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Swiss Regulator Broke Law By Handing Over Tax Records To US
The old saying about no use crying over spilled soon to be hyperinflated commodity products will not help the thousands of people with formerly anonymous Swiss bank accounts, but will at least provide some closure. Earlier last year, when the entire financial system was collapsing and the viability of UBS depended on the generosity of the US, the Obama administration did the sneaky thing and in a blatant example of quid pro quo, demanded Swiss banks release the holy grail - full details of their account holders. Today, however, we learn that while the US decision may or may not have been just, the Swiss response to agree to US demands was illegal. Unfortunately, some fatal consequences of this dubious action are already starting to surface.
From Bloomberg:
Switzerland’s financial markets
regulator broke the law when it ordered UBS AG to give data on
255 of the bank’s clients to the U.S. last year, a court ruled. The Swiss Financial Market Supervisory Authority, known as
Finma, exceeded its authority when it told the bank Feb. 18 to
deliver the information to the U.S., the Federal Administrative
Court in Bern ruled today. The case is separate from a larger
agreement made in August to turn over data on as many as 4,450
UBS accounts.
This decision begs the question of what the legal basis for the administration's demands for such disclosure is, and whether a court review would not find comparable such illegality domestically. Of course, any such review is a pipe dream. More from Bloomberg:
Finma ordered UBS to hand over customer information so the
bank could avoid criminal prosecution in the U.S., which may
have led to the bank’s insolvency, according to the regulator.
The Justice Department accused UBS of conspiring to defraud the
U.S. by helping Americans hide accounts from the Internal
Revenue Service. The five judges rejected Finma’s argument that action was
needed to prevent the bank’s insolvency and ensure the stability
of the Swiss financial system. The government and the parliament
are the only institutions with the authority to implement state
of emergency laws, the judges said in their 60-page ruling.
Alas, America's ability to become global tax regulator, if even for a year, is cold comfort to both accountholders and a Swiss banking industry that will have an uphill battle to convince depositors they can be safe in their anonymity.
Finma’s order was an “extremely grave, difficult decision,
on the occasion of an emergency-like situation,” the Bern-based
supervisor argued before the court.
A day after UBS agreed to pass on the client data and pay a
$780 million fine, the U.S. sued the bank to force disclosure on
as many as 52,000 American accounts. UBS shares fell 23 percent
over the following three days. The stock rose 3.2 percent to
17.11 francs by 4:04 p.m. in Swiss trading today.
UBS and the Swiss government settled that lawsuit in August
by agreeing to reveal data on as many as 4,450 U.S. clients
suspected of evading taxes through an administrative assistance
procedure between the U.S. and Switzerland.
“This decision strengthens the banking secrecy,” Hans
Geiger, a former professor of banking at the University of
Zurich said by telephone today. “However, it won’t change the
trend that Switzerland will assist more and more in cases of tax
evasion.”
At the end of the day, America's attempts to push the balance of power using financial strength and Bernanke's printing machine has been temporarily rebuffed in the political arena, but not before the IRS is privy, and able to collect, on billions in new tax penalties. Whether or not this will help the already insurmountable budget deficit is irrelevant (it won't). However, this is merely yet another example of how the reserve currency holder rules the day, and the tremendous political leverage it affords in even such topics as bank independence in legendarily neutral countries such as Switzerland.
As for other, more tangible implications stemming from the loss of banking anonymity, we draw your attention to an article in Vanity Fair, in which the author William Cohan speculates that the IRS' forceful actions were the cause of multi-millionaire Finn Caspersen's suicide:
The day after the memorial service, The New York Times weighed in.
Citing an unnamed source, reporter Lynnley Browning wrote that
Caspersen “was suspected of dodging many millions in federal taxes” and
“the authorities, it seemed, were closing in.” She wrote that they
“asserted he might have owed as much as $100 million in back taxes and
fines or, possibly, even have faced prison” and that the Internal
Revenue Service had “learned” that Caspersen “held an account at LGT,”
a private bank controlled by Liechtenstein’s royal family. She noted
that Liechtenstein had agreed in December 2008 to disclose the names of
wealthy Americans with accounts at LGT, “but it was unclear if Mr.
