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January 4, 2013updated 04 Apr 2017 3:30pm

Wegelin to close after conspiracy guilty plea

Switzerland’s oldest bank, Wegelin & Co, is closing down after pleading guilty to conspiracy to evade tax in front of a New York court.

By Elsa Buchanan

Switzerland’s oldest bank, Wegelin & Co, is closing down after pleading guilty to conspiracy to evade tax in front of a New York court.

The bank, founded in 1741, admitted charges of conspiracy in helping more than 100 US taxpayers avoid paying up taxes to the Internal Revenue Service (IRS) on up to $1.2bn held in offshore accounts, for almost a decade.

Under the terms of the plea agreement, Wegelin admitted that between 2002 and 2010 it violated US law by opening and maintaining bank accounts for US taxpayers.


Bank "knew it was wrong"

Wegelin managing partner Otto Bruderer admitted that the bank knew that certain US taxpayers were maintaining non W9-accounts at [the bank] in order to evade their tax obligations, in violation of US law.

W9-accounts are mandatory tax forms that report a taxpayer’s income and provide the name, address, filing status and social security number of the taxpayer.

"Despite being aware of [the] legal duty [to report to the IRS], Wegelin intentionally opened and maintained non W9-accounts for these taxpayers with the knowledge that by doing so, Wegelin was assisting [them], in violating their legal duty," said Bruderer in front of the court, and added, "Wegelin was aware that this conduct was wrong."

After the plea, the bank stated, "Once the matter is finally concluded, Wegelin will cease to operate as a bank."


Pay outs of $57.8m

According to documents issued by the US Attorney of the Southern District of New York, the federal court "charged Wegelin with conspiracy to defraud the IRS, file false federal income reserve tax returns and evade federal income taxes".

The Swiss bank agreed to pay $57.8m that is comprised of restitution for lost taxes ($20m), forfeiture of gross revenues attributable to the bank’s business with US clients ($15.8m), and a $22m fine.

Wegelin was also required to "ensure the safe-keeping of US client data pending further instruction from competent Swiss authorities", according a statement released by the bank following the court order on 3 January.

The bank refused further comment when contacted by PBI.


Fictitious accounts allegedly created

The closure comes almost a year after three Wegelin bankers and one managing partner were charged in the alleged scheme, a week before the bank made a deal with Raiffensen Switzerland and transferred a majority of its clients and staff to Notenstein Private Bank in January 2012.

A week later, in February 2012, the bank was charged with conspiracy to evade tax by the US authorities when prosecutors alleged Wegelin created fictitious foundations and code names for the accounts to hide US tax evader’s true identities.


A long-running investigation

This is the first guilty plea by a non-US bank since 2009 when the US government boosted its effort to hold banks and individuals accountable for tax evasion.

US authorities are investigating other Swiss banks, including Credit Suisse and Julius Baer, for alleged the same reasons.

The guilty plea comes four years after Swiss bank UBS admitted helping US taxpayers evade tax, was fined $780m and agreed to turn over the names of 4,450 clients following the charges.

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