The Swiss units of Goldman Sachs Group (GS:US) Inc. and Morgan Stanley (MS:US) are among 106 banks seeking U.S. non-prosecution agreements after saying they had reason to believe they helped Americans violate tax laws, according to three people familiar with the banks’ actions.
Both Goldman Sachs and Morgan Stanley applied to a Justice Department program that requires banks to disclose how they helped Americans hide assets, hand over data on undeclared accounts and pay penalties, according to the people who asked not to be identified because they weren’t authorized to discuss the matter publicly.
To gain non-prosecution deals, banks must pay 20 percent of the value of accounts not disclosed to the Internal Revenue Service on Aug. 1, 2008, 30 percent for such accounts opened between then and February 2009 and 50 percent for accounts opened afterward. Banks submitted letters of intent by Dec. 31.
Andrea Raphael, a spokeswoman for Goldman Sachs, and Wesley McDade, a spokesman for Morgan Stanley, declined to comment.
The voluntary disclosure program, offered last year to more than 300 Swiss banks, is part of the U.S. crackdown on offshore tax evasion. It wasn’t open to 14 institutions already under criminal investigation, including Credit Suisse Group AG, the second-biggest Swiss bank; the Swiss unit of HSBC Holdings Plc; Julius Baer Group Ltd., Switzerland’s third-largest wealth manager; and Zuercher Kantonalbank, the largest state-owned regional bank.
Morgan Stanley is considering strategic options for its Swiss private bank, including a sale or wind-down, a person briefed on the discussions said last month.
Those under criminal investigation are known as Category 1 banks, while those seeking non-prosecution agreements are called Category 2. If no undeclared U.S. accounts are found, banks can apply as Category 3. Category 4 banks are those with mainly local clients.
Banks seeking non-prosecution agreements must disclose the total number of U.S. accounts since 2008, their highest dollar value, and the employees who managed them. The banks also must use independent examiners to certify findings.
Assistant Attorney General Kathryn Keneally said in January that the department is reviewing the letters of intent to see if applicants qualify as Swiss banks. Some banks are still reviewing records, and some may withdraw, she said.
At least 33 banks announced that they will join the program in Category 2, including Cie. Lombard, Odier SCA, Geneva’s oldest bank, and BSI Group, the Swiss private bank owned by Italy’s Assicurazioni Generali SpA.
Banks that said they will participate include: Union Bancaire Privee, the Geneva-based bank founded by Edgar de Picciotto in 1969; Edmond de Rothschild Group, owned by Baron Benjamin de Rothschild; and EFG International AG, controlled by Greek billionaire Spiro Latsis and his family. Another 15 banks, mainly regional lenders, declared they will opt for Category 3 or 4.
Category 3 banks seek Justice Department letters saying they’re not a target of a criminal probe. In return, an independent examiner must confirm the bank broke no laws.
The Wall Street Journal earlier reported about the banks’ participation in the U.S. program.
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