Caspersen’s name was among them.”
The financial pressure on Caspersen had no doubt ratcheted up
exponentially in February 2009, when U.S. federal prosecutors entered
into a “deferred prosecution agreement” with UBS, the giant Swiss bank,
whereby UBS agreed to pay a $780 million fine. From 2000 to 2007 the
bank had “participated in a scheme to defraud the United States” and
the I.R.S. by “actively assisting” American clients to create and then
conceal offshore accounts. After further negotiations, UBS agreed to
turn over to the I.R.S. the names of 4,450 well-heeled Americans who
were suspected of using the offshore bank accounts to avoid paying
billions of dollars of taxes to the I.R.S. The U.S. government had
hoped to get information on more than 50,000 secret Swiss bank
accounts, but agreed to the lower number as part of the settlement with
UBS. In March, the I.R.S. offered amnesty from
criminal prosecution to Americans with offshore accounts who had not
properly been paying taxes. To take advantage of the amnesty program,
taxpayers had to come forward voluntarily, tell all, and agree to pay
back taxes plus interest, plus a penalty (in an effort to encourage tax
evaders to “get right” with the I.R.S., Commissioner Doug Shulman
said). The I.R.S. coffers are expected to swell by billions of dollars
in otherwise uncollected taxes as a result of the UBS deal.
The UBS agreement “sent a shock wave around the world,” Shulman
later observed. “It has showed we are serious about piercing the veil
of bank secrecy.” The original I.R.S. deadline to obtain the amnesty
was September 23, 2009, 16 days after Caspersen committed suicide. That
date was later extended to October 15.
The money-management firm Boxwood Strategic Advisors observed that
since Caspersen’s tax basis in Beneficial stock was so low—his father
had helped to nurture and grow the business 78 years before it was
sold—any sale of the Household stock or HSBC stock that Caspersen
received after the acquisition would have been subject to gargantuan
capital-gains taxes. It is possible that in order to minimize those, he
might have sought offshore tax advice and considered offshore tax
havens.
Whittemore, for one, says Caspersen was “very aware” of the
September 23 amnesty deadline and he made numerous decisions based upon
what could be looming problems for him with the government, “some
subtle and foolish, some thoughtful.” Whittemore was not surprised that
Caspersen would have sought advice about minimizing the taxes that
needed to be paid. “I don’t know how he avoided the I.R.S. for so many
years and then got in trouble,” Whittemore says. Caspersen’s tax
problems “had been under discussion and brewing for some time, I’m
told.” Whittemore believes the dispute with the I.R.S. was about “the
way he accounted for some of the profits from the sale of the company”
and not “one of these tax residency things.” (The I.R.S. will not
comment.)
Unfortunately, as the IRS investigation progresses, we sadly expect many more such developments in the land of the ultra wealthy.
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A relatively small amount of permanent productive assets in other countries can get you dual citizenship complete with pasaporte.
(wink-wink)
Your passport or current citizenship do not matter to the IRS as a former citizen you are responsible for filling federal tax returns.
And, unless you renounce your US citizenship you are required to pay taxes on your income every year no matter what part of the globe you hide out in.
How small an amount, almighty one?
And a second passport will help how??
I wonder what Jim Rogers has to pay? Certainly he didn't move his investing business to Singapore with the intention of continuing to nurse the IRS.
Like Government Sachs and the Cayman Islands [and Bermuda, Mauritius, and the British Virgin Islands ]...
http://www.mcclatchydc.com/227/story/81465.html
http://open.salon.com/blog/anthony_m_freed/2008/12/18/goldman_sachs_evad...
did anyone see the toothpaste diamond smuggler on 60 minutes last sunday? i'm not sure i've seen anyone lie so audaciously in my life, it was a sight to behold
None of these Swiss banks should be doing business in the United States.
