This page has been archived and commenting is disabled.

DOJ's Latest "Beat Down" on Swiss Banks

Bruce Krasting's picture




 

DOJ's Latest "Beat Down" on Swiss Banks

Courtesy of Bruce Krasting

 

 

Wow! The Department of Justice took an extraordinary step yesterday. It indicted Swiss private bank, Bank Wegelin, for aiding and abetting in US income tax fraud. 

This is a big deal. 


I’ll try to keep this fascinating story brief.

Bank Wegelin (W) has been around for 270 years. In Switzerland, it is referred to as a “Private Bank”. There are dozens of Private Banks in the country (less every week). 

 

 

Private Banks do private things and charge big fees. Up until four years ago, the Swiss Private Banks were doing private things for private clients from all over the world, including many US names.

The DOJ sued the big Swiss bank, UBS, over this private business. UBS folded when the DOJ threatened a criminal complaint. (UBS would have had to close all its US businesses had a criminal complaint prevailed.) It ended up costing the bank $780 large and, for the most part, the DOJ got the “names” it was after.

Having blown UBS to smithereens, the DOJ set its sights on the other Swiss Banks. It targeted eleven Private Banks. W was on the list.

Talk of a settlement, including big buck fines and the release of more "names", has been in the press for a few months. Treasury Secretary Geithner met with Eveline Widmere-Schlumpf (Swiss Finance Minister) in Davos last week. It seemed like progress was being made on the thorny problem of the private banks:  

 

 

 

Widmere-Schlumpf:

“We’re hoping that we’ll reach an agreement with the U.S. within the next couple of months”

 

 

I was surprised when the non-USA assets of W were “sold” to Notenstein Private Bank on January 27. Notenstein is 100% owned by Raiffeisen Bank (R). This sale should have been a tip off that the conversation between Geithner and Widmere-Schlumpf was not as friendly and optimistic as the public comments suggested.

 

The Senior Managing Partner of W, Konrad Hummler (KH), commented on the sale of his bank: (Apparently he was surprised too)

 

 

 

I never could have imagined that we, as owners of Switzerland’s oldest bank, would have ever considered selling”

KH was clear that the sale was a reaction to the pending DOJ hammer blow:

“The extraordinarily difficult situation and threat to the bank brought about by the legal dispute with the US”.

With the non-US assets stripped out of W, the DOJ suit is functionally against a dead person.

Note: Wegelin had no physical assets in the USA. It did have a bank account in the US holding $16.2mm. That was seized yesterday. But that amount is peanuts. The DOJ wants much, much more.

There's an unusual part to this which I find curious. W had an ‘old school’ way of doing business. To give assurances to its private customers that the bank was solid, and their money was safe, the Board of Directors of W assumed personal liability for the affairs of the bank.

No one has lost a Franc in the account transfers from W to R, so it would appear that those directors are now free from any liability. However, the DOJ has named EXECUTIVE X as a plaintiff in the charges files yesterday. So it would appear that Konrad Hummler’s (KH) problems are not over.

It just so happens that KH is also the Chairman of the Neue Zuricher Zeitung (NZZ), an influential Swiss rag. KH has a long history in Swiss banking. He used to run Swiss Bank Corp., which he later sold to UBS. He was the former head of the Swiss Private Bankers Association. He was an adviser to the Swiss National Bank for seven years!  (He lost that job in April, 2011 as the DOJ noose was getting tighter.) This guy is wired.

The DOJ might also pursue the former assets of W. This could be problematic. The timing (and the surprise) of the sale of W's non-US assets to Raiffeisen Bank (R) might have pissed off the folks at the DOJ. There are (unconfirmed) reports in the Swiss press that the sale price for W's non-US assets was CHF 700mm ($725mm). That might explain the actions DOJ took. That’s a lot of loot.

Will the DOJ go after R? This would seem unlikely. R has a very big presence in Switzerland. It is a retail bank with three million customers and branches all over. It is affiliated with Raiffeisen Bank International (RI).  RI is a very big bank in Eastern Europe with 13mm customers . Of further interest is that both R and RI are part of Unico Banking Group. 

 

 

 

This consortium includes the big Dutch bank, Rabo and also the French bank, Credit Agricole. Maybe I’m nuts, but I don’t see the DOJ messing with a hornets' nest this size.

I think the DOJ's steps yesterday were just “shock and awe”. This puts more pressure on the remaining Private Banks. The DOJ blew up W in a rather spectacular fashion. Other Swiss bankers in the DOJ's cross-hairs must be crapping in their pants. Many of them are gathering up client dossiers - and getting ready to write big checks.

