WASHINGTON (July 17) - European bankers and some of their U.S.
clients faced grilling by senators Thursday about offshore tax
abuses that investigators believe are costing American taxpayers
about $100 billion a year.
The questioning follows the release of a report by a Senate
panel accusing the banks of helping commit massive tax evasion and
urging establishment of tougher laws to combat offshore tax havens
around the world.
The 109-page report by the Senate Homeland Security and
Governmental Affairs' investigations subcommittee took aim
specifically at Switzerland's UBS AG, among the world's largest
wealth managers, and Liechtenstein's LGT group, owned by the
principality's royal family.
Representatives from UBS were testifying, along with some of
LGT's U.S. clients. LGT declined to send a representative.
"While LGT declined to testify for the subcommittee, it has
cooperated by sending a senior official of the bank for a lengthy
interview," Michael Robinson, a spokesman for the bank said in a
statement. Robinson added that the bank had produced all requested
documents and answered all questions permitted under
Both LGT and UBS came under withering criticism from the
"Tax havens are engaged in economic warfare against the United
States and honest, hardworking American taxpayers," said Sen. Carl
Levin, D-Mich., the chairman of the subcommittee. "Today we will
look at two banks that relied on secrecy and deception to hide, not
just the tax avoidance schemes of their clients, but the actions
they themselves took to facilitate U.S. tax evasion."
A federal judge ruled this month that the Internal Revenue
Service could serve legal papers to UBS in an expanding probe of
U.S. taxpayers who may have used overseas accounts to hide assets
and avoid taxes. UBS has said it is cooperating with Swiss and
American investigations and will disclose records involving U.S.
clients who might have broken tax laws. It also has banned its
Swiss bankers from traveling to the United States.
Investigations linked to LGT have been launched in a number of
countries since German authorities obtained in February a CD-ROM of
some 1,400 alleged tax cheats with accounts at the bank. Germany
has since passed the file to other countries, including the United
U.S. taxpayers are required to report all their foreign
financial accounts if the total value exceeds $10,000 at any point
during the tax year. Failure to report the accounts can result in
penalties of up to 50 percent of the amount in the accounts.
The subcommittee report said "UBS Swiss bankers targeted U.S.
clients, traveled across the country in search of wealthy
individuals and aggressively marketed their services to U.S.
taxpayers who might otherwise never have opened Swiss accounts."
It said the bank's practices resulted in billions of dollars of
U.S. taxpayer money in undeclared accounts that were not disclosed
to the IRS. The report said UBS has estimated that it has 1,000
declared accounts in Switzerland for U.S. clients against 19,000
undeclared, with a combined value of $17.9 billion.
While UBS did not technically violate U.S. reporting
requirements under the 2001 "qualified intermediary program," it
actively assisted clients in structuring their Swiss accounts to
avoid disclosure responsibilities with the IRS and thus aided tax
evasion, the report said.
In Liechtenstein, the report said the royal family's LGT Group
contributed to a "culture of secrecy and deception" that enabled
clients to "evade U.S. taxes, dodge creditors, and ignore court