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DOJ's Latest "Beat Down" on Swiss Banks
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.
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If you dont break the law you have nothing to worry about in the US. - UTTER BULLSHIT
Apparently you just don't have anything the IRS wants (yet).
The contempt of the US government for the priviledges and obligations afforded its citizens under the very charter which legitimizes the US government is contemptible.
You are officially dumber than a rock.
"If you don't break the law you have nothing to worry about in the US". The classic way of boiling the lobster alive, just eat away little by little using the same mantra.
I have no intention visiting the USA and being treated, as a visitor, like a suspect by the TSA. And that's only the start.
DavidC
TSA doctrine is a symptom of a much bigger problem - corruption.
well gov shill tell that to the MFG customers who cant get their money due to the corruption endorsed by the gov in the US
Bruce has enough money to buy Davos. If he was on the Soros deal and if he knows how to play the spiel which he apparantly does. But money or no money, if the US is getting to be a 'no country for honest men, exercising free will,' its time to catch the Zeppelin and hope it won't run out of gas on the way! Or burn.
Happy skiing from then on! Its freezing cold right now and those who are heading for the hills will have frozen nuts and siberian hands. But there is always hot gluhwein to warm you up as your nose falls off! Some things even money can't buy like a crooked smile over steaming goulash.
Gluhwein?
falak
'no country for honest men, exercising free will"
Pretty much covers all countries, including Europe.
Crony Capitalism bound to Ensconced, useless bureaucrats. All countries have the same disease.
Bruce, heed this man's advice. Every time I read one of your postings, my first thought is "Why does Bruce Kasting remain in the USA? He is a Swiss citizen and will have no problem repatriating to Europe."
Then, I rationalize for you and think you must remain there for financial reasons. Perhaps you have been working for hamburger flipping wages for too long and cost of living in Switzerland is too high quality and too expensive, for you. However, be aware that a Swiss citizen can legally take residence anywhere in the EU. Switzerland is great if you have some money. France is fantastic if you have none.
I realized the door was closing on the Fasacist States of Amerika ten years ago and got out. I refuse to visit, for any reason and am reluctant to do business with US companies, especially the insolvent banks and brokerages.
I would consider it, but like everyone else, I can't sell my house. So I ain't moving...
b
You are definitely smart enough to work around that problem. Those assets are relatively fungible. At worst, rent out your digs here and take those rent payments and pay your rent in Switzerland.
Wrong. Fair market rents do not cover the costs of ownership for me. They don't for most people. So for me to rent and leave, would cost me $50k a year.
Okay, let's assume rental rates are massively depressed where you are. In that case you should WALK AWAY from your mortgage like millions of others have done, assuming you are under water. If you are not underwater, just take the loss and leave. Everyone has loser investments from time to time.
You sound like those jews who were stupid or in denial in nazi germany. They got exterminated because they wouldn't take a loss or tolerate the minor hassle of getting their butts out of dodge before it was too late.
Man, if I had a swiss passport, i would have left the USSA many, many years ago. As it was, I left the USSA over 2 years ago because the writing on the wall was already in bold italic caps. Was it convenient? Hell, no. Am I glad I vanished? Damn straight.
The USSA now FEELS like a dangerous prison. Anyone who intentionally stays in a dangerous prison when the door isn't locked... is just plain stupid, no matter what the disadvantages other places might have. If you don't like switzerland any more, there are lots of other viable places, as I found by first hand exploring. Furthermore, in most places foreigners are treated better than their own "citizens" because they consider foreigners as "cash cow travelers" and their "citizens" as "overt slaves".
If you get trashed... and trapped... you asked for it.
Refinance and rent it out. Take the $$$ and don't look back.
My goodness, Bruce, you have been reduced to a state of serfdom?
Then you don't have a rich wife like DSK...he moved, house or no house! But he was toxic...for all and sundry, and not just those in stilettos.
What makes a man dangerous? What he knows or what he could find out. Both are dangerous, for those who hide behind the curtain.
Its a bitch free speech. And curtains have a way of falling when we least expect it. So sing in the rain BK!
Well they should have already delisted from American stock exchanges after SOX (Sarbanes-Oxley) got passed (but the grace period was still on)...