The DOJ is like a Rhinoceros. It's not very good looking, and when it puts its head down and charges into the brush, it tramples anything in its way. Nothing can stop it.

This matter will come to a head pretty soon. If it doesn’t, the DOJ will knock off the next Private Bank on the list. 

Fines will get paid. Names will be turned over. Some individuals will be prosecuted. The “names” have some explaining to do. At the top of this list is the good old IRS. Other interested parties will include creditors, wives, ex-wives, ex-wives’-lawyers, current-wives’-lawyers, business partners, employers, the press, relatives and friends.

After a while, this will all be forgotten. Sort of. The door for Americans to hide money away from the IRS is closed. Sort of. The foreign banks won’t want American customers; it’s too much of a hassle. If you do find a Banca di..... outside of the USA, you will have to plunk down a SS card, and agree to have info given to the IRS. 

The door is closed for all electronic money. But the door is not completely closed. This story is as old as the Egyptians. Folks have been cheating their partners, wives and the taxman forever. It’s not likely to stop. 

I understand that cash boxes are filling up with bills in some locations. In a zero interest rate environment, that makes some sense. Sort of. It makes infinite sense if rhinos are around. 

On second thought, this episode will not be forgotten. Many people have already been trampled. More are in harm's way. Such is life. It has left a scar on the US image in some of the financial centers. The US played hardball and won. You don’t win many friends playing hardball. But this had nothing to do with friends. (Switzerland was once a friend of the USA.) It was always about the money.

There are many pieces of this story that would make for a good movie. For the life of me, I can’t figure out who are the good guys. Maybe that's the point.

.
Note: Tyler Durden sent me a note with a link to a ZH piece from 2009.
This is a rant by Konrad Hummler, the "Boss" at Wegelin. ZH was three years ahead of the curve on this one.
 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sat, 02/04/2012 - 07:13 | 2126219 Dugald
Dugald's picture

So DOJ goes after those naughty Swiss Gnomes, leaving the Crooks back home breathing much easier.....it pure coincidence of course... init?

Sat, 02/04/2012 - 09:28 | 2126305 Widowmaker
Widowmaker's picture

Crooks can be gnomes, too.

Crooked banking is a worldwide epidemic.

Sat, 02/04/2012 - 00:58 | 2125997 penisouraus erecti
penisouraus erecti's picture

just remember, what comes around is all around......

http://www.youtube.com/watch?v=pL_D5z5ikvI

Sat, 02/04/2012 - 00:08 | 2125913 Barefooted_Tramp
Barefooted_Tramp's picture

F*ck Wegelin and their "Financial Instruments" for the Ueber-Rich.

I had to pass this Bank everyday on my way to school and later on to my favorite hang-out.

I always wondered what they touting in their window.

Hummler is a right-wing shill and Wegelin thrived on Nazi ties in WW2.

Hummler advised the Swiss National Bank? What a job.... Probably he told the SNB to sell off half of its Gold below a 1000$ to invest the proceeds in more productive assets like Wegelin Financial Instruments and Derivatives??? LOL.

Karma bitchez.

Send in the Seals to get this sucker.

Fri, 02/03/2012 - 23:14 | 2125821 barliman
barliman's picture

 

Bruce,

This is "the Chicago way". It isn't about lost taxes. It isn't about the money. It isn't about the banks. This is about information and the leverage it provides. Two clips for your consideration BUT in reverse order from the way the media has covered them:

First, Rep. Raul Labrador questioning A.G. Holder

http://www.youtube.com/watch?v=81mnxzvNIDA

Second, A.G. Holder's response

http://www.youtube.com/watch?v=Zjwg9OkUW8k

A.G. Holder's contempt for Congrees has been on display from his first day in office. The last Attorney General to behave this way was John Mitchell. They both have used their office and the DoJ to pursue political ends.

Are you ever going to step past the Swiss banks & taxes line?

barliman

 

Sat, 02/04/2012 - 00:54 | 2125992 penisouraus erecti
penisouraus erecti's picture

It seems that an inquisitive media could have a field day looking in to Mr. Holders past history............yet they seem to be totally uninterested. Wonder why that is.

Sat, 02/04/2012 - 01:29 | 2126030 barliman
barliman's picture

 

LOL ...

As Deepthroat said to Woodward, "Follow the money."

barliman

Sat, 02/04/2012 - 15:56 | 2126996 Reptil
Reptil's picture

Timmah (and those holding his leish) wants it ALL!