"Let's have a Quiet Conversation(tm)"
"Let's commit tax fraud together(tm)"
Probably would quadruple their business if they chose to skip the USA.
JP Morgan (for profit) public benefit payments business much stronger on increase in Food Stamp Use
Bloomberg Video January 8, 2010
http://tinyurl.com/ygn3rs4
Chris Paton the director of that business unit shares how his business is up sharply and an important contributor to JPM's bottom line.
It is nice to know that Jamie Dimon profits off the hardship of others
the dimon's in the details
meant to post in the prior thread
I think the Swiss threw in Roman Polanski as part of the deal.
From the article:
Hmmmmmm.
You're never a client of Goldman, you're always on the menu
To Serve Man is a vampire squid cookbook then?
interesting sidenote to this whole story -- why the whistleblower is the only one going to prison:
http://www.democracynow.org/2010/1/7/why_is_the_whistleblower_who_exposed
(disclosure: shared to fill in some gaps of the story, not to express a particular viewpoint on the matter)
I'm glad you brought it up. It just shows that there is no such thing in this country (if anyone believed it ever existed) as blind justice. The whistleblower admitted to wrongdoing so it was an open and shut case. The accused would have sicked armies of attorneys on the government costing everyone involved a lot of time and money, so the feds just took the low hanging fruit. Moral of the story, if you have the ability to out litigate the Feds they won't touch you.
Another way to illustrate this is a lil part of the movie Public Enemies. Dillinger is robbing banks and becomes persona non grata to the mob. Too much attention they say. They can run their books netting more any given day than a bank robbery could. All they have to do is bribe the cops and the white collar crime is ignored.
Moral of the story, if you have the ability to out litigate the Feds they won't touch you.
That may well be the most important lesson anyone here may well learn. It is a certainty that it saved my hide. It is good to remember that with turnover being what it is that one must be prepared to send reminders of that situation.... After all, there is no such thing as a settled situation from our governments perspective.
The Modus Operandi of Federal prosecutors is to take from the defenseless while assiduously avoiding contact with those who can defend themselves. "Justice" has nothing to do with anything.
It is the same logic that cowards and bullies use.
Playing Hob Scotch on zee landmines, Ja.
It always amazes me how certain people make a truck load of money by some windfall, and then have to find a way to avoid taxes. First, if you owe 'em. they'll find you and they get it out of you. So you're really only delaying the inevitable, while adding penalties and interest to boot.
I could understand if it was earned by blood sweat and tears over a lifetime; that's your money and you don't want to give it to the tax man. But these people didn't do ANYTHING, they got lucky, got rich and got way too greedy all in one day.
Perhaps they are applying their sense of money from the day before, when a million dollars was a lot of money. The next day they owe $50M to the government, and they can't imagine paying it, so they don't.
For crisakes! it's capital gains tax which is only 15%. F'ING PAY IT!!! Once you've paid them, the money's all yours, no worries! You certainly don't have to hide it all under the alps.
I must say, that some states charge income tax rates on capital gains, which in some cases (NYC) doubles your tax bill. So move to Florida, you only need a few months notice to establish residency before your windfall is tax free at the state level.
lol I watched that yesterday and was amazed
Time for the Fair Tax. Everyone pays.
Wrong. It is time to re-establish taxes that are morally defensible. The only tax that is morally defensible is an excise tax because it can be legally avoided.
The founding fathers specifically banned direct taxes and specified the use of excise taxes in the constitution because they knew that excise taxes are the only morally-sound tax.
But then again, who cares what the Constitution says anymore?
thank you.
i despise all transaction based tax schemes because
they are all about controlling every single action
in which people engage....every time you shit,
flush, or buy the government is there to take its
cut just like a good criminal operation.
