Thousands of employees of Swiss banks are finding that their employers are hanging them out to dry in exchange for hoped-for leniency in connection with American accounts involved in a tax evasion investigation.
Bloomberg reported Thursday that several Swiss banks so far have turned over data that included telephone records and e-mails for employees who were within Swiss law but in violation of U.S. law in setting up accounts for U.S. citizens who were then able to evade taxes.
As previously reported by AdvisorOne, Swiss bank Wegelin & Co. was indicted by the U.S. Department of Justice on Feb. 2 on charges that it helped its U.S. clients keep money from the IRS. Funds were seized from UBS, its correspondent bank in the U.S., on charges that Wegelin took over U.S. clients from UBS and continued to assist them in hiding money from the IRS. In 2009, UBS reached a deferred prosecution agreement with the DOJ and paid $780 million on charges of fraud and conspiracy in connection with the tax evasion scheme.
Other Swiss banks have seen their country’s tradition of secrecy worn down as the DOJ continued to pursue its investigation. Swiss companies are forbidden to turn over evidence in foreign legal proceedings; however, the Federal Council made an exception in April after the Swiss government was petitioned by numerous banks in the matter.
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As a result, the council gave its consent to allow banks to surrender the names of staff members, a move that Alec Reymond, a former president of the Geneva Bar Association, called illegal in the report. Reymond is representing two members of Credit Suisse’s staff.
Douglas Hornung, a Geneva-based lawyer who represents 40 current and former employees of HSBC Holdings’ Swiss unit, Credit Suisse Group and Julius Baer Group, was quoted saying, “The banks are burning their own people to try and cut deals with the DOJ. This violation of personal privacy is unprecedented in the Swiss banking industry.”
According to Hornung’s estimates, at least five banks have given up the data on up to 10,000 employees to pacify U.S. authorities. He also said banks have turned over not just correspondence, but also copies of their employees’ passports.
Credit Suisse said that it had been authorized to surrender staff names by the Swiss government. Marc Dosch, a bank spokesman, said in the report, “Credit Suisse provided the U.S. authorities with internal business documents that show how it ran its U.S. cross-border business. The large majority of Credit Suisse employees complied with the applicable laws and regulations and have nothing to fear.”