NEW YORK, (Reuters) – Wegelin & Co, the oldest Swiss private bank, said yesterday it would shut its doors permanently after more than two and a half centuries following its guilty plea to charges of helping wealthy Americans evade taxes through secret accounts.
The plea, in U.S. District Court in Manhattan, marks the death knell for one of Switzerland’s most storied banks, whose original European clients pre-date the American Revolution. It is also a potentially major turning point in a battle by U.S. authorities against Swiss bank secrecy.
A major question was left hanging by the plea: has the bank turned over, or does it plan to disclose, names of American clients to U.S. authorities? This is a key demand in a broad U.S. investigation of tax evasion through Swiss banks.
“It is unclear whether the bank was required to turn over American client names who held secret Swiss bank accounts,” said Jeffrey Neiman, a former federal prosecutor involved in other Swiss bank investigations who is now in private law practice in Fort Lauderdale, Florida. “What is clear is that the Justice Department is aggressively pursuing foreign banks who have helped Americans commit overseas tax evasion,” he said.
Charles Miller, a Justice Department spokesman, declined to comment immediately. Wegelin admitted to charges of conspiracy in helping Americans evade taxes on at least $1.2 billion for nearly a decade. Wegelin agreed to pay $57.8 million to the United States in restitution and fines.
Otto Bruderer, a managing partner at the bank, said in court that “Wegelin was aware that this conduct was wrong.”
Speaking in a thick Swiss-German accent, he said that “from about 2002 through about 2010, Wegelin agreed with certain U.S. taxpayers to evade the U.S. tax obligations of these U.S. taxpayer clients, who filed false tax returns with the IRS.”
When last February Wegelin became first foreign bank in recent memory to be indicted by U.S. authorities, it vowed to resist the charges. The bank, founded in 1741, was declared a fugitive from justice when its Swiss-based executives failed to appear in U.S. court.
The surprise plea effectively ended the U.S. case against Wegelin, one of the most aggressive bank crackdowns in U.S. history.
“Once the matter is finally concluded, Wegelin will cease to operate as a bank,” Wegelin said in a statement yesterday from its headquarters in the remote, small town of St. Gallen next to the Appenzell Alps near the German-Austrian border.
But the fate of three Wegelin bankers, indicted in January 2012 on charges later modified to include the bank, remains up in the air. Under criminal procedural rules, the cases of the three bankers – Michael Berlinka, Urs Frei and Roger Keller – are still pending.
Wegelin, a partnership of Swiss private bankers, was already a shadow of its former self – it effectively broke itself up following the indictment last year by selling the non-U.S. portion of its business.
Dozens of Swiss bankers and their clients have been indicted in recent years, following a 2009 agreement by UBS AG, the largest Swiss bank, to enter into a deferred-prosecution agreement, turn over 4,450 client names and pay a $780 million fine after admitting to criminal wrongdoing in selling tax-evasion services to wealthy Americans.
William Sharp, a tax lawyer in Tampa, Florida, with many U.S. clients of Swiss banks, said Wegelin’s plea “should serve as a wake-up call” to the world banking community servicing U.S. clients to takes steps to ensure compliance with U.S. law.
Sharp called Wegelin’s change of heart “shocking.”
Banks under U.S. criminal investigation in the wider probe include Credit Suisse, which disclosed last July it had received a target letter saying it was under a grand jury investigation.