Feb. 11 (Bloomberg) -- Wegelin & Co. officials facing criminal charges of helping Americans evade taxes failed to appear at a Manhattan court hearing, and prosecutors called the 270-year-old Swiss bank a “fugitive.”
Wegelin and three of its client managers had been indicted as part of a U.S. crackdown on offshore tax evasion. Prosecutors said after the hearing yesterday in federal court that the client managers also failed to appear and were considered fugitives.
When no defendants or defense attorneys showed up, U.S. District Judge Jed Rakoff asked prosecutors for a proposal on how to proceed. Prosecutors said they will confer with the Justice Department and advise Rakoff on their proposals.
“Unlike an individual, arresting a company is somewhat difficult,” Rakoff said.
Wegelin, based in St. Gallen, said in a statement that its representatives didn’t appear because “the legal prerequisites to initiating criminal proceedings under U.S. law have not been met.”
The case can’t begin until the defendant has been served with a summons, according to the statement. Because Wegelin hasn’t been properly served, the bank said, it wasn’t required to appear and proceedings may not begin.
“The circumstances create a clear dilemma for Wegelin & Co.: If it were to adhere to current U.S. legal practice aimed at Swiss banks, it would have to breach Swiss law,” the bank said. “The bank will, as it has done until now, make every effort to resolve this matter within the boundaries of respectful cooperation with the U.S. and obedience to Swiss law.”
Wegelin is the first overseas bank to be indicted by the U.S. for aiding tax fraud, federal prosecutors say. The three Wegelin client managers at the Zurich branch, Michael Berlinka, Urs Frei and Roger Keller, were also indicted.
The managers serviced “undeclared accounts” for U.S. taxpayers, meaning the income derived from them wasn’t reported to the U.S. Internal Revenue Service, according to the indictment. The bank helped Americans hide more than $1.2 billion in assets, the U.S. says.
The U.S. and Switzerland are in talks to resolve a U.S. probe of offshore tax evasion. Wegelin was one of at least 11 banks under criminal investigation by the Justice Department’s tax division.
Prosecutors said that Wegelin and the three bankers wooed U.S. clients fleeing UBS AG, the largest Swiss bank. UBS avoided U.S. prosecution in 2009 by admitting it aided tax evasion, paying $780 million and handing over data on 250 accounts. It later disclosed information on about 4,450 more accounts.
By attracting clients leaving UBS, Wegelin opened new undeclared accounts for at least 70 U.S. taxpayers, according to the indictment. Most of those accounts were given an internal code of “BNQ,” indicating the accounts were undeclared.
The effort to woo UBS clients was backed by Wegelin’s senior management, according to the indictment.
The case is U.S. v. Wegelin, 12-00002, U.S. District Court, Southern District of New York (Manhattan).
--Editors: Andrew Dunn, Peter Blumberg
To contact the reporters on this story: David Glovin in New York at Dglovin@bloomberg.net; Don Jeffrey in New York at firstname.lastname@example.org.
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