Wachtell, Lipton, Rosen & Katz litigation partner John Savarese represented Zurich-based banking giant UBS as it entered into a deferred prosecution agreement on Wednesday with federal prosecutors that ends an investigation into whether UBS helped U.S. clients avoid paying taxes.
Under the terms of its agreement with the government, UBS will pay a $780 million fine and disclose the names of certain account holders to the Internal Revenue Service. While the government's indictment states its interest in the identities of between 17,000 and 20,000 UBS cross-border clients, the deferred prosecution agreement does not specify how many client names will be turned over to U.S. authorities.
UBS received permission from the Swiss Financial Markets Supervisory Authority (FINMA) to move forward with the agreement, which has been approved by U.S. District Judge James Cohn in Fort Lauderdale, Fla.
As part of its agreement with the government, UBS also settled an SEC suit filed on Wednesday in Washington, D.C., that claims the Swiss bank had received more than $380 million in profits by advising U.S. clients as an unregistered brokerage.
The settlement is a coup for the Justice Department and the IRS, whose ongoing probe into whether UBS had helped U.S. clients hide assets in overseas accounts in order to avoid paying taxes was stymied by secretive Swiss banking laws. (A Swiss newspaper is reporting that the Swiss government may lift its banking secrecy law to allow UBS to turn over confidential client data.)
The investigation itself gained steam after the government unveiled a 12-page indictment in May of former UBS private banker Bradley Birkenfeld and the co-founder of a Liechtenstein-based bank. Birkenfeld pleaded guilty to fraud charges in June and began cooperating with prosecutors.
UBS turned to Skadden, Arps, Slate, Meagher & Flom litigation partners David Zornow and Lawrence Spiegel to represent Martin Liechti, the head of the bank's wealth management unit in the Americas, when Liechti was detained in Miami last April and hauled before a permanent Senate subcommittee on investigations the following month. (Liechti took the Fifth but was later allowed to leave the country.)
But in November prosecutors announced a grand jury indictment of Raoul Weil, the former chairman of UBS's global wealth management and business banking division, on charges that the 49-year-old executive helped UBS clients in the U.S. avoid income taxes on overseas accounts.
Weil retained former Covington & Burling white-collar defense partner Aaron Marcu, but subsequently failed to show for a hearing and was declared a fugitive by Judge Cohn. Charges against Weil were not dropped as part of the government's agreement with UBS. (Marcu later skipped out on Covington, defecting to Freshfields Bruckhaus Deringer in late January.)
"It is extremely disappointing that the indictment of Raoul Weil was not dismissed as part of the bank's settlement with the United States," Marcu said in a statement. "Mr. Weil is an innocent victim of a political dispute between the United States and Switzerland over Swiss bank secrecy. [An extensive investigation by FINMA] expressly found in a report released today that there was no evidence that Mr. Weil was aware of or participated in any conspiracy to violate U.S. law."
The government's investigation was led by U.S. Attorney for the Southern District of Florida R. Alexander Acosta, acting assistant U.S. attorney general John DiCicco, Assistant U.S. Attorneys Kevin Downing and Michael Ben'Ary of the tax division at Main Justice, and Assistant U.S. Attorney Jeffrey Neiman in Fort Lauderdale.
"UBS executives knew that UBS's cross-border business violated the law," Acosta said in a statement released by the Justice Department. "They refused to stop this activity, however, and in fact instructed their bankers to grow the business. ... This was not a mere compliance oversight, but rather a knowing crime motivated by greed and disrespect of the law."
It has been a rough year legally for Switzerland's largest bank, which turned to Debevoise & Plimpton's Mary Jo White and Andrew Ceresney to help negotiate a $19.4 billion auction-rate securities settlement in August. The ARS investigation resulted in the resignation of David Aufhauser, the former general counsel of the bank's investment banking subsidiary, who later agreed to his own ARS-related settlement with state prosecutors in New York.
This article first appeared on The Am Law Daily blog on AmericanLawyer.com.