Former UBS Client Must Give Tax Records to Grand Jury, Appeals Court Rules
By David Voreacos – Aug 23, 2011 12:01 AM ET
A former UBS AG (UBSN) client can’t assert his constitutional right against self-incrimination to avoid turning over his bank records to a U.S. grand jury, a federal appeals court ruled in a victory for prosecutors in their crackdown on offshore tax evasion.
The client, identified only as M.H., must produce records sought by a federal grand jury in San Diego, according to the U.S. Court of Appeals based in San Francisco. A three-judge panel rejected M.H.’s argument that the Constitution protects him from being a witness against himself, saying the Fifth Amendment privilege doesn’t cover records on foreign bank accounts.
“It’s a huge win for the government,” said tax attorney Ed Robbins of Hochman, Salkin, Rettig, Toscher & Perez in Beverly Hills, California, who isn’t involved in the case. “This ruling says that the government has the right to go to any taxpayer anywhere and say, ‘Give me your foreign bank records’ and they’d have no Fifth Amendment protection.”
Prosecutors seek information that M.H. must keep under the Bank Secrecy Act, asking for the name and number of each account, the name and address of each bank, and the maximum values of accounts, according to the Aug. 19 opinion. Such record-keeping requirements mean M.H. must comply, the appellate panel ruled.
“Because the records sought through the subpoena fall under the Required Records Doctrine, the Fifth Amendment privilege against self-incrimination is inapplicable, and M.H. may not invoke it to resist compliance with the subpoena’s command,” according to the panel.
Secret Swiss Accounts
The grand jury issued a subpoena in June 2010 to M.H., who is the target of an investigation into whether he used secret Swiss bank accounts to evade taxes, according to the ruling. He transferred securities from his UBS account in 2002 to a different Swiss bank, UEB Geneva, according to the ruling.
M.H. asserts the information being sought might conflict with what he previously told the IRS, according to the ruling.
“Production might reveal, for instance, that he has accounts he has not reported or that the information he has reported is inaccurate,” the panel ruled. “On the other hand, if M.H. denies having the records, he risks incriminating himself because failing to keep the information when required to do so is a felony.”
M.H. attorney Pamela Naughton of Sheppard, Mullin, Richter & Hampton LLP in San Diego didn’t return calls seeking comment.
Account Data Disclosed
UBS, the largest Swiss bank, was charged in 2009 with aiding tax evasion by U.S. clients. UBS avoided prosecution by paying $780 million, admitting it fostered tax evasion, and giving the IRS data on more than 250 accounts, including M.H.’s, according to the opinion. UBS later turned over data on another 4,450 accounts.
Since 2008, the U.S. has filed criminal tax charges against at least 34 former U.S. clients of Zurich-based UBS; Zurich- based Credit Suisse Group AG (CSGN); and London-based HSBC Holdings Plc (HSBA), Europe’s biggest bank. Most of those clients have pleaded guilty.
The U.S. also has charged at least 18 bankers, financial advisers and lawyers who aided clients at various Swiss banks.
The appellate panel upheld the ruling of a district court in the Southern District of California. Robbins said that he is fighting two similar cases in Fort Lauderdale, Florida, where he lost a ruling.
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