Sat, 02/04/2012 - 00:07 | 2125912 Eireann go Brach
Eireann go Brach's picture

Old college friends are out having drinks at a school reunion, the US is the obnoxious asshole that everybody hates and grins inside knowing that their fucking day in the sunshine is coming when the house of printers come crashing down, and just maybe this fucking asshole may be hung from a lamp post by the balls, and you can walk by one day and sneer back at the fucker and say" you belong on that lamp you fucking prick" that is where the US is going!

Sat, 02/04/2012 - 01:28 | 2125942 barliman
barliman's picture

 

Interesting perspective but there is one part of the equation you are missing.

If that day comes when the US is hanging on the lamppost by its balls - who will be the new  obnoxious asshole(s) that are ruining the party for everyone else?

barliman

Fri, 02/03/2012 - 22:56 | 2125795 rlouis
rlouis's picture

All the US sourced money belonging to Intl. Dope Inc will be just fine.  Only the small fry get caught in this net.  I would be willing to bet money on this, but since I don't have it, BFD. 

Fri, 02/03/2012 - 23:45 | 2125881 imaginalis
imaginalis's picture

+1

Fri, 02/03/2012 - 22:46 | 2125775 steve from virginia
steve from virginia's picture

 

Hummler's article is here:

http://www.scribd.com/fullscreen/19350839

The point made is the Treasury gains some taxes but loses on the borrowing end as the putative tax cheats lend to the US government: self-defeating.

The only products the US makes that the world takes now are .223 ammo and dollars. Bureaucrats want to stifle the dollar trade. How much do you want to pay for gas, again?

More assaults on paper currency and finance assets: yuan devaluation and lack of float, the unraveling euro, the massively over-valued yen, AUD. Singapore dollar looks good and so do gold and silver. Coming back soon will be clipper ships and beaver felt hats.

 

Sat, 02/04/2012 - 12:07 | 2126433 stant
stant's picture

going long on deer skin. gona take the acog off my ar and mount on my ky long rifle

Sat, 02/04/2012 - 04:10 | 2126157 jeff montanye
jeff montanye's picture

beaver hats bitchez

Fri, 02/03/2012 - 22:39 | 2125768 penisouraus erecti
penisouraus erecti's picture

DOJ - playground bully

Fri, 02/03/2012 - 22:36 | 2125762 Big Ben
Big Ben's picture

If only the US government would go after ordinary cheats with as much vigor as it goes after tax evaders.

If you are a tax evader, the IRS will pursue you to the far ends of the earth the same way the Israelis hunted down Nazi war criminals.

But if you are a Madoff or a Corzine who cheats individual citizens, their attitude is: "So what? Who cares? We got our taxes. What else matters?"

Sat, 02/04/2012 - 20:16 | 2127414 Waterfallsparkles
Waterfallsparkles's picture

Makes you wonder if Corzine or whoever benifited from that 1.5 Billion dollar windfall will ever have to pay taxes on that money.

IRS looking for Swiss Bank Accounts while whoever got the 1.5 Billion dollar windfall rfrom MF Global goes un Taxed.  That Money would probably bring in more revenue than all of the Swiss Bank Accounts.

Sat, 02/04/2012 - 04:09 | 2126155 jeff montanye
jeff montanye's picture

also a bit like the prosecutions of whistle blowers (many and vicious) versus war criminals (none) by the most transparent administration in history (and its predecessors for that matter).

Fri, 02/03/2012 - 22:35 | 2125758 ozziindaus
ozziindaus's picture

Did somebody say RINO, wife and Swiss bank account?

http://www.nakedcapitalism.com/2012/02/romneys-wife-had-3-million-in-ubs...

Fri, 02/03/2012 - 22:53 | 2125790 Joe Davola
Joe Davola's picture

No way Holder's "justice" department is doing this for non-political reasons - this has to be all about getting the goods on O's enemies (and friends too).

Fri, 02/03/2012 - 22:01 | 2125697 Heyoka Bianco
Heyoka Bianco's picture

Where are all the ponies in this dog and pony show? Even the whole $725 million is a piss squirt down the sucking hole that is the US budget deficit.

Fri, 02/03/2012 - 21:36 | 2125643 proLiberty
proLiberty's picture

Tax grubbers want their tax money no matter what the unintended consequences elsewhere.  And tax grubbers never get what they think is being hidden.  These folks will never acknowledge that there are limits to government.  They think government is god and owns all of us. 

