Swiss authorities investigate bribery accusation in UBS tax case

July 29, 2009

By Oliver Hirt and Sven Egenter
ZURICH, July 29 (Reuters) – Swiss prosecutors said on Wednesday they are investigating allegations that an unnamed high-ranking Swiss official took a bribe from a U.S. client of UBS to help cover up tax fraud.

Federal prosecutors said in a statement the tax authority had filed charges against unknown persons which it was now investigating, without giving further details.

A U.S. client of the Swiss bank, which is at the centre of a U.S. tax fraud case, pleaded guilty on Tuesday to using Swiss bank accounts to hide money from the U.S. taxman and said he paid a Swiss official $45,000 to help cover up the fraud.

Swiss Finance Minister Hans-Rudolf Merz, who also holds the country’s rotating presidency, said the investigation should help clear up whether the allegations were “rumour or reality”.

“We don’t believe that this has happened but the testimony is so serious that we immediately got the law involved and we will let this be cleared up by the judiciary,” Merz told Swiss television.

Corruption is virtually unheard of in Switzerland, which is ranked as one of the five least corrupt countries in the world by Transparency International.

Jeffrey Chernick, a U.S. resident who admitted using secret Swiss accounts for tax fraud, said a lawyer persuaded him to use a well-connected former UBS banker to pay a Swiss government official to prevent disclosure of his accounts.

The banker joined a small Swiss bank that was not subject to U.S. scrutiny and Chernick agreed to invest some of his assets with the small bank, according to documents made public as Chernick entered his guilty plea in a Florida court.

Coming on the heels of the tax fraud case against UBS in the United States and amid global pressure on tax havens, the bribery case, if proven, has the potential to further damage the image of Swiss banking.

“It’s a catastrophe for the image of Switzerland, which, until now had a good reputation in the United States,” said a source close to the Geneva-based banking community.

“After the problems of UBS, they are going to start thinking that everything is rotten in Switzerland.”

The Swiss Banking Association declined to comment on the suspected bribery case.

The Swiss and U.S. governments are in talks to try to
settle out of court a civil tax fraud litigation against UBS.

The United States said on Wednesday no deal had been reached so far in talks with Swiss authorities and it expected a trial against UBS AG to go ahead as scheduled on Monday.

The UBS case is also expected to figure prominently in talks between U.S. Secretary of State Hillary Clinton and Swiss Foreign Minister Micheline Calmy-Rey on Friday.

Asked whether the bribery case would feature in those talks, a Swiss foreign ministry spokesman said the two would discuss “all current bilateral topics as well as international cooperation.”

(Additional Reporting by Lisa Jucca, Pascal Schmuck; Editing by David Cowell and Rupert Winchester)

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