
And how is this happening? UBS is one of the biggest counterparties to credit default swaps entered into by AIG who received TARP funds (i.e. taxpayer money) from AIG. AIG received more than $150 billion in TARP funds so far since it is “too big to fail” and used $100 billion of that to pay Goldman Sachs, Merrill Lynch, Deutsche Bank, and other banks for amounts they claimed AIG owed under credit default swaps entered into with them. As one of AIG’s biggest counter parties, UBS received $5 billion from AIG when it dolled out its TARP funds to counterparties and it appears that part of UBS’s share was used to pay its $780 million fine for promoting tax evasion.
What would happen if UBS was not a bank “too big to fail” but a mere individual advisor caught helping his or her clients commit tax evasion? Most likely, he or she would lose their professional license, pay significant fines out of their own assets, and spend time in prison. Generally, the individual would be prohibited from engaging in the business utilized to commit fraud (for example, a tax lawyer convicted of tax fraud typically loses his or her law license and is prohibited from ever again practicing law). The individual advisor most certainly would not get a payout – direct or indirect – from the US government to pay fines levied by the US government for his or her wrongdoing.
Since UBS deliberately promoted an extensive program to help 52,000 US taxpayers commit tax fraud which substantially cost the US government of millions of tax dollars and it continues to refuse to disclose the names of the taxpayers involved, what is the proper penalty it should face? More fines? Criminal prosecution? Should UBS be allowed to conduct business in the US at all or, like a convicted individual advisor, lose its right to do so?
