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Switzerland’s UBS faces €3.7-billion fine as crucial court ruling looms

A Paris court will rule Wednesday on whether Swiss banking giant UBS illegally tried to convince French clients to hide billions of euros in Switzerland, charges which prompted prosecutors to seek a record €3.7-billion fine.

Switzerland's UBS faces €3.7-billion fine as crucial court ruling looms
UBS denies charges it helped French clients evade tax and says it will defend itself "vigorously". Photo: AFP

The trial opened last autumn after seven years of investigations, launched when several former employees came forward with claims of unlawful conduct. 

The move came as authorities across Europe cracked down on tax evasion and dubious banking practices in the wake of the global financial crisis which erupted in 2007.

The pressure eventually forced Switzerland to effectively end its tradition of ironclad bank secrecy, by joining more than 90 countries which agreed to automatically share more client account information among each other.

In the UBS case, French authorities determined that more than €10 billion had been kept from the eyes of tax officials between 2004 and 2012.

The National Financial Prosecutor's office urged a €3.7-billion ($4.2 billion) fine, the largest ever sought in France, saying the bank and its directors “were perfectly aware that they were breaking French law” by unlawfully soliciting clients and helping them evade French taxes.

They also sought a €15 million fine for UBS's French subsidiary, and fines of up to €500,000 for six top executives, including Raoul Weil, the former third-in-command at UBS, and Patrick de Fayet, formerly the second-ranking executive for its French operations.

In addition, lawyers for the French state, which is a plaintiff in the case, asked for €1.6 billion in damages.

UBS, which was ordered to post €1.1 billion in bail, has denied the charges and said its operations complied with Swiss law.

It also says that it was “unaware” that some French clients had failed to declare assets in Switzerland, and that prosecutors have not produced any proof, such as client names or account numbers, to back up their fraud claims.

The case is being closely watched by industry executives at a time when Paris and other European capitals are hoping to lure multinational banks from London as Brexit looms.

'Milk tickets'

UBS is accused of organising or inviting prospective clients to prestigious outings such as the French Open or luxury hunting retreats, where UBS's Swiss bankers would meet their “prospects” — something they were not allowed to do under French law.

UBS France directors then used notes called “milk tickets” to keep track of how many “milk cans” – amounts of money – were transferred to Swiss accounts.

They say the system was merely a way to balance out bonuses due to French bankers who were effectively losing a client to their Swiss peers, and the notes were later destroyed.

But investigators claim the “milk tickets” were proof that UBS had a parallel accounting system for keeping the transfers off its official books.

Only one “milk ticket” was found during the inquiry, prompting defence lawyers to argue there was no proof to justify claims of a massive fraud.

Yet prosecutors pointed to the roughly 3,700 French UBS clients who later took advantage of an amnesty offer to regularise their tax declarations with the French authorities.

UBS has been embroiled in a series of similar cases, most notably in the United States, where the authorities said the bank used Switzerland's banking secrecy laws to help rich clients avoid taxes.

In 2009 it paid $780 million to settle charges it helped thousands of American citizens hide money from the Internal Revenue Service, and agreed to turn over information on hundreds of clients, severely denting Switzerland's long tradition of shielding banking clients and their operations from prying eyes.

That case was also prompted by a former American UBS employee turned whistleblower, Bradley Birkenfeld, whose book “Lucifer's Banker: The Untold Story of How I Destroyed Swiss Bank Secrecy” was published in 2016.

Last November UBS was again sued by US authorities, who accuse the bank of misleading investors over the sale of mortgage-backed securities in 2006 and 2007, just before the financial crisis struck.

UBS has denied the charges and said it will defend itself “vigorously”.

SKI

Franco-Swiss cold war breaks out over ski border car park

Switzerland and France are in a snowball fight over a cross-border car park which serves Swiss ski slopes but has been closed by the French due to the coronavirus pandemic.

Franco-Swiss cold war breaks out over ski border car park
The object of the Franco-Swiss war: parking lot Les Dappes. Photo by AFP

The Battle of Dappes Car Park — for the moment a rather cold war — has been rumbling for weeks, triggered by the different Covid-19 rules on either side of an invisible line in a snow-covered field.

The 650-space car park sits in the valley between the pistes of La Dole on the Swiss side, and Les Tuffes in France. It is 250 metres inside French territory.

In the Jura mountains, the summit of La Dole overlooks Lake Geneva in the west of Switzerland — a country which has kept ski slopes open despite the pandemic, while neighbouring France has closed theirs.

So the chair lifts for La Dole sit empty — because nobody can use the shared car park in France.

“I cannot understand how the French authorities can decide that the Swiss cannot go skiing in their own country. This is a unilateral decision,” fumed Gerard Produit, tourism chief in Switzerland's Nyon region.

“We are being held hostage by the politics of both countries,” he told AFP, deploring the “legal imbroglio”.

The frozen chair lifts are an unwelcome sight for Patrick Freudiger, the boss of the Tele-Dole ski lifts company.

“In mid-December, we organised a meeting between France and Switzerland to present the Covid plan” for La Dole, Freudiger told AFP.

But since the end of December, “we have received three successive orders banning the use of the car park” — the latest one being valid until February 3.

READ MORE: Large crowds on Swiss ski slopes spark concern over coronavirus spread

'They won't listen' 

The prefecture of the Jura local authority in France told AFP the car park is “likely to encourage the gathering of more than six people in a public space in France, the mixing of groups, and therefore the circulation of the virus”.

The wider Bourgogne-Franche-Comte region has the highest intensive care bed occupancy rate in France, while the Jura local authority area has one of the highest Covid-19 incidence rates in the country.

Freudiger is fuming that the French authorities did not try to reach an agreement on access to the car park.

Rubbing salt into the wounds, the site was refurbished last year thanks to Swiss investment, as part of a project to create a cross-border ski destination.

Freudiger also voiced surprise that the car park is shut while car-pooling car parks for French inhabitants who work in Switzerland remain open.

“We tried to get in touch with the prefect; we could not reach him. They do not hear us, they won't even listen to us,” said Produit.

See you in court 

Tele-Dole filed two appeals last Friday to the Besancon administrative court in France over the situation. A hearing is scheduled to take place next Monday.

Switzerland's Nyon region wrote to the Jura authorities on Thursday requesting talks “as soon as possible” on potential solutions and “financial compensation” for Tele-Dole.

According to Freudiger, the ski lifts have already lost 40 working days — almost half the season — and 300,000 Swiss francs (€280,000).

Tele-Dole cannot claim any financial assistance from the Swiss government, because there is nothing to stop ski stations remaining open during the pandemic.

Etienne Bovard, director of La Dole's Swiss Ski School, faces the same headache. The school has around 20 instructors but has had to stop all group lessons.

“In terms of turnover, we are 20 percent down at the moment, and if this continues throughout February… it will amount to an 85 percent loss,” he said.

“What's terrible is that it's the children,” who make up 80 percent of the clientele, “who are victims of this political game”.
 

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