Switzerland, Luxembourg, Other Offshore Centers on Alert

Remember this name: Steven Michael Rubinstein.

Steven Michael Rubinstein, age 55, of Boca Raton, FL, a wealthy accountant at a yacht building company was the first US citizen to be arrested on 2 April 2009 for tax evasion, linked to the new war on tax havens. He is accused to have established an offshore corporation in the BVI to hide his identity as the beneficiary of an account at Swiss bank UBS, holding about $6 million. His trial in the US District Court of South Florida is scheduled for September 30, 2009. He has pleaded guilty and will pay a fine equal to 50% of the highest balance on the account. If convicted he faces total loss of his property and, up to five years in prison for tax evasion and three years for filing false tax returns. He is currently free on bail of $12 million.(1)

UBS, in the context of its assistance to that type of US client, paid a fine of $780 million. Earlier this year Raoul Weil, who was a senior executive at UBS was charged with conspiracy to hