Witness sheds light on hiding assets

US panel delves into practices of foreign banks

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Associated Press / July 18, 2008

WASHINGTON - A man wanted by Liechtenstein for leaking secret banking information that identified millionaire tax cheats across Europe and the United States has described to congressional investigators how money was concealed.

Lawmakers played a videotape of the testimony by Heinrich Kieber at a congressional hearing yesterday that revealed rare details of offshore practices at two European banks. At the hearing, Swiss banking giant UBS AG said that because of recent revelations, it will stop offering US clients offshore services through branches based abroad.

Kieber appeared only as a silhouette against a white screen with eyeglasses and a balding head apparent. Kieber is living under a new name in an undisclosed witness protection program, according to lawmakers. He has never spoken publicly about his role in exposing tax shelters he says were used by Liechtenstein's LGT group.

In the taped interview with the congressional investigators, he described ruses that he saw while at the bank, which he said were used to cover the tracks of money moved into accounts.

The hearing by the Senate Homeland Security and Governmental Affairs investigations subcommittee highlighted offshore tax abuses that they believe cost the US government about $100 billion a year.

The hearing came a day after the panel released a 109-page report that took aim at LGT, owned by Liechtenstein's royal family, and UBS, one the world's largest wealth managers.

Mark Branson, chief financial officer of UBS's global wealth management, said at the hearing that the bank regrets "any compliance failures that may have occurred" and will now provide banking or security services to US citizens only through companies licensed in the United States. He said the bank also is working with US authorities to identify clients involved in tax fraud.

LGT refused to send a representative but said in a statement that it had cooperated by sending a senior official for a lengthy interview and providing all the documents requested by the panel.

Both LGT and UBS came under withering criticism from lawmakers.

UBS has said it is cooperating with a Swiss investigation as well as an expanding US probe of taxpayers who may have used overseas accounts to hide assets and avoid taxes. UBS has promised to disclose records involving US clients who might have broken tax laws. It also has banned its Swiss bankers from traveling to the United States.

US authorities also have asked the Swiss government to help in the investigation.

The subcommittee report said that UBS bankers searched out wealthy clients and aggressively marketed services to taxpayers who otherwise would not have opened Swiss accounts. It said the bank's practices resulted in billions of dollars of US taxpayer money in accounts that were not disclosed to tax authorities. The report said UBS has estimated that it has 1,000 declared accounts in Switzerland for US clients against 19,000 undeclared, with a combined value of $17.9 billion.

Investigations linked to LGT have been launched in a number of countries since German authorities obtained in February the CD-ROM of some 1,400 alleged tax cheats with accounts at the bank that Liechtenstein says Kieber leaked. Germany has since passed the file to other countries, including the United States.

In his videotaped testimony, Kieber described shell companies used as "high grade camouflage." Money was often transferred through bank-controlled legal entities registered in numerous countries with lax regulations, including Panama, the British Virgin Islands, and Nigeria, he said.

Additional concealment was provided by fake transactions designed to make it look like clients had withdrawn cash from a bank, when in reality they were credited into a LGT account.

"The only purpose of all of this is to make it extremely complicated for law enforcement agencies to follow the trail, as each step serves as a filter to hide the track of the client's money," he said.

He said that clients were advised how to avoid scrutiny, including not telling anyone including lawyers and family members about hidden money. Clients were also encouraged to use pay phones to contact bank representatives on cellphones from Switzerland and Austria and to use code words in communications.

LGT questions Kieber's objectivity and accuses him of stealing information, according to a bank spokesman. It says that much of the information that Kieber provided involves records going back to the 1970s and 1980s.

"LGT's practices were consistent with accepted industry standards of the time and do not reflect the way in which LGT conducts business today," he said.

UBS executive Mark Branson told a congressional panel the bank regrets 'any compliance failures' that allowed US taxpayers to hide assets overseas.

UBS position

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