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Offshore banks face grand jury scrutiny

Probe centers on allegations of tax evasion

By David Voreacos
Bloomberg News / September 21, 2011

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NEWARK - Eight offshore banks are under federal grand jury investigation for facilitating tax evasion by US citizens as part of an investigation the Justice Department said has dealt “fabled Swiss bank secrecy a devastating blow.’’

The department disclosed the investigations on a section of its website detailing the Tax Division’s Offshore Compliance Initiative. In 2009, prosecutors charged UBS, the largest Swiss bank, with aiding tax evasion by US clients. UBS avoided prosecution by paying $780 million, admitting it fostered tax evasion, and giving the Internal Revenue Service data on more than 250 accounts. It later turned over data on another 4,450 accounts.

Prosecutors opened 150 grand jury investigations of offshore-banking clients, charging 30 people, and indicting 13 other people who facilitated the hiding of assets offshore, according to the website.

“In addition, grand jury investigations have been opened into eight additional offshore banks across the world,’’ according to the website. “The outcome cannot be measured in litigation results alone. This enforcement effort has dealt fabled Swiss bank secrecy a devastating blow.’’

The Justice Department, which didn’t identify the eight banks, hadn’t previously said how many were under investigation. Charles Miller, a spokesman for the department, declined to comment yesterday.

“The fact that the department has confirmed that there are eight grand jury investigations into offshore banks shows that the government’s enforcement efforts are a lot further along than had previously been disclosed,’’ Jeffrey Neiman, a former federal prosecutor who worked on the UBS case, said in a phone interview.

Neiman, who is now in private practice in Fort Lauderdale, Fla., said it is highly unusual for the government to “trumpet’’ the opening of a grand jury investigation.

“What makes this public acknowledgement so peculiar is the secrecy that usually surrounds grand jury investigations,’’ he said. “In fact, the department is prohibited by law from speaking about matters occurring before the grand jury.’’

Credit Suisse Group, the second-largest Swiss bank, has said that US prosecutors stated it’s a target of a criminal investigation. Victoria Harmon, a spokeswoman for Zurich-based Credit Suisse, declined to comment and referred to a July 21 bank statement. Seven Credit Suisse bankers, including the former head of North American offshore banking, Markus Walder, were indicted that day in federal court in Alexandria, Va., on a charge of helping US clients evade taxes through secret accounts.