Graft: Laundromat Royale

It sounded like the plot of an action thriller. A US Senate subcommittee held hearings last Thursday on how UBS/Switzerland, the world’s largest private bank, and LGT (Liechtenstein Global Trust), owned by the royal family of that micro-tax-haven state, organised complex tax evasion schemes for US clients, and used spy-type tactics to avoid being detected.

LGT bankers allegedly used code names and public phones instead of making calls that could be traced. UBS agents carried encrypted laptops and business cards that didn’t mention they were in the “wealth management” division. According to testimony and records, both banks took care to disguise their activities because moving and hiding the money of tax evaders and other criminals is very lucrative, bringing hundreds of millions of dollars in profits.

The Senate Permanent Subcommittee on Investigations had impeccable inside sources. One was Heinrich Kieber, who worked for LGT for two years, collected 12,000 pages of incriminating documents, including 1,400 names, on DVDs, and made them available to eight western countries, including the US. He is now in a witness protection programme with a secret identity and new name, hiding from a Liechtenstein international arrest warrant and 10-million-dollar bounty.

The other was Bradley Birkenfeld, a former UBS banker who was arrested for helping a US real estate mogul cheat on taxes and agreed to talk to get a lighter punishment. Kieber appeared via a videotape that disguised his voice and appearance; it was the first time he has talked to the public. In 2002, Kieber had been assigned to scan and index all the documents of LGT Trust. As he read them, he was appalled. He said LGT helped not only tax evaders but facilitated corruption, links to dictators, and business deals to avoid a US embargo.

He described how the system worked. He said LGT set up foundations and other entities into which clients transferred securities and cash (now over 99 billion dollars) and also real estate, paintings, and even patents. To block paper trails, it established “special purpose vehicles” (SPVs), either bank accounts or shell companies that owned and controlled accounts and were never registered in Liechtenstein, but in Panama, the British Virgin Islands, or sometimes Nigeria.

Kieber explained that LGT would transfer a client’s assets out of the US through a country such as Canada, which would not raise tax authority suspicions. Then it would move through countries with weak or non-existing compliance laws and then through a Swiss bank such as the Banca del Gottardo in Lugano.

Sen. Carl Levin, who chairs the subcommittee, said he had proposed a law that would “attack tax havens head on.” He said the Stop Tax Haven Abuse Act would create the presumption that a US taxpayer who forms an entity in an offshore secrecy jurisdiction or who sends assets to or receives assets from an entity in a tax haven is liable for the income tax on those assets. The person would have to refute that presumption with evidence.

He said, “They’re not going to be able to go to that (Grand Caymans) building that’s got tens of thousands of name plates with phony corporations without violating our tax laws. We have

to take on that building in the Caymans and places around the world.” — IPS