UBS Accuses French Whistle-Blowers of Lying, Blackmail
(Bloomberg) -- Top executives at UBS Group AG’s French unit took aim at the whistle-blowers who helped trigger probes into allegations its Swiss parent conspired to encourage rich clients to evade taxes, saying one had “lied” and accusing the rest of “blackmail.”
Hervé Mercier-Ythier, director general at UBS France, said one former employee, Stephanie Gibaud, was “totally incorrect” when she told investigators that her files on events she organized for wealthy clients were deleted or modified while she was on holiday. The testimony came during the third week of a trial over allegations that UBS bankers illegally encouraged French citizens to lower their tax bills by moving money out of the country.
“Gibaud lied,” Mercier-Ythier told the Paris criminal court on Monday, in an attempt to point out gaps in the investigation that UBS has sought to characterize as a web of unsubstantiated allegations. He said it would be impossible to delete files because they are saved on UBS’s internal network and added that the bank produced an IT report that refuted Gibaud’s claims. “Her assertion is stupid and ill-intentioned.”
The UBS case is part of a French crackdown on tax fraud operated via Switzerland that’s seen the conviction of a former minister and a 300 million-euro ($344 million) settlement with HSBC Holdings Plc. In addition to any fines, France is seeking 1.6 billion euros in compensation from Zurich-based UBS at the case.
During testimony Monday, both Mercier-Ythier and his boss responded to the allegations by trying to knock the credibility of some of the prosecutors’ key witnesses.
Jean-Frederic de Leusse, the chief executive officer of UBS France since 2012, said a 2008 report issued by a former audit manager triggered “a proper inquiry with interrogation sessions.” In response to the report by Nicolas Forissier, UBS traced and analyzed transactions where money was sent to the bank in Switzerland to weed out potentially illegal movements, de Leusse said.
“We looked back and found nothing,” de Leusse told the court. “Each time Nicolas Forissier and co. made a denunciation they never came up with a name or a transaction.” Forissier declined to comment and Gibaud didn’t immediately respond to an email.
Mercier-Ythier said Forissier’s whistle-blowing is “a manipulation,” suggesting that the same behavior took place in France and in the U.S.
“It appears one only needs to point a finger at a bank for things that have never been proven to become credible,” the UBS France executive said. Nearly a decade ago, UBS agreed to pay $780 million to avoid U.S. prosecution in a similar tax probe after admitting it helped thousands of clients in the country cheat the Internal Revenue Service.
De Leusse, 60, further said that Gibaud and Forissier were part of a group of four or five UBS France employees who “tried to blackmail the bank.”
“They told us ‘I am planning to leave so give me some money or I will denounce you,’” the UBS France CEO said. “We fired these people, which is clearly the best way to hush up the affair,” de Leusse added sarcastically.
The Paris trial includes allegations that UBS assisted French customers between 2004 and 2012 by providing services such as numbered accounts or by setting up trusts to launder funds they hadn’t declared to tax authorities.
The money-laundering accusations can lead to fines of as much as half the amount of the funds stashed offshore for clients. Under one estimate, investigators say the Swiss bank managed 10.6 billion euros in undeclared cash from French citizens -- putting the maximum fine at 5.3 billion euros.
In Mercier-Ythier’s opinion, the rapid rise of UBS France -- which currently manages more than 17 billion euros of clients’ assets -- belies the accusations the unit faces.
“Clearly, it’s not by pushing the majority of our clients to go to Switzerland that we were able to achieve this result,” he said. “This part of the incrimination, personally, makes me angry.”
The UBS France general manager even bragged about the significance of the achievement.
“It’s not Credit Suisse Group AG who managed this feat, it’s not Deutsche Bank AG,” he said. “The only foreign bank that’s been able to do this is UBS.”
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