Bradley Birkenfeld – the American former UBS banker who played a central role in breaking the Swiss bank’s secrecy and confidentiality in trying to protect its U.S. clients from evading payment of their U.S. taxes – was sentenced to 40 months in federal prison today.

Birkenfeld helped turn Swiss Bank account secrecy’s cachet – at least for U.S. clients – into ‘cachet-less accounts,’ the likes of which heads of state, terrorist leaders, and reputed drug traffickers have benefited from over the years.  The United States settled a lawsuit with UBS this week over the bank’s refusal to turnover a list of its U.S. client accounts, and the Swiss government agreed to help them divulge the identities of at least 4,450 clients without breaking Swiss law.

Exactly what did Birkenfeld give the feds in exchange for today’s sentence?

In contravention of U.S. law, a 2002 internal UBS memo advised UBS Wealth Management and Business Bankers with U.S. Clients that:

A 2002 letter that UBS sent to U.S. clients (p. 28 of the UBS Internal Memo) advised them that if they chose not to execute a W-9 form reporting their investment income to U.S. tax authorities, the bank would protect their identities from being revealed:

Here is what Birkenfeld admitted in federal court that he did for UBS to help clients avoid paying their federal taxes to the IRS:

Birkenfeld signed a plea agreement with federal prosecutors over a year ago. You can read the former UBS banker’s plea agreement here:

According to a Portfolio magazine article, here are some of the things that Birkenfeld did for UBS clients while he worked at the Swiss bank

He helped one of his U.S. clients, billionaire Igor Olenicoff, (referred to as ‘IO’’ in Birkenfeld’s indictment below) avoid making payments to the I.R.S. – at least until someone appeared to tell U.S. authorities about his holdings – by placing hundreds of millions in UBS Swiss accounts. Olenicoff was later charged with illegally avoiding federal tax obligations through his Swiss bank account deposits. He pleaded guilty, received probation, and paid $52 million in fines to the I.R.S.

You can read Birkenfeld’s original criminal indictment here:

In testimony before the U.S. Senate Permanent Subcommittee on Investigations earlier this year, a UBS executive acknowledged that UBS violated U.S. law, and took pains to apologize for what it said was “one small part” of the Swiss bank’s operations:

But for his role in breaking through the veil of Swiss bank secrecy laws, Birkenfeld can only dream of being in the Alps while he’s in prison during the next three years.

 

Related Resources:

  • UBS - U.S. Settlement: Swiss Bank to Identify at Least 4,450 Names, FindLaw (Aug. 19, 2009)
  • Cachet-Less Accounts: Swiss Bank UBS Client Identities Likely to Be Revealed, FindLaw (Aug. 12, 2009)
  • Tax Haven Banks and U.S. Tax Compliance, U.S. Senate, Permanent Subcommittee on Investigations (Jul. 17, 2008)
  • Obtaining the Names of U.S. Clients with Swiss Accounts, U.S. Senate, Permanent Subcommittee on Investigations (Mar. 4, 2009)
  • FindLaw’s Tax Center

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