UBS, LGT Helped Hide Assets, Evade Taxes, Senate Says

UBS, LGT Helped Hide Assets, Evade Taxes, Senate Says (Update2)

By David Voreacos and Carlyn Kolker, Bloomberg.com

 UBS AG and Liechtenstein bank LGT Group aided rich U.S. clients who wanted to disguise ownership of accounts and evade taxes on hidden assets, a Senate subcommittee said.

UBS, the world’s largest wealth manager, hid as much as $17.9 billion for 19,000 Americans who didn’t declare assets to the Internal Revenue Service, the Senate Permanent Subcommittee on Investigations said in a report released in Washington late yesterday. LGT, owned by Liechtenstein’s ruling family, fostered a “culture of secrecy and deception” while assigning code names to U.S. clients, the panel said.

“UBS has opened thousands of accounts in Switzerland that are beneficially owned by U.S. clients, hold billions of dollars in assets, and have not been reported to U.S. tax authorities,” according to the 114-page report by the subcommittee, which is scheduled to begin hearings today on tax-haven banks. U.S. prosecutors and regulators are investigating Zurich- based UBS, which is cooperating. A former UBS banker pleaded guilty last month to helping a billionaire evade taxes. LGT is at the heart of a tax scandal involving investigations by about a dozen countries. The probes began after a former LGT employee allegedly sold stolen information on the secret accounts to German authorities.

UBS shares rose 7 percent to 20.16 Swiss francs at 12:20 p.m. in Zurich trading today. The stock has dropped 69 percent over the past 12 months.

Cover Up the Tracks

Both banks flouted agreements to help the IRS track foreign assets of U.S. clients, the subcommittee said. Bankers wooed wealthy Americans while moving their money into pass-through entities in different countries to break direct links to the true owner of assets, according to the report. LGT used such transfer corporations in tax havens including the British Virgin Islands to “cover up the tracks” of funds moving into client accounts, a bank employee told the subcommittee. The bank told employees to use public phone booths when contacting clients to make it more difficult to trace calls to Liechtenstein. One of LGT’s biggest clients was billionaire Frank Lowy, Australia’s second-richest person, the panel said. Lowy, founder of Westfield Group, the world’s biggest shopping mall owner, set up a secret Liechtenstein bank account to hide at least $68 million from tax collectors, according to the report.

Lowy, 77, issued a statement saying he “totally rejects” the committee’s assertion that he tried to evade taxes.

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