UBS Men Meet Tax Justice

(Bloomberg) -- It wasn’t just UBS Group AG that was found guilty Wednesday of helping rich clients stash offshore funds away from French tax collectors. So were five of the six former UBS bankers who sat in the courtroom during the six-week trial.

UBS

UBS was accused of sending Swiss bankers across the border to illegally seek out new clients and of providing services to launder money French residents hadn’t declared to the tax man.  The parent bank was ordered to pay a fine of 3.7 billion euros ($4.2 billion) and give the French state 800 million euros in damages. The French UBS unit also was told to pay 15 million euros—and the ex-bankers must pay a total of 950,000 euros.

While he wasn’t personally accused of any wrongdoing, UBS’s vice chairman of wealth management, Alain Robert, represented the Swiss lender at the Paris trial. Robert sought to rebut allegations that it was well-known inside the bank that the vast majority of French clients didn’t declare their Swiss accounts. “It’s up to the client, not the bank, to take responsibility vis-a-vis tax authorities,” he said during court hearings last year.

Robert also took a swipe at former UBS employees who testified against the bank in statements made to investigators, saying they weren’t credible. That prompted a sarcastic remark from Presiding Judge Christine Mee. “There was maybe a quite serious hiring problem at UBS around that time,” she said.

Raoul Weil, 59
Verdict:
Not Guilty
Former CEO of UBS’s wealth management unit

UBS Men Meet Tax Justice

For Weil, the legal nightmare began a decade ago. UBS’s former global wealth-management chief lost his job in 2008 after U.S. authorities indicted him on a charge of conspiring to help as many as 17,000 taxpayers abuse Swiss bank secrecy to hide $20 billion. He was arrested while vacationing in Italy, extradited to the U.S. and then spend months under house arrest. Ultimately, Weil was cleared in late 2014 after American jurors deliberated only 85 minutes. But that wasn’t the end of Weil’s ordeal. Just weeks after he was acquitted in the U.S., the former UBS executive received a summons to appear in front of the French lead investigator.

During the French case, Weil was the sole defendant who answered questions in English with the help of an interpreter. He denied encouraging Swiss and French bankers at UBS to work together on a scheme to move funds to Switzerland, and instead said the animosity between colleagues on each side of the border was such that it would have been impossible anyway.

Key Quote:
“In the 30 years that I have been a private banker, no client has come to me and said: ‘By the way, I am a tax cheat.’”

Dieter Kiefer, 68
Verdict: Guilty
Used to head wealth management for Western Europe

UBS Men Meet Tax Justice

The retired executive said that the rapid rise of UBS France—which started from scratch in 1999 and currently manages more than 17 billion euros of clients’ assets—undercuts accusations that it pushed to send cash to Switzerland. “That never would have happened if we had been directing money to the other side,” said Kiefer, who reported to Weil.

In Kiefer’s mind, tax wasn’t why people sent money to Switzerland. He credited the country’s political and economical stability and praised the merits of the Swiss banking industry. 

Kiefer was quizzed about allegations that some UBS bankers helped launder funds by returning to France with wads of cash for clients with undeclared Swiss accounts. He admitted that there are “very creative bankers” but said he put his foot down when he took over UBS’s wealth management for Western Europe in 2001.

Key Quote:
“When I arrived, I said that’s something I don’t want to see,” Kiefer said. “The fear of being fired made it so that people who might have done that at some point just stopped.”

He was given a suspended sentence of 18 months and fined 300,000 euros.

Philippe Wick, 60
Verdict:
Guilty
Ran UBS’s France International desk

Wick isn’t a celebrity but he does have a few famous friends. Before becoming a banker in Switzerland, Wick tried his luck as a soccer player and kept ties with Christian Karembeu and Youri Djorkaeff, who went on to win a World Cup for France.

Much like Kiefer, Wick told the court that he made sure the guidelines UBS provided to Swiss bankers going to France were crystal clear: anyone caught seeking out new clients after local rules changed in 2003 would be fired on the spot.

Wick’s interrogation session in court may have been one of the most heated during the UBS trial as the presiding judge vented her frustration at hearing the same repeated explanations, comparing them to a children’s book by Enid Blyton.

