Polanski arrest serves as warning to Swiss bankers

 

The arrest of fugitive film director Roman Polanski by Swiss authorities on U.S. charges serves as a warning to bankers indicted for helping Americans evade U.S. taxes: be careful where you travel.

From the UBS AG tax case, U.S. prosecutors so far have charged four foreigners with aiding Americans hide money overseas - including the former head of the Swiss banking firm's wealth management section Raoul Weil - but none have been arrested because they are outside the U.S. reach.

These tax crimes are not covered under an extradition treaty between the United States and Switzerland, making it a safe haven as the Obama administration tries to crack down on the billions of dollars believed to be hidden overseas.

But many other countries are stricter on tax crimes and the four could face arrest if they left Switzerland.

"They're basically prisoners in their own country" said Peter Zeidenberg, a former federal prosecutor and now a partner at DLA Piper. "They're going to be spending the rest of their lives scrutinizing the extradition treaties of every place they want to travel."

Polanski was arrested in Switzerland after fleeing the United States in 1978 to avoid sentencing in an underage sex case. Despite not including most tax crimes, the U.S.-Swiss extradition pact could apply to Polanski but it might take years of legal battles to bring him to the United States.

"Be careful where you travel is one important message of the Polanski case" said Alexander Greenawalt, an international law professor at Pace Law School in New York. But he noted that there is some discretion enforcing such arrest warrants.

"In theory you could travel to a country that might be dangerous for you" he said. "If the authorities are not going through the right procedures or not pursuing the case, you might still be safe." 

BANKER INDICTED

In the tax case, prosecutors have also indicted Swiss banker Hansruedi Schumacher, who once worked for UBS but moved to Neue Zuercher Bank where he allegedly encouraged American clients to switch their accounts to his new employer because it would likely avoid U.S. scrutiny.

Schumacher was quickly fired by NZB after he was indicted in August. The bank also shut down its private banking business for U.S. customers earlier this year.

Also charged was Swiss lawyer Matthias Rickenbach who was accused of working with Schumacher to provide legal advice to his clients, allegedly advising them that because NZB did not have U.S. operations it would be less likely to receive pressure from the United States to reveal those accounts.

"The DOJ has shown time and again that it is going to be much more aggressive than it has been in the past going after these cases" said Glen Donath, a former prosecutor now a partner at Sonnenschein Nath and Rosenthal LLP.

The U.S. Internal Revenue Service has given Americans until October 15 to come clean about any assets they hold overseas or face criminal prosecution. Already the IRS has granted one extension but has insisted it would be the only one.

Adding pressure for Americans to come forward is an August deal by the Swiss and U.S. governments to have UBS turn over 4,450 accounts of Americans to U.S. tax authorities.

As a result scores have come forward to disclose their holdings stashed in foreign bank accounts but the trickier endeavor for the Obama administration will be prosecuting those who helped them set up the accounts in the first place.

"It can be a very lengthy and difficult process to get someone back to the United States for prosecution" Zeidenberg said. "On the other hand, it's not exactly a picnic for the person on the other end." 

Experts also noted that in addition to being trapped in potentially a handful of countries that do not have extradition treaties for the related tax crimes, being charged by the United States would also likely hinder their ability to work as well as tarnish their own personal reputation.

"The reality is it makes life complicated, difficult and unpleasant" said Donath.