WEve only had an income tax for a relatively short time in this country. Even now it only brings in about 1T in revenue. You wanna increase tax revenue then end the income tax and dont replace it with anything. Laffer is BS.
Why should we pay taxes when we can just auction off another Trillion in debt and since deficits make us wealther according to keynsians it would be a double plus. =)
actually laffer has a great deal of empirical
evidence supporting its thesis....it was this
insight which removed many of the perverse
incentives which destroyed or subverted economic
activity especially during the tax-rich 1960s-70s...
on the other hand you are correct about the
back door mechanism of taxation supported by
central banking and debt....this is a huge tax
which most folks do not recognize and is one reason
why taxes have not gone up yet....but that is
coming - even on the poor shmucks making less than
250k per year...
100 years is not a relatively short period
of time...there was a time when it did not bring
in even 1% of the gdp let alone the 14% it does
now...
Since you do, please refer me to the exact section of the Constitution that "specifically ban[s] direct taxes".
unaportioned
Ummm ... Correct me if I'm wrong, but isn't the FairTax actually a kind of excise tax?
I've been paying close attention... and have noticed that they never actually say exactly what information, if any, was released on the broader pool of 4500. Every informational release from the IRS is very menacing and threatening, but they never detail exactly what the terms of the arrangement were. My guess is that UBS agreed to the deal precisely because the IRS did not require any substantive disclosure, but instead agreed not to correct the erroneous public conclusion that they had. Tax "cheats" come out of the woodwork to turn themselves in, when they would probably have been ok anyway.
the swiss regulator broke the law to prevent the cia from putting a bullet hole in his head....
Switzerland has never been really safe. Jews in the 1930s thought it was and the Swiss handed over their property, accounts, gold, everything to the Nazis.
Our sovereign has as voracious an appetite as the Wermacht ever had. Expect fractures to start to develop between gov't actors and the financier class
Yes - except that it is not as well known that during the Third Reich's reign over Europe, an American was at the helm of the most powerful bank in Switzerland, the Bank of International Settlements. While most of the board of the BIS were Nazis, Thomas McKittrick presided over the board from 1941-46. (it is also important to note that between Gates McGarrah and Leon Fraser, 3 out of the 5 presidents of the BIS between 1930 and 1950 had also been American bankers)
McKittrick was not just any U.S. citizen - he was close friends with Allen Dulles, who was simultaneously the OSS bureau station chief in Switzerland and also a legal representative (via the law firm of Sullivan & Cromwell that he and his brother John Foster managed) of many other large US institutions and their European subsidiaries and their interests that were making Nazi war efforts possible: such as Chase Bank, JP Morgan bank, Union Banking Corporation (the one Prescott Bush managed) Ford, General Motors, Standard Oil of NJ, ITT, IBM, IG Farben, etc. Allen Dulles himself sat on the board of the Shroder bank, which housed slush funds for the Nazi SS.
Anyway, the point is that Americans, not the Swiss, were presiding over the nefarious activities that helped finance the Nazis. The question? have things changed in Switzerland? or are there US bankers that still have a significant interest in the opacity of Swiss financial institutions in order to mask cold blooded unofficial macroeconomic/geopolitical activities?
for more on the history of this see
http://jasonweixelbaum.wordpress.com/2009/12/21/following-the-money-an-e...
That explains it. So its payback time now. Now that they have substantial power in US, they are taking sweet revenge.
Yeppers, 'Remember a few years back, they( Swiss) were sued by Holocaust survivors relatives, for keeping/hiding/stealing, the funds the Jews deposited there during, and prior to the war?, as well as diamonds, gold,etc.
This really sucks, once you pay taxes on your earnings/investments, you should not have to pay them over & over again on the same damned income.
When this balloon finally goes up,I think the US Gv't will lose a ton of it's stroke on who it can tell what , when or where.
Just like the OLD days.....................when we still had countries, and rights.