Fri, 02/03/2012 - 21:48 | 2125673 CH1
CH1's picture

They think government is god and owns all of us.

Bingo!

Fri, 02/03/2012 - 21:02 | 2125556 DeadFred
DeadFred's picture

When DOJ goes after any of the major US banks this way I'll give them some backing, until then I oppose everything their corrupt hands try to do.

Sat, 02/04/2012 - 04:04 | 2126150 jeff montanye
jeff montanye's picture

that is pretty much it, imo.  the moral authority of what is, even to the less aware (me), increasingly a police state is such that the state's more morally/legally ambiguous maneuvers (this one) are given the worst interpretation because of the evil that precedes (and seems sure to follow) it.

Fri, 02/03/2012 - 20:52 | 2125528 IdioTsincracY
IdioTsincracY's picture

I don't get it!!

Why is this bad news???

Fri, 02/03/2012 - 21:49 | 2125675 CH1
CH1's picture

Why is this bad news???

I guess it's not, if you like thugs and thuggery.

Fri, 02/03/2012 - 20:51 | 2125523 IdioTsincracY
IdioTsincracY's picture

No way i am gonna complain when something good happens!!

Put the banksters and tax cheats in jail!!

Fri, 02/03/2012 - 20:50 | 2125517 vegas
vegas's picture

So, let me get this straight: they go after KH, who has NO business in the US but they let slimeball Corzine walk? WTF.

 

http://vegasxau.blogspot.com

Sat, 02/04/2012 - 00:41 | 2125967 malek
malek's picture

I'd hazard a guess:
Corzine likely paid the minimum 17% or so tax rate on his loot, so all is fine...

Fri, 02/03/2012 - 21:30 | 2125624 Larry Dallas
Larry Dallas's picture

Maybe I'm crazy, but I have to ask. We've seen this with Madoff too and now MF Global: that is the dissapearance of funds. Perhaps not all of them, but a lot of those funds that can't be traced.

Does Israel have similar banking secrecy laws that the Swiss once had? I can't see the DOJ going after Israel. I'm sorry, but I can't help but think with the relations that are there that Israel might be seen as an offshore haven for the uber-elite.

 

Sat, 02/04/2012 - 10:01 | 2126331 Widowmaker
Widowmaker's picture

What part of dual citizenship doesnt strike you as a haven for elite crime??

Fri, 02/03/2012 - 20:35 | 2125487 VelvetHog
VelvetHog's picture

Its time to start yanking the charters of the U.S. Ponzi masters too.

Fri, 02/03/2012 - 20:22 | 2125437 SmittyinLA
SmittyinLA's picture

BS meter is pegged, the DOJ is only collecting traffic fines, the Swiss have the ultimate hole cards, US & EU politicians with assets in Swiss banks.

If the DOJ were really serious they'd go after those Delaware PO boxes.

Fri, 02/03/2012 - 20:45 | 2125506 PontifexMaximus
PontifexMaximus's picture

It never will!

Fri, 02/03/2012 - 20:27 | 2125457 agent default
agent default's picture

The US is attacking foreign offshore centres in order to attract money to its own, like Delaware, Nevada and other assorted places.

Fri, 02/03/2012 - 20:20 | 2125431 agent default
agent default's picture

So this is the rub:  Government gets to decide how much to tax you, even on gains made outside the country.  Government gets to spend your money and borrow just as much and spend it, without having anything to show for it at the end.  Government gets to decide what "fair tax rates" are while stuffing you with the bill for the incompetence/corruption/stupidity.  Government tries its best to make sure you do not have the basic right of self defense against their organized looting.  Any of you guys think anybody will engage in any meaningful productive activity  under such a system?  W is not the problem.  It is the symptom, of people realizing what a bunch of useless scumbags are running public finances, and walking away from it.  If the US is such a Free Country(TM) why do you have to pay taxes to the US even after you have thrown their precious US citizenship to their faces and told them to shove it? 

PS: The Swiss are beyond stupid in this banking thing.  By yielding to the US in such a manner, their are only encouraging those US wannabes in the EU to demand more from them.  There is either some sort of conspiracy to force Switzerland into the EU, or they have gone completely silly.

Fri, 02/03/2012 - 21:45 | 2125659 CH1
CH1's picture

If the US is such a Free Country(TM) why do you have to pay taxes to the US even after you have thrown their precious US citizenship to their faces and told them to shove it?

