UBS suffers setback in bid to fend off charges of tax fraud
UBS GROUP suffered a setback in its fight against charges that it helped clients to cheat on taxes when a French court rejected its bid to stop a former executive from striking a plea deal in the case.
UBS France lost a motion to be treated as a plaintiff in deliberations over Patrick de Fayet’s guilty plea, according to a person familiar with the non-public ruling at the Paris appeals court, who spoke on condition of anonymity.
If the French unit had been granted the role of a victim, it could have been in a position to thwart the process.
Although the loss can still be reversed at France’s highest court, prosecutors are one step closer to being able to rely on statements from De Fayet to bolster their main case against the bank, which risks a fine of as much as 4.9 billion (R79bn).
UBS and its French unit were ordered in March to stand trial for tax fraud after settlement talks broke down over the size of the penalty.
Authorities are unlikely to set a date for the trial until the issues over the unit’s request to be a plaintiff are settled.
Zurich-based UBS, which did not benefit from a so-called European passport or have a French banking licence, is accused of illicitly soliciting clients on French territory and laundering the proceeds of tax fraud, according to a person familiar with the indictment.
The bank’s French unit, as well as several former employees, would have to respond to charges in court that they assisted UBS in the wrongdoing, the person said in March.
The French ruling is the latest twist in a prosecution that has seen UBS post a 1.1bn bond to cover any potential penalties three years ago and De Fayet make a deal in 2016 with French prosecutors to plead guilty.
The plea process still needs the approval of a judge and the consent of any plaintiffs.
French financial prosecutors and UBS France did not immediately respond to requests for comment.
UBS is expanding its operations in France even as it faces trial.
The French unit is seeking to accelerate growth in the country by allying with a Parisian private-equity firm, counting on Serge Dassault’s family and former Lazard chairperson Michel David-Weill among investors.
Authorities are unlikely to set a date for the trial until the issues over the unit’s request to be a plaintiff are settled.
Over the past five years, UBS’s French private bank has doubled in size, with 15bn under management.
In the tax case, French investigators accuse UBS bankers of organising clients events in the country, including golf tournaments and art exhibitions, to encourage residents to move assets to Switzerland, according to prosecutors’ recommendations issued last year, which were seen by Bloomberg.
Switzerland-based UBS bankers, who were not allowed to solicit clients in France, took steps “worthy of James Bond” to avoid detection, a former employee of the firm’s French unit said in the prosecutors’ document.
The bankers used encrypted computers, had business cards without the lender’s logo and were told to switch hotels regularly, according to the document. – Bloomberg