Saturday, May 15, 2021

French prosecutors seek $3.6 billion fine for UBS in tax case


French prosecutors and lawyers for the government said UBS Group AG should be ordered to pay 3 billion euros ($3.6 billion) — 33% less than the original judgment — for allegedly helping French clients hide money from the nation’s tax authorities.

Prosecutor Serge Roques asked a Paris court of appeals to impose a 2 billion-euro fine on UBS, acknowledging the limits set by recent guidance from France’s top court. The French state, which is a plaintiff in the case, is also seeking 1 billion euros in damages from the bank in addition to any court-imposed penalties.

The request came as part of the company’s appeal of a February 2019 ruling requiring it to pay 4.5 billion-euro in fines and damages, a European record. It was emblematic of a French crackdown on tax evasion that has focused on big banks from HSBC Holdings Plc to Credit Suisse Group AG, who investigators believed encouraged such behavior by its citizens.

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“For facts of an exceptional magnitude, it is necessary to apply an exceptional fine,” Roques said Monday during closing arguments in the case that started earlier in March.

Roques on Monday called upon the court to send a message despite the “restrictive” guidance from France’s top court, which prosecutors “regret.”

“We are no longer in a settlement process,” Roques said. “We must change the scale” for the fine.

A 3 billion-euro penalty would still exceed any amount UBS may have paid if the bank had settled, but talks broke down in 2017 over the amount.

At the time, UBS had started by offering 180 million euros, less than a fifth of the 1.1 billion-euro bond it had to post in the case. As French enforcers dismissed the UBS offer, which it had improved slightly, as unacceptable, the bank’s legal team decided to play hardball, pushing the case to trial in the hope of wringing out a smaller penalty.

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Appeals in France take the form of a new trial where judges are often free to cut or raise the penalty. The lower-court judgment has been put on hold pending the appeal and UBS has only set aside 450 million euros in provisions for the eventual verdict.

In court, UBS’s lawyers have made it clear they plan to invoke the French top court ruling, which called into question calculations like those used to fine UBS two years ago.

Six months after UBS was slapped with the fine, France’s Cour de Cassation in September 2019 ruled that the penalty demanded from a man convicted of laundering undeclared funds in an unrelated case should be sharply cut. The top judges said it had been erroneously based on the amount hidden from tax authorities rather what was owed.

UBS’s hefty fine was similarly based on the undeclared wealth in the bank’s Swiss accounts that nearly 4,000 French clients belatedly admitted to and declared by 2015, rather than the tax they avoided.

With fresh data corresponding to the tax paid by nearly 17,000 French clients with UBS accounts in Switzerland who put their houses in order, Roques said that ceiling for a fine on appeal is about 2.2 billion euros, in line with the top court guidance.

A ruling is expected in several months.

The bank was found guilty in 2019 of helping clients launder funds that should have been declared to French tax officials through numbered accounts and trusts. UBS was further convicted of covertly dispatching Swiss bankers across the border to encourage prospective clients to move money across the border.

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Five former UBS bankers were also found guilty, as was the lender’s French unit.

Earlier Monday, appellate judges expressed doubts about UBS’s arguments.

Presiding Judge Francois Reygrobellet voiced his exasperation after UBS invoked yet again Switzerland’s banking secrecy to remain evasive about a question that concerned client data.

“Foreign law cannot apply to facts that took place in France,” the judge said.

That followed Judge Hervé Robert being troubled by the way bank employees handled a prospective client in Bordeaux who had won 26 million euros in the lottery.


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