That one's easy! Because they employed armed men and publicity officers... and you don't!

The purpose of the state is to collect taxes. All that "services" crap is for selling the arrangement to the suckers.

Sat, 02/04/2012 - 07:13 | 2126220 Rusty_Shackleford
Rusty_Shackleford's picture

"The purpose of the state is to collect taxes."

 

...and KILL PEOPLE.

Fri, 02/03/2012 - 20:20 | 2125429 SloSquez
SloSquez's picture

"ZH was three years ahead of the curve on this one."

This site has been there awhile.  Many are starting to realize the twist, much to their chagrin.  Enjoy your work Bruce, top notch for sure.  The door is closing fast, I agree it should. 

Fri, 02/03/2012 - 20:29 | 2125464 agent default
agent default's picture

Well Shanghai, Macau and other places in Asia are opening up, Hong Kong is still there, and good luck taking on China over this one.

Sat, 02/04/2012 - 04:00 | 2126147 Non Passaran
Non Passaran's picture

Hehehe, exactly!
Screw DoJ and long live Asian anarcho-capitalism!

Fri, 02/03/2012 - 19:56 | 2125372 Yen Cross
Yen Cross's picture

 The " COLD PILL"? Clocks, Cheese, Watches, Chocolate (debatable) I wonder if Jimmah Cramer is a Swissie?

Fri, 02/03/2012 - 19:47 | 2125338 Coldfire
Coldfire's picture

It is obvious who the good guys are not, Bruce. The jack-booted thugs collecting blood money for the IRSS.

Fri, 02/03/2012 - 19:45 | 2125335 eddiebe
eddiebe's picture

Mr. Obama, tear down this wall!

Fri, 02/03/2012 - 19:24 | 2125248 Geoff-UK
Geoff-UK's picture

It's not necessary that the U.S. wins the court case.  It's sufficient that they've frightened Swiss (and other banking havens) into soon thinking "there's no amount of profit worth taking on U.S. customers.  Eff 'em."

 

Capital controls bitchez.

Sat, 02/04/2012 - 01:41 | 2126045 imaginalis
imaginalis's picture

But not for the controllers

Fri, 02/03/2012 - 19:18 | 2125226 bank guy in Brussels
bank guy in Brussels's picture

The US, and the corrupt US court system, need to be treated like the pariahs they are.

Every Swiss bank and European bank should be out of the US, and legal actions by the US need to be treated as if they were legal papers being served by North Korea, as worthless papers, and the venue too dangerous to visit.

It's crazy for any European to show up personally to be a witness or argue a case in the US, so that he doesn't end up with a lifetime - no charges - 'contempt of court' jailing, just like Beatty Chadwick was jailed in the US for 14 years with no trial or conviction, or economist Martin Armstrong jailed for seven years, no trial or conviction.

US judges have arrogated unlimited Nazi-style powers to jail someone indefinitely for 'contempt of court' by not turning over assets that the US courts believe are in another country. Beatty Chadwick was jailed for 14 years because crazy judges believed he had millions stashed away somewhere, his wife and his wife's lawyers wanted the money for a divorce.

US lawyers are disbarred or jailed, like Richard Fine, if they talk about the corruption.

Lots of Europeans already know - DON'T do business in the USA, DON'T personally attend court proceedings there. If you know the feds are coming for you, GET OUT. I know a businessman who got out on a flight out of NYC after he was tipped he was going to get that indefinite 'contempt of court' jailing the next morning.

Speaking of Nazis, the US federal courts already have a higher conviction rate than Nazi Germany, about 98 %, with the way the US judges rig what evidence can be presented, whether you even get to speak to a jury at all.

Our political refugee from the US in Brussels, was told by the US federal judge who instantly banned his freedom of speech for some bribery cash, that the journalist would not get a jury trial, because the judge opined, "A jury might like the f*cker."

Bruce Krasting, you need to get the hell out of America, too. I understand you have your roots and your memories and your familiar places.

But would hate to think of you in the US FEMA gulag camp, with the 2.3 million+ other US prisoners (so far), wishing you had gotten the hell out of the Fourth Reich while you had the chance.

Sat, 02/04/2012 - 10:20 | 2126342 Widowmaker
Widowmaker's picture

Hey fag in brussels, im your -1.

If you dont break the law you have nothing to worry about in the US. Your (and your banks') contempt for the law makes you and your steaming piles of euro trash unwelcome. Boo hoo.

I call bullshit on your entire rant.

Do NOT follow this link or you will be banned from the site!