Damn, sure do miss them.................you very young here, do not have a clue what it was like to live in a Free country.I do not know what's worse, having done so, and watch it turn Fascist, or like some of you, never having known.
.
Once the damage is done the rule of law matters little to those that manipulate it.
I agree with Stevm30. What is the basis for determining which 4500 out of 52000 accounts were going to be revealed. Were the senators and representatives, the mafia dons, the drug kingpins, the weapons dealers, Kissingers, Bakers, Kennedys excluded first? It would be nice to know, but it will never happen. Only the little people will go to jail or have substantial fines. The biggies will get a slap on the wrist (settlement to pay $xxx and not admit guilt).
LOL... wonder how many Obama campaign voters were in the "4500"??
Forgive me if I don't shed a tear for the tax-dodging ultra-wealthy. This "invasion of privacy" consists of forcing them to disclose information they are already required to disclose to the IRS.
Your enemy is not the rich, my friend. It's the politicians. Let's keep our in-fighting minimal, and focus on the true tyrant - the federal government.
That's an interesting worldview, but how would you respond if I told you that the rich own the politicians completely, and the politicians and rich together own the federal government?
Just as it has been for 100's of years, we are seeing the ultra-rich fighting against the moderately rich, with everyone else an unwitting pawn.
In that case it's still the power we give the politicians that is the root of the problem... if they didn't have the power, there would be nothing of value to buy.
The question is not the rich, or the politicians. The question is about the moral foundation of our legal system.
Direct taxes (i.e., income taxes and property taxes) are not moral taxes because abuse and tyranny are inherent in them.
The solution is to eliminate those taxes with an unsound moral basis.
Excise taxes have a sound moral basis because they can be legally and morally evaded. Don't want to pay the tax? then fine, avoid the taxed activity.
Income taxes and property taxes are morally unsound because there is no way to avoid them. That is tyranny.
bullshit....the plutocrats control the government
and in ways about which you don't have a clue...
The rich are competely to blame. Throughout recorded history the rich have conspired to defraud the general population to their own benifit. They cause the misery of war for their own purpose and quite frankly they should be shot on sight.
Kill the rich.
Uh Huh,
And WHO is going to start companies, and hire people?.
The Poor?.
This is exactly what Communism is about.And why it failed.
Just like what we have started here, it's going down.
See where Chavez, just devalued their currency?.
Overfricken night....................
Think it won't hit here?.Dream on.
Just pointing out the facts is all. Sheep and dogs screwing each other. I'm a wolf ... it's very funny.
I'm here just for my amusement and this is a wonderful place.
To me that's not the real point here.
What if your not hiding dick?.
What if you want to protect legal assets offshore?.A lot of those accounts were IMHO, just that..................
What if you wanted to keep gold, diamonds etc, offshore.
Bought ,paid for, taxed, and then you have assclowns getting into a legal account?.
This entire matter has screwed up the International Banking system..............even expatriates, in a lot of countries cannot even OPEN an account.........NOW.
After YEARS of living there, and are having their accounts closed.
There is an estimated 20 billion $'s in swiss banks belonging to Americans. Lets say they earn 2%. THat totals: 400 million$. Half is taxed to the Swiss: that leaves 200 million in question to the IRS. Wow. That is going to offset the 25 trillion spent on wall street? This is like the 10% tax on botox that will fund a 10 trillion$ Health Bill. Innumeracy?
Wanna know something....?
If the US would change its tax structure to a
15% consumption tax only....tax revenue would go up.....
and there would be no need to deposit $ offshore....In fact
money from all over the world and businesses would flock to the US....
Also the stock market and business formation would send the US to the next Golden Age....
keep clicking your heels and envision yourself
not in kansas anymore...
+10000 internets to you!
That is exactly right. If taxes were low (especially for those making under 100k) and easy to deal with (especially if you own a small business) people would pay without thinking. But because you are forced to deal with egregious paperwork, and you get angry at this nightmare of bureaucracy and insane tax code, you almost feel honor bound to take any and every deduction.
