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ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
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March 2, 2009 2:15 PM ET
UBS Chairman Peter Kurer sat on a high-level 2002 corporate committee accused by U.S. prosecutors last month of “knowingly” withholding information relating to its obligations to report on American taxpayers’ secret accounts, according to a recently released federal document. The U.S. Department of Justice alleged that the UBS Group Executive Board that ran the Swiss bank’s daily business operations contributed to a conspiracy to defraud the United States of tax revenue. The allegation is contained in a single paragraph of an 11-page exhibit attached to the bank’s settlement of a U.S. criminal investigation filed with the court last month. “Executives on UBS’s executive board knowingly” failed to tell the Internal Revenue Service in Sept. 2002 of an internal audit showing deficiencies in UBS’s implementation of its tax oversight obligations, prosecutors alleged. The bank was required under an agreement with the U.S. to report and withhold taxes on American clients, according to the exhibit, a document that constitutes a written accusation of crimes signed by prosecutors. The Justice Department did not identify Kurer, then a senior company lawyer, or the nine other members of the Group Executive Board by name. Its accusations were leveled at UBS and unnamed executives who “occupied positions at the highest levels of management” and were termed “unindicted co-conspirators.” It did not say if any unindicted co-conspirators were on the Group Executive Board. The Group Executive Board’s September 2002 members were identified in UBS’s Annual Review that year, a public document. The panel was appointed and overseen by the company’s board of directors. UBS’s $780 million settlement, which headed off a likely indictment, limits the bank’s exposure to prosecution but not that of its employees. The IRS has filed a separate civil suit seeking to force the company to disclose the identities of U.S. taxpayers involved in the case. “If I were advising the individuals who served on that committee, I’d tell them to be concerned that the U.S. Government might bring charges,” George Clarke, a Washington criminal tax lawyer who represents clients with offshore accounts. “These allegations are serious for the people individually.” But Clarke, a partner with Miller & Chevalier, questioned the potential strength of the government’s allegation based on the limited information made public. He called it “a little bit of a stretch.” Columbia University law professor Daniel Richman, a former federal prosecutor, said 2002 Group Executive Board members could be in U.S. cross-hairs. “This is an indication that the government believes it has clear evidence with respect to individuals on that board, and that they could be charged,” he said. Kurer, now 59, joined UBS in 2001 as group general counsel and was appointed to the banker-heavy Group Executive Board in July 2002. He became chairman of the board of directors last April. “A U.S. lawyer would have heightened ethical responsibility in that context,” said former federal prosecutor Jacob Frenkel, now with Shulman, Rogers in Rockville, Md. “But it’s unclear how the Swiss government will view it, and they could choose to protect their citizens.” Another member of the 2002 panel, who had been appointed that July, Marcel Rohner, rose to become UBS chief executive officer. He resigned last week. Kurer said last week that Rohner told the board of directors in January that he wanted to step down following some internal restructuring. Also on the 2002 panel was John Fraser, head of the bank’s global asset management, who remains on the Group Executive Board. He was appointed in late 2001, according to UBS’s 2002/2003 Handbook, also a public document. The Group Executive Board was headed six years ago by the then-president of the company, Peter Wuffli, who left UBS in 2007. He was appointed board president in December 2001, the Handbook said. The most senior UBS executive to be charged to date is Raoul Weil, who headed the bank’s oversight of its U.S. cross-border business and was appointed to the Group Executive Board in 2005. He was indicted by a U.S. grand jury in November. He has been declared by the court to be a fugitive. The IRS sued UBS last month for the names of as many as 52,000 Americans with secret offshore accounts. The Swiss bank turned over 250 names as part of its settlement of the criminal investigation but is resisting the release of any more. UBS, the largest Swiss bank, acknowledged in its settlement that it schemed to defraud the U.S. by helping American citizens evade U.S. taxes from 2000 to 2007. Some UBS executives who knew of the illegal conduct “continued to operate and expand the United States cross-border business because of its profitability,” the bank said in the agreement. “Unfortunately, we are unable to comment on individuals,” UBS spokesman Kris Kagel said in an email last week. Kurer, a Swiss citizen who received legal training at the University of Chicago, commented in a Feb. 18 UBS statement announcing the settlement. “UBS sincerely regrets the compliance failures in its U.S. cross-border business that have been identified by the various government investigations in Switzerland and the U.S., as well as our own internal review,” he said in a statement. “We accept full responsibility for these improper activities.” Swiss banking regulators who investigated UBS practices made findings about senior management’s culpability that are diametrically opposed to those of U.S. prosecutors. The Swiss Federal Banking Commission “did not find any indications that the bank’s top management had any knowledge of violations of duties,” the agency’s overseer said in a Feb. 18 report. The Swiss report also said that Weil bore little responsibility as he told subordinates there would be “zero tolerance” for non-compliance with U.S. law. UBS’s failures were caused by underlings rather than senior management, it said. Richman, the Columbia law professor, questioned how much UBS would stand to gain if Kurer, like Rohner, were to leave the company. “While it would reduce possible leverage that the U.S. Government has, the bank would still have enough on the line for the U.S. to pursue it,” he said. “UBS will have to resolve the issue of whether to release American clients’ names if it wants to continue to do business with the United States.” Frenkel, the former federal prosecutor, said uncertainty over the UBS executives’ legal status could linger for years. “The U.S. government could continue investigating for years, and it also could choose to indict some UBS executives under seal,” he said. “They wouldn’t know they’e been indicted until they came to this country and were arrested after coming through Customs.” UBS finance officer Mark Branson is scheduled to testify Wednesday before the Senate Permanent Subcommittee on Investigations, which is looking at the bank’s offshore havens. UBS has failed to fulfill its pledge last July to give the IRS the names of 19,000 U.S. clients with about $18 billion in assets, the subcommittee headed by Michigan Democrat Carl Levin said Friday.
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