UBS face $6 billion fine as tax-fraud trial nears end

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UBS Group AG could be forced to pay as much as 5.3 billion euros ($6 billion) in a Paris case over allegations that it helped French clients hide money from tax authorities.

Serge Roques, a prosecutor at the Parquet National Financier, asked the court to impose a record fine of 3.7 billion euros that would be proportionate with UBS’s size, the nature of the crime and the damage to society. The French state, which is a plaintiff in the Paris trial, is seeking 1.6 billion euros from the Swiss bank in addition to any court-imposed penalties.

“The underlying facts are of an exceptional breadth and a systematic nature,” Roques said Thursday during his closing arguments at the month-old trial.

The case is one of many legal obstacles Zurich-based UBS has faced since the start of the financial crisis a decade ago, including a $1.5 billion fine in 2012 for rigging the Libor benchmark. Tax-related investigations have also cut into the bank’s reserves: it paid $780 million in the U.S. nearly a decade ago and about 300 million euros in Germany in 2014.

UBS called the prosecution’s fine calculation “irrational” and said the trial was ordered by lead French investigators on the basis of “erroneous conclusions.”

Before the court case started, UBS had to post 1.1 billion euros in bail. The bank had denied all the allegations.

Roques went through a complicated explanation to argue that the the fine should be based on 2015 evidence from French investigators that found almost 4,000 French residents with Swiss UBS accounts made late tax payments on assets worth about 3.8 billion euros.

UBS said that the calculation was the result of “a simplistic approach taking into account the full amount regularized by French taxpayers without any proof of an underlying offense.”

“The bank has strongly contested this assessment and, more generally, any criminal liability in this case since the beginning of the investigation,” UBS said in a statement.

Earlier on Thursday, a second prosecutor, Eric Russo, said UBS “used illegal means” to encourage residents in France to place funds in undeclared Swiss accounts and provided services to launder their money.

“The banks that take part in tax fraud deserve to be punished,” Russo said.

While the potential UBS penalty is by far the most significant, Roques also sought fines against other defendants including six former bankers and the bank’s French unit.

He said UBS France should be found guilty of aiding and abetting its Swiss parent to commit the wrongdoing and pay a 15-million-euro fine. Roques said that the highest-ranking UBS official at the time of the offenses, Raoul Weil, should pay a 500,000-euro fine.

The trial is set to run until Nov. 15, with closing speeches from defense lawyers next week. A ruling in the case is expected several weeks later.

During Thursday’s closing arguments, Roques detailed the methods UBS allegedly used to launder French clients’ money. He listed a series of services UBS offered to Swiss account holders such a setting up offshore trusts and providing numbered accounts to “increase the level of opacity” and hide the funds from the taxman.

He dismissed the arguments of the various defendants — that the services were designed to protect privacy — as “laughable.” Roques said he wasn’t convinced that customers asked the bank not to send mail about their accounts to their homes to avoid family feuds.

“The explanations given by the UBS representatives — past and present — were a veritable festival of hypocrisy,” the prosecutor said.

Bloomberg News
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