They'd probably get more just by making it simpler - now it feels like you are being tortured and raped. The worst part is that any money we fork over goes to the criminals at AIG, Freddie and Fannie so they can pay their execs to buy a nice summer homes. Or to buy votes, or for payoffs to the politically connected.
On a final depressing note - the whole system is doomed anyway, the debt is unpayable at this juncture, so any money paid into the system is like throwing piles of hundred dollar bills into a giant swirling, sucking, fiery whirpool.
If I were the Swiss, I would have said "fine, we'll hand over everyone, beginning with all of the Congressmen/Senators/high-profile banksters." The Swiss should have fucking outed the entire lot - PUBLICALLY; including names, amounts, etc.
I am an immigration consultant in Canada and I've been reading this blog for months now. I love the articles and I love the comments. It's one of the few sites where commenters seem to know what's really going on in the world.
As commenter #1 said, yes you can get out of future tax increases in the US with a Canadian passport with an investment of CAD $400,000. It's actually a 0 coupon government bond with a 5 year maturity.
So you pay the Canadian government $400,000 and get it back in 5 years with 0 interest. In return, you, your spouse and children if any can move to Canada as permanent residents (like a Green Card holder) in about 18 months and can move all of your assets into an offshore trust (legally and with the approval of the Canadian government) for 5 years. The money you bring into Canada is not taxed either.
Once residing here you can choose to pay EITHER Canadian OR American taxes depending on which one gives you the least exposure. (Hint: Corporate taxes in BC are soon to be 10% on the first $800,000 in profits and you can pull out dividends from your company for close to free)
Our company is www.russcanada.com
My name is Ryan Monsurate. I'd also love to just chat about your views on the future of the world's economy and how you see things shaping up over the coming years.
Very interesting profile you have there Ryan. Judging from what it says, we would certainly appear to have similar interests, although I have yet to actually read Kurzweil's books, even though I find his ideas (though perhaps not his personality) attractive. I also couldn't agree more with your statement that "It's one of the few sites where commenters seem to know what's really going on in the world."
By way of further similarities, I actually have quite a bit of knowledge of, and experience with, the PNP program. When it was still running in PEI, I worked at a law firm that dealt extensively with it. While I wouldn't say it was a scam per se, the quasi-graft that results from teh program has a suspicious habit of enriching those closest to the program. That said, at the end of the day I'm all for taking money from the world's wealthy in exchange for their coming to Canada. In a global economy, our desirability as a nation in which to live is one of our largest natural resources, and it should be taken advantage of. Anyways, I have to run and write a brief about how the CRA are a bunch of ignorant bureaucratic arseholes who shouldn't have persecuted my client and should now be made to pay his legal fees. The more I realize how big of a waste bureaucracy is, the more I'm all about low-taxation and small government, which small government does include universal healthcare for all - what is the point of universal taxation if not to keep the people alive? This last point makes me laugh cry when you consider the American logic on the topic of "defense" - let's spend trillions to "protect" people instead of spending a minute percentage of that to keep millions of people alive. If this absurdity doesn't immediately drive home the fact that U.S. politica policy and actions are a mere guise to continue enriching the wealthy, I don't know what will.
Guys, remember the IRS has a law that allows them to seize your entire account if you ever forget to file a disclosure form to them concerning your overseas account. This whole thing was not about the IRS collecting evaded taxes (which were probably minimal), it was about taking all of those people's money.
Who knows why those people had money in Switz. I heard that a lot of them were just expats with relatively small accounts. I can see reasons why someone might keep an offshore account (divorce, lawsuits, secrecy) that have nothing to do with evading taxes
Ya know, ultra-wealthy tax cheats killing themselves to stay out of jail doesn't exactly jerk any tears from me.
I think it's rotten that the US has the power to greenmail foreign banks or even whole governments, but the "victims" here are crooks, and maybe they ought to let their cases play out in court instead of offing themselves.