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Entries in UBS (5)

Tuesday
Sep112012

Whistleblower Gets $104 Million from IRS

Bradley C. Bower/Bloomberg via Getty Images(WASHINGTON) -- An ex-banker and convicted tax cheat who told the IRS how his employer, UBS, helped thousands of wealthy clients duck U.S. taxes has just been awarded $104 million by the U.S. government, a sum his lawyers say is the largest payout ever for a whistleblower.

Bradley Birkenfeld, who was released from federal prison six weeks ago, pleaded guilty in 2008 to helping American clients avoid paying federal income and other taxes to the IRS. As part of his plea, Birkenfeld confessed to helping businessman Igor Olenicoff conceal $200 million in assets and evade paying $7.2 million in taxes.

But while Birkenfeld was confessing his own sins, he also provided testimony that allowed the Justice Department to punish his employer, forcing UBS to admit that it had allowed its clients to evade taxes by hiding their assets offshore. In February 2009, under a deferred prosecution agreement, the company agreed to pay $780 million in criminal fines for offering tax haven accounts for U.S. clients. UBS agreed to release data on almost 5,000 client accounts.

Birkenfeld's lawyers, Stephen M. Kohn and Dean A. Zerbe, of the Washington-based National Whistleblowers Center, said that because of Birkenfeld the IRS has been able to recover $5 billion in revenue from 33,000 U.S. citizens who have voluntarily disclosed their offshore accounts.

"The IRS sent 104 million messages to whistle-blowers around the world -- that there is now a safe and secure way to report tax fraud," said the National Whistleblowers Center in a statement. "The IRS also sent 104 million messages to banks around the world – stop enabling tax cheats or you will get caught."

According to Kohn and Zerbe, the $104 million award is the largest award to an individual whistleblower to date, and the first awarded to an IRS whistleblower.

The IRS report disclosing Birkenfeld's award said that "while the IRS was aware of tax compliance issues related to secret bank accounts in Switzerland and elsewhere, the information provided by the whistleblower formed the basis for unprecedented actions against UBS AG."

Birkenfeld began serving a 40-month prison sentence in January 2010. According to the federal Bureau of Prisons inmate locator, Birkenfeld was released on August 1 and is serving the remainder of his sentence in a community corrections center in the Philadelphia area.

Sen. Charles Grassley, R.-Iowa, who authored the whistleblower laws for tax fraud, said in a statement, "This case provides evidence about how the whistleblower program can be effective because the IRS is saying its work against this kind of tax fraud would not have been possible without the whistleblower. By paying an award as the law allows, the IRS encourages courageous actions by others against such big-dollar tax cheating."

A spokesman for the IRS declined to say how much money has been collected from tax evaders using Swiss bank accounts in recent years. In 2009 The Justice Department and IRS reached an agreement with Switzerland to obtain information from UBS AG to identify information on up to thousands of accounts held by the Swiss banking giant. Justice Department and IRS officials believed as much as $18 billion could be located in those accounts.

"The IRS believes that the whistleblower statute provides a valuable tool to combat tax non-compliance, and this award reflects our commitment to the law," said Michelle Eldridge, an IRS spokeswoman.

Birkenfeld, now 47, worked at UBS for five years. He sought immunity from prosecution when he came forward as a whistleblower, but the DOJ elected to arrest and prosecute him. Under U.S. whistleblower laws, he was allowed to seek 30 percent of the taxes recovered by the IRS via the information he provided.

Copyright 2012 ABC News Radio

Monday
Sep192011

Bailed-Out UBS Trading Incident Could Lead to More Regulation

SEBASTIAN DERUNGS/AFP/Getty Images(LONDON) -- After a securities trader was arrested and charged in London in connection with $2.3 billion in rogue trades at Swiss bank UBS, analysts have warned that more regulation is pounding its fist on bank doors.

