It looked like it was business as usual for President Barack Obama on the first day of his Martha's Vineyard vacation, as he spent five hours golfing with Robert Wolf, president of UBS Investment Bank and chairman and CEO of UBS Group Americas. Wolf, an early financial backer of Obama's presidential campaign, raised $250,000 for him back in 2006, and in February was appointed by the president to the White House's Economic Recovery Advisory Board. Economic recovery for whom?
Interestingly, Wolf's appointment came in the same month that UBS agreed to pay the U.S. $780 million to settle civil and criminal charges related to helping people in the U.S. avoid taxes. Not to worry. UBS, an ailing bank with a pre-existing condition, had great insurance coverage. It was actually receiving $2.5 billion in a backdoor bailout from bailed-out insurance giant AIG. Sen. Olympia Snowe, R-Maine, said, "It looks like we're simply laundering this money through AIG." UBS, this bank that shelters wealthy tax dodgers, was actually being bailed out by hardworking U.S. taxpayers.
UBS, which once stood for Union Bank of Switzerland, was founded more than a century ago. Its success hinges on Switzerland's famous banking secrecy laws, allowing people to squirrel money away in untraceable "numbered accounts." Secret Swiss bank accounts have become a favorite way for wealthy people in the U.S. to dodge taxes. According to the U.S. Senate's Permanent Subcommittee on Investigations, in a July 2008 report, "From at least 2000 to 2007, UBS made a concerted effort to open accounts in Switzerland for wealthy U.S. clients, employing practices that could facilitate, and have resulted in, tax evasion by U.S. clients."
As part of the settlement, UBS agreed to share client account information with the U.S. government. While there may be as many as 52,000 such accounts, UBS is releasing only about 4,450 client names. Internal Revenue Service Commissioner Doug Shulman said in a press release, "We will be receiving an unprecedented amount of information on taxpayers who have evaded their tax obligation by hiding money offshore at UBS." UBS will be sending account holders notification that their names may be among those delivered to the IRS, and the IRS, in turn, is granting leniency to tax dodgers who turn themselves in before Sept. 23. Account holders won't know if their names are included, though, so gamblers among them may keep quiet and hope their accounts stay secret.
Last Friday, as Wolf was preparing for his golf game with Obama, UBS whistle-blower Bradley Birkenfeld was sentenced to 40 months in prison for facilitating offshore tax evasion through UBS banking schemes, despite assisting federal investigators in exposing the secretive bank.
Above the entrance to UBS' headquarters in Zurich is a bust of the Greek god Hermes--not only the fleet-footed messenger of the gods, but also the god of thieves and merchants. The symbolism is striking. Whether or not Wolf won his golf game against Obama, UBS has clearly scored a hole in one.
Denis Moynihan contributed research to this column.