The Fine Art Of Wealth Management Or The Fine Art Of Tax Evasion?

MayorBob.

Posted to Business on Fri Jul 18, 2008 at 03:13:13 PM EST (promoted by port1080). RSS.

When you arrive at the LGT Group's web site you are greeted with sort of a mission statement. It reads "The fine art of wealth management: Applying innovative methods and instruments to build, preserve and enhance lasting value." Outwardly, that's a fiscally smart strategy - diversify and watch your wealth grow legally - totally befitting a staid European bank located in Liechtenstein. But, now it seems that mission statement might have a less than smart aspect to it as investigators in the US and Europe begin looking to see if innovative = illegal.

Heinrich Kieber is not a well-loved person these days in Liechtenstein. He's the "disgruntled" bank computer technician who is now considered a thief for violating the country's strict bank privacy laws. What he did was copy the account details of hundreds of people onto CDs. The people were allegedly using LGT to avoid taxes in their native countries. He sent the CDs to tax authorities in those countries. Germany has been pursuing leads the CDs gave them on as many as 900 wealthy Germans. They may have hidden enough money to have stiffed the German treasury to the tune of €4 billion in taxes. The first German to fall was Klaus Zumwinkel, former CEO of world's largest logistic company, Deutsche Post. Zumwinkel resigned in February when the heat turned up due to allegations he had hidden millions of euros in accounts at LGT.

But now anxiety and fear have spread to this part of the world. That's because of the hundreds of names of Americans which were on Kieber's CDs. Those names are in the hands of the IRS which is beginning its investigation. They suspect that these people may have managed to evade taxes on more than (US)$20 billion worth of assets by hiding them in LGT. US Senator Carl Levin (D - MI) is scheduled to kick off hearings of the Senate's Permanent Subcommittee on Investigations. Kieber is among the star witnesses scheduled to testify before the committee. Also testifying will be Martin Liechti, an executive with the Swiss bank UBS, which is suspected of playing a role in helping LGT transfer funds.

One UBS banker, Bradley Birkenfeld, has already cut a deal with the federal government in return for providing evidence. Birkenfeld will also testify before the committee. One of the names on the CD given to the IRS was Peter Lowy, a wealthy businessman, philanthropist, and heavy contributor to various politicians and parties. Although Lowy was subpoenaed by Levin's committee, he is out of the country and unavailable to testify, according to his lawyer.

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Tags: edited by Port1080, written by MayorBob, banks, money, taxes, tax evasion, Germany, Swiss bank (all tags)

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1	The fine art of organized crime jwb. Sat Jul 19, 2008 at 10:53:43 PM EST 5.00 (astute)

I don't care what happens to the individuals. The IRS tends to get what they want, but they also will take money over blood. These wealthy tax dodgers will probably be able to pay their way, or most of their way, out of trouble.

What I'd really like to know is what will happen to UBS, assuming they have been conducting themselves in the manner alleged. You would have a case of a corporate entity which has been a key element in an organized scheme to defraud the government. In my mind, that should be enough to have them barred from doing business in the USA ever again. Not only that, but the executives, managers, and account representatives who participated in the scheme should be barred from securities trading, banking, and management of publicly traded companies, for life.

Either that, or a trillion-dollar fine. Something big. There has to be a deterrent. Obviously, our laws and penalties are not sufficient to deter this kind of behavior as is. Someone, and some company, are going to have to be made examples.

2 1	Re: The fine art of organized crime gerrymander. Sun Jul 20, 2008 at 12:56:13 AM EST 5.00 (brilliant)

You would have a case of a corporate entity which has been a key element in an organized scheme to defraud the government.

I used to work for them, so I can safely say, no, it's not. UBS is incorporated in Switzerland, where non-declaration of income isn't a crime. Heck, every person who opens an account in Switzerland proper (as opposed to a foreign branch) automatically gets an undisclosed-to-governments "black" account along with every regular account opened.

This isn't the first time the US government has gone around this particular carnival ride. It says to some Swiss-owned bank, "tell us about illegal activity," and the bank says, "no." Then the US goes to the Swiss government and say, "make them tell us about illegal activity," and the Swiss say, "it's not illegal to us; and have you noticed which of our countries runs a federal tax surplus?" The only difference this time is that some guy decided to take it upon himself to expose internal bank workings from the similarly-set up LGT Bank to the US government.

In my mind, that should be enough to have them barred from doing business in the USA ever again.