With already fragile confidence in UBS, Switzerland's largest bank, critics point to the fact that UBS was the beneficiary of a bailout on the other side of the Atlantic.  In the U.S., the Treasury stepped in with a $700 billion bailout of all the major banks during the financial crisis in 2008.  New regulations followed here and in the United Kingdom in an effort to stem future taxpayer bailouts.

Kweku Adoboli, 31, was arrested on Thursday on suspicion of fraud and is still in police custody, according to the British newswires of the Press Association.  He was charged on Friday with fraud and false accounting for the unauthorized deals.

Adoboli started working for UBS as a trainee investment adviser in March 2006 and has had no disciplinary action taken against him previously, according to the Financial Services Authority register of advisors, as reported by the Press Association.

Erin Davis, senior stock analyst with Morningstar, said it seems Adoboli worked in the back office until he was promoted to the trading floor, which points to "below average" risk controls at the bank.

"A lot of banks won't allow that kind of promotion explicitly to avoid creating this kind of opportunity.  It appears that the trader, because of his back office experience, was able to by-pass the risk management systems," she said.

During the financial crisis, UBS lost nearly 30 billion Swiss francs, or $34.5 billion, and had to be bailed out due to its investments in low-quality assets, especially U.S. subprime mortgages.  As a result, UBS raised over $5 bilion from the Swiss government and it was permitted to transfer up to $60 billion in distressed assets to a fund supported by Switzerland's central bank.

With the news of the rogue trader last week, Davis said more regulation is likely on its way.

Davis said the most obvious solution to prevent unauthorized trades, or other potentially risky situations for investment banks, would be for Switzerland to require its banks to "ringfence" its retail or "plain-vanilla" commercial banking operations from its investment bank, as the U.K. is trying to do.

The U.S. is also implementing a similar policy after the Dodd-Frank Act passed the Volcker rule.  That policy prohibits American banks from executing particular speculative investments that could harm their customers.

Copyright 2011 ABC News Radio

Sunday
Sep182011

UBS Announces Rogue Trading Losses Amount to $2.3 Billion

ADRIAN DENNIS/AFP/Getty Images(LONDON) -- Swiss bank UBS announced Sunday that it lost more on rogue trading than initially reported.

The company announced Thursday that one of its London traders, Kweku Adoboli, cost the company $2 billion. On Sunday, it was revealed the figure was actually $2.3 billion.

Adoboli was charged on Friday with fraud and false accounting.

Copyright 2011 ABC News Radio

Thursday
Sep152011

Did Single Trader Cost UBS $2 Billion? Arrest Made in London

SEBASTIAN DERUNGS/AFP/Getty Images(LONDON) -- A 31-year-old man has been arrested in connection to UBS' announcement that a single trader may have cost the bank an estimated $2 billion.

The man, who has not been identified, was detained in London Thursday morning.

That same day, the Swiss bank said in a statement that "unauthorized trading by a trader in its Investment Bank" resulted in the 10-figure loss.

UBS noted that the amount lost could change since the matter was still under investigation, and warned that the deficit could lead it to report a loss when its third quarter figures come out for the year.

The bank did not offer any further details but said that "no client positions were affected."

Copyright 2011 ABC News Radio

Tuesday
Aug232011

Swiss Bank UBS to Cut 3,500 Jobs

SEBASTIAN DERUNGS/AFP/Getty Images(ZURICH) -- UBS AG announced Tuesday that it will be cutting around 3,500 positions in an effort to help reduce its expenses by 2 billion Swiss francs, or $2.5 billion, each year.

The Swiss bank said the job cuts "will be achieved through redundancies as well as natural attrition."

Nearly 45 percent of the staff reductions will come from UBS' investment bank business, while 35 percent will come from its wealth management and Swiss bank business.  The remaining 20 percent will be divided evenly among the bank's global asset management unit and its wealth management Americas unit.

UBS hopes to achieve its savings by the end of 2013.

Copyright 2011 ABC News Radio







ABC News Radio