Key Quote:
“We’re not in the world of Noddy,” Mee snapped at Wick after he told her that visits from a Swiss banker to existing clients in France were simply a way of reassuring customers whose portfolio hasn’t been performing well.

He was given a suspended sentence of 12 months and fined 200,000 euros.

Olivier Baudry, 55 
Verdict:
Guilty
Took over France International desk after Wick

When he took the stand, Baudry had to clarify that he isn’t a former soccer player, contrary to what was alleged in the indictment. The confusion stemmed from the fact that he shares a name with a player who took the field with legends including Zinedine Zidane in France’s under-21 team.

Baudry spent about nine years at UBS in Switzerland but the court only cared about allegations from when he replaced Wick as head of the France International desk in 2007 and early 2009.

Echoing what other executives on trial had already said, Baudry insisted that he only became aware that some clients might not have declared their Swiss accounts when France set up a taskforce to facilitate tax payments from residents who weren’t in order. That prompted another outburst from the presiding judge. “You say ‘we didn’t know’: That seems hard to believe,” Mee said.

Key Quote:
“I was managing director at Julius Baer Group Ltd. in the last two years,” Baudry said about his work situation. “I didn't feel it was right to be in court in Paris for two months while working there so I quit.”

He was given a suspended sentence of 12 months and fined 200,000 euros.

UBS France

The French unit was on trial on charges that it helped its Zurich-based parent company illegally poach new clients in France and launder customers’ undeclared money. The unit’s two representatives spent most of their time at the stand trying to knock the credibility of whistle-blowers who helped trigger the probe, saying one had “lied” and accusing the rest of “blackmail.”

UBS France CEO Jean-Frederic de Leusse said a whistle-blower report issued by a former audit manager before he took over in 2012 triggered “a proper inquiry with interrogation sessions.” But the bank “found nothing,” he said.

De Leusse said his predecessor wasn’t impressed when several employees threatened to denounce the bank unless they got a big severance check. “We fired these people, which is clearly the best way to hush up the affair,” the current UBS France CEO said sarcastically.

Patrick de Fayet, 63
Verdict:
Guilty
Former general manager at UBS France

UBS Men Meet Tax Justice

De Fayet stood out during the Paris trial for two reasons: his highly-recognizable mop of strawberry blonde hair and his aborted guilty plea. Last year, the Frenchman sought to avoid a trial but judges refused to approve his plea. His lawyer said the move should simply be seen as a negotiation to find a “painless exit,” not as an admission of guilt.

De Fayet was the second defendant to take the stand during the trial. At times, he seemed to be making a presentation rather than grilled by judges.

“I was told to answer your questions precisely and not to digress, still, I’ll make one brief digression,” he said before giving a long explanation about how UBS France attracted wealthy local clients.

De Fayet said the French unit was able to get off the ground by setting ambitious objectives to an elite team of bankers they recruited by offering them fancy cars and big bonuses. Often, that sparked tensions with UBS bankers who managed French clients’ money in Switzerland—with each side keen to ensure customers held money on their territory.

Key Quote:
“It’s a world of money, it’s a war, everyone has to collect funds.”

He was given a suspended sentence of 12 months and fined 200,000 euros.

Herve d’Halluin, 50
Verdict:
Guilty
Used to head UBS France’s Lille bureau

D’Halluin was the first suspect judges interrogated at the Paris trial. They failed to get much out of him as the Frenchman dialed back statements he made in 2012 when he was questioned for hours by investigators. He explained the change of tune by saying he hadn’t been quite able to “organize his thoughts” after spending a night in a cell.

When interrogated six years ago, d’Halluin described the bank’s actions in France from 2006 onward as “a nauseating search-and-sweep operation” that targeted well-to-do citizens with “inopportune visits” from Swiss bankers in regional offices such as the one in Lille. He also referred at the time to the steps taken by a colleague in Switzerland to avoid leaving trace of any activity in France.

D’Halluin was also questioned at length on two hunting outings he organized in the north of France. He denied witnessing any of the Swiss bankers who participated illegally offering services to prospective clients. He said it just wasn’t that sort of setting. “It would nearly be impolite to talk about products with clients,” d’Halluin said. 

Key Quote:
“I have a hard time imagining signing a swaps contract between two rifle shots.”

He was given a suspended sentence of six months and fined 50,000 euros. 

©2019 Bloomberg L.P.