Actually my understanding is that the governments of France and Germany (and I would imagine Belgium as well) are VERY interested in the particulars of this investigation. In an age of "forced austerity" i'm surprised...especially as a "bank guy from Brussels" whose state is in deep doo-doo...are coming out against clamping down on tax cheats. of course "it's not like the folks will simply tell you where the money is." thus "de Ameericans" must before starting their investigation must "get in the mood" with "quality investigative music": http://www.youtube.com/watch?feature=player_detailpage&v=HhHwnrlZRus trust me..."we're on to you...cheatah" signed..."Panther, Pink"
I think this is being done because as a few have said, the writing is on the wall. The US is wanting to stop any easy way for people to move their money out of the US and essentially sail away. You see American banks and the US need our money in our system, if we decided to move lets say mister small business man my life savings of 3 million out of the US and in a safe Swiss bank or private bank in Europe they wouldn't be able to touch it. The wouldn't be able to repatriate it when the economy in the US implodes, because the banks over in europe won't do it and see what is going on. They want to make it difficult (not impossible) for ordinary people to move money out quickly and easily.
Imagine as Mike Rivero said yesterday that the US had to raise taxes by 30% and/or take your 401k's and invest them into the Social Security fund, in order to maintain the system. Eventually they know people would say I'll just leave and go to whatever country until the craziness is over in the US, and they can't have that. I think it's funny going after these "tax cheats", but I think it shows the govt. won't stop in order to keep it's people on the ranch and keep their money.
But there is a very easy and legal way to remove your money from the USA.
Buy shares of companies which trade on both US and non-US stock exchanges. Travel to the host country of that non-US exchange and open a brokerage account... Do I need to explain more?
Turn your assets into something physical and store is anonymously in Vienna at Das Safe, www.dassafe.com
You can store your assets anonymously now, it's just a felony to do so. That's the whole fucking point. It should not be a felony for someone to take money that he/she has earned and already paid taxes on and stash it somewhere without having to tell the fucking gov't about it. It is none of their fucking business, period. Yes, if those assets grow through interest or capital gains then taxes are owed, big deal. It still isn't any of the gov'ts business that I have an account overseas, imo.
And for people who are afraid of their own shadow, don't buy interest or dividend generating assets. Buy physical gold, silver, platinum, palladium, rhodium or any other durable good and hide it where nobody can find it. Problem solved.
By the way, how on earth is it supposedly a felony for anyone to bury gold high in the andes mountains?
really. think how many left in the '20's just to escape babbittry and the volstead act.
"the govt. won't stop in order to keep it's people on the ranch and keep their money"
+100 BINGO!!
"take your 401K's and invest them into the Social Security fund" ?? "Invest" is interesting choice of word - sort of like "vaporize" for a missing $1.2 billion? Set aside the misleading semantics and call it what it will be - Steal your 401K and lose it forever in the Social Security bottomless pit.
Hubris begets Nemesis. The writing for the US is on the wall on every front. Just play for time, those who survive the turmoil will be fine.
until one is invited into the club, one is an outsider
http://www.youtube.com/watch?v=i5dBZDSSky0
Elite on elite financial warfare... you can either use your spoils into turn the money multiplier wheel or have your position stripped and funds redistributed.
I can see the headline now.
"This just in: Anonymous to open a new and improved Private Bank. A "crypto" private bank. No names, just numbers and 512-bit "keys" to get your money. You can't find this bank on any map..."
Hard to clamp down on someone you can't find, and with no name, and with money that doesn't exist in the system.
There are several such places. One being www.dassafe.com
Obviously you haven't heard of bitcoin.
Lets hope they don't have any "tellers"
I don't think the U.S. has "won" just yet. They forced this bank into selling/closing the bank. I believe Swiss banking law does not allow bank executives to disclose account information unless a Swiss court orders it. Does the U.S. have any authority to order a Swiss bank to turn over this information? Apparently the executives thought that there must be some sort of threat. I'm hoping this plays all the way out in the courts so we can finally see what kind of balls the Swiss actually have when defending their banking secrecy laws.
What courts?
#1: The USSA has zero jurisdiction over them.
#2: USSA courts are 100% predator-controlled.
I'll tell you what's going on. The executives who control those private swiss banks are rich. When told, "we here in the federal government of the USSA are utterly lawless and without ethics or scruples, and we will break any and all international law to grab you and your family and lock you away forever. we will unilaterally declare that you are a terrorist because obviously somebody who has deposits in your bank has some kind of tenuous connection to someone who has some tenuous connection to someone who has some tenuous connection to someone who once considered maybe becoming a terrorist someday".
Since they have a lot to lose, they fold. That they did not fold when the nazis were running roughshod over europe tells everyone that most humans have become a totally spinless species.
UBS actually handed over the client information before a Swiss court had decided on it. For windowdressing, the court then decided afterwards to (retroactively) legalize it.