Here's the thing -- for a US citizen to even get an interview about opening up an account at UBS, you need to have $250,000 ready to deposit. To be assured of opening one, you need more money at hand or "a significant profile in the community" -- and preferably both. Noteworthy personal aspects which count toward a "significant profile" include things like charitable investment, or community work/political activity. Get the picture? Any congressman trying to ban international private banking might as well title it the "Rich People, Please Donate To My Political Opponent's Next Campaign Bill". And that's presuming it ever gets out of committee, where other well-to-do congressmen might have their own family financial skeletons to keep hidden.

3 2	We hold our customers to the highest standards. Lou. Sun Jul 20, 2008 at 12:06:42 PM EST 4.00 (informative)

Noteworthy personal aspects which count toward a "significant profile" include things like charitable investment, or community work/political activity.

Well, I guess this fellah's activities could be community work or political activity.

And yes, the bank did confiscate the dough. I guess the guy conducting the interview of Mr. Salinas was new at the job.

"Gee whiz, Mr. Salinas...it looks like you have done many fabulous things to the Mexican people. You certainly meet our standards...welcome to our little banking family"

It's the end of the world as we know it, and I feel fine

4 3	there's a difference gerrymander. Mon Jul 21, 2008 at 11:59:46 AM EST 4.00 (astute)

And yes, the bank did confiscate the dough.

Of course it did. Money laundering is illegal under both Swiss and US law. This is a contrast to income tax evasion, which is legal to in Switzerland but illegal in the US.

7 4	not the point Lou. Tue Jul 22, 2008 at 06:56:04 AM EST none

Of course, they did take back the money. But my question is, given the high standards that you maintain that Swiss banking uphold, how did Salinas even get through the door?

(and if you say "innocent until proven guilty", I will say pah.)

It's the end of the world as we know it, and I feel fine

8 7	Re: not the point gerrymander. Tue Jul 22, 2008 at 12:23:49 PM EST none

But my question is, given the high standards that you maintain that Swiss banking uphold, how did Salinas even get through the door?

I maintain that UBS has high standards. There are other Swiss banks with less circumspection. And, of course, criminals try to hide their trails with false identities. Note that the UBS is not among the four banks listed as part of Salinas' laundering network.

But in the Senate hearings, it's UBS on the carpet.

9 8	Re: not the point Lou. Tue Jul 22, 2008 at 12:31:33 PM EST none

thank you for the clarification

It's the end of the world as we know it, and I feel fine

5 2	Re: The fine art of organized crime jwb. Mon Jul 21, 2008 at 02:34:20 PM EST none

That's all fine and good. Maybe you can go testify on behalf of UBS. But what I've read about this secret witness is that he's going to testify that his job was to sell rich Americans on the tax evasion properties of UBS's wealth management accounts. That's pretty damning, if he does indeed testify to that.

Funny thing is, it seems that the witness has come forward because UBS tried to stiff him on his commissions. If true, that will go down in history as one of the most boneheaded cost saving measures of all time.

6 5	Re: The fine art of organized crime gerrymander. Mon Jul 21, 2008 at 03:08:36 PM EST none

Yeah, it's always a bad idea to renege on promises to your sales staff.

I will be interested to learn what the witness says. The real question will be whether the UBS sales pitch involves selling illegal tax evasion or the perfectly legal tax avoidance -- and trust me when I say the UBS private banking reps are well-versed in the difference.

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The Fine Art Of Wealth Management Or The Fine Art Of Tax Evasion?

MayorBob.

Posted to Business on Fri Jul 18, 2008 at 03:13:13 PM EST (promoted by port1080). RSS.

The fine art of organized crime

jwb.

Sat Jul 19, 2008 at 10:53:43 PM EST

5.00 (astute)

1

Re: The fine art of organized crime

gerrymander.

Sun Jul 20, 2008 at 12:56:13 AM EST

5.00 (brilliant)

2

We hold our customers to the highest standards.

Lou.

Sun Jul 20, 2008 at 12:06:42 PM EST

4.00 (informative)

3

there's a difference

gerrymander.

Mon Jul 21, 2008 at 11:59:46 AM EST

4.00 (astute)

4

not the point

Lou.

Tue Jul 22, 2008 at 06:56:04 AM EST

none

7

Re: not the point

gerrymander.

Tue Jul 22, 2008 at 12:23:49 PM EST

none

8

Re: not the point

Lou.

Tue Jul 22, 2008 at 12:31:33 PM EST

none

2

Re: The fine art of organized crime

jwb.

Mon Jul 21, 2008 at 02:34:20 PM EST

none

5

Re: The fine art of organized crime

gerrymander.

Mon Jul 21, 2008 at 03:08:36 PM EST

none