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FEBRUARY 18, 2015 U.S. Court Allows Birkenfeld to Travel to France for UBS Inquiry William Hoke

A federal judge on February 17 granted a petition allowing Bradley Birkenfeld to travel to Europe to comply with a French subpoena requiring him to testify against UBS AG.

Birkenfeld is on parole after serving 31 months in prison for helping U.S. citizens evade taxes while he was an employee of the Swiss banking giant. The order signed by Judge William J. Zloch of the U.S. District Court for the Southern District of Florida allows Birkenfeld to travel to Paris from February 24 to March 1, 2015, to comply with a subpoena issued February 3 by French Magistrate Judge Guillaume Daieff. Daieff has demanded Birkenfeld's appearance in Paris on February 27 to provide testimony and "documentary evidence." Birkenfeld's lawyer, Gerald Greenberg, said Daieff is leading the French investigation into the activities of UBS.

While at UBS, Birkenfeld solicited and dealt with wealthy U.S. clients, helping them channel funds into Swiss bank accounts, often through accounts and shell companies in London, Panama, and Liechtenstein. Birkenfeld subsequently registered with the IRS as a whistleblower and provided the government with confidential information about a number of the bank's U.S. clients. He was convicted in 2009 on a single count of conspiring to defraud the United States but received a $104 million reward in 2012 for his "exceptional cooperation" with the Justice Department. (Prior coverage .)

Agence France-Presse reported February 17 that Daieff and another French magistrate judge issued arrest warrants for three former UBS employees in January after the trio, who are living in Switzerland, failed to comply with a summons to appear for questioning. The news agency

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attributed the report to a confidential source within the French judicial system. The names of the three bankers were not disclosed.

A UBS spokesman told Tax Analysts that the bank has no comment on either the reported arrest warrants or the subpoena issued to Birkenfeld. A request to the French embassy in Washington for information about the arrest warrants for the three former UBS bankers was not answered by press time.

UBS reportedly is facing fines of up to €4.9 billion in France. The bank was fined $780 million in 2009 as part of a deferred prosecution agreement with the U.S. government following allegations that it helped approximately 17,000 U.S. clients conceal an estimated $17 billion in assets. (Prior coverage .)

In its fourth-quarter financial statements, released February 10, UBS disclosed that it is under investigation once more in the United States over sales of bearer bonds and other unregistered securities to U.S. clients. In its Form 6-K filed with the SEC, UBS said the inquiries, which began in January, are focused on whether the sales violated the 1982 Tax Equity and Fiscal Responsibility Act. (Prior coverage .)

Possible Problems Elsewhere in Europe

While Birkenfeld was primarily involved with U.S. clients, he worked out of UBS's Geneva office, which was the base for many of the bank's dealings with its French clientele. "He was in close proximity with France and likely very familiar with the cross-border business with France," said Milan Patel of Anaford AG. "I would suspect that UBS employed the same tactics it used for U.S. cross-border business . . . in France."

Patel said the French investigations could presage similar inquiries in several other countries. "There is seemingly no end in sight for UBS," he said. "It's like the whack-o-mole game. You smash one mole, and another two pop up."

Patel said a trip to Europe could be risky for Birkenfeld. In addition to allegedly helping French citizens avoid taxes, "he probably faces criminal charges in Switzerland for violating Swiss banking secrecy," Patel said.

Birkenfeld told Tax Analysts that the DOJ rejected his offer to testify in the Raoul Weil case in Florida and asked, "Why does it take the French government -- from 4,000 miles away -- to subpoena me to testify against UBS, and my own government -- that is, the DOJ -- ignored my offer to provide extensive evidence and testimony in the Weil case?"

Birkenfeld's probation will end November 28. He petitioned the U.S. district court in Florida to allow him to move back to Europe, but Zlock denied that request January 12.

Tax Analysts Information

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Jurisdictions: France; United States Subject Areas: Criminal violations Tax avoidance and evasion Fraud, civil and criminal Financial institutions Financial products and banking Penalties Audits Industry Group: Banking, brokerage services, and related financial services Author: William Hoke Institutional Author: Tax Analysts Tax Analysts Document Number: Doc 2015-3857 Tax Analysts Electronic Citation: 2015 TNT 32-2

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