The Swiss have no balls or they would not have capitulated with UBS. Anyone with "real fiat assets" to protect knew it when they charged UBS...fly meet spider.
Unless its stopped, it continues.
Again, if its traceable, you're pretty much fucked, even after taxes...because they don't care about the money, really, in the end.
Its not the money they really want control over. They already have that. Its your life, your mobility, your freedom, your discretion to do what you want, when you want, with whoever you want.
Its about control.
The peeps need to grow up and understand this.
nmewn
Nevertheless, if the DOJ was going after all off-shore havens, then they might have some credibility. By going after the Swiss only, I get the feeling all U.S. politicians had already moved their brown paper bag money to the Caymans.
Its my view that, like a terrorist picking a high profile target to attack, Swiss banks are associated in the public mind with customer confidentiality & secrecy.
The thing being, a successful attack on the most well known (the Swiss) and the objective might be secured in one fell swoop. The Caymans, Channel Isles all the rest can be brought bowed into the fold.
Fortunately for you and I it doesn't mean anything (financially) to us. I know I don't have enough to merit an offshore account but its the damned principle of the thing with me.
The money has been taxed once already somewhere, somehow, in some nation.
If its illegal funds we're talking about (drug money, dictators looting their people, whatever) then they need to do their jobs from a different direction. Its a lot like a drive by shooter to me...killing everyone on the street corner instead of just going after the one.
To gain absolute control over the lives of others make them fear the future.
"Its not the money they really want control over. They already have that. Its your life, your mobility, your freedom, your discretion to do what you want, when you want, with whoever you want."
Bingo!!
They want the ability to immobilize you at any time without notice simply by deleting (freezing, confiscating) your digitally stored accounts. No money for decent lawyers, indefinite detention follows.
ditto torture: not information, control of others yet to be tortured. the shadow cast by george orwell grows apace.
Ok, but at what point do people revolt? It feels like the US is pushing everyone harder and harder so they will revolt. It's like the US wants a revolution aimed against it.
In all probability a revolt would make the excuse to clamp down on the populace very convenient and easy. With the majority of the populace afraid to even miss the next episode of American Idol, do you think you could find even the 3% of the Revolutionary War? With the weaponry, communications, and sophistication the police, military, and para-military factions have do you think the average citizen would just go off half-cocked and start shooting anything with a white/blue license plate? Not if they want to see another sunrise. Look at what happened last year in the States. Now imagine what it would look like if all the protesters were armed. They'd have gunships up in no time to quell the 'domestic terrorists'. Rubber bullets? Tear gas? Nope. Egypt, Part Deux. Once they get enough disruption, drop the Martial Law ball, start breaking out the camp furniture and setting up tents, and in no time people will be shaking in their shoes, afraid to even mutter anything except a charge against a 'radical' neighbor, the one with more than 7 days of food and a gun. I think part of any change has to start with the ability to have people in government/military who recognize the need for correcting the problem and the ability to remove top-tier problems and organize down to the populace. Cutting off the head of the snake so to speak. Problem is, there seems to be a very effective effort in place to keep the right kind of people out of those positions. What to do?
NO. The people in government WILL NOT do anything about it. You can forget about "military coups" or other nonsense.
The only possible exception is the rank and file of the US military. At some point some percentage of them might say, "I will not obey orders that are clearly evil and unconstitutional and clearly harm the people I am sworn to protect and defend".
The real question is, will they also take the next logical step - turn their weapons on the predators who issued those orders to them. They should, but somehow I doubt they will unless there is some kind of "reverse pearl harbor" - some kind of action by government that is so blatantly evil that even the most disingenuous sheeple become angry. Unfortunately, I think the sheeple of this world are now so devoid of honesty and ethics, and so much dumber than rocks, that this will never happen.
Probably the only feasible solution is that somebody eventually does cut off the majority of heads on the global governance medusa.
It's a huge risk to take.
The law is unintended consequences is lurking out there somewhere.
And Holder and his flying monkeys still can't arrest Jon Corzine?
Moral: Thou Shalt Not Compete with Lloyd and Jamie.
but on the bright side, after all the (fill in your favorite sexual, scatological, etc. metaphor) the obama administration has performed for wall street, the money men are stiffing them this time around: http://www.huffingtonpost.com/2012/02/02/obamas-world-of-finance-b_n_125...
it has been speculated that these events are not disconnected with the one detailed in the present post.
after all the "Favors" the obama administration has performed for wall street, the money men are stiffing them this time around:
Whores don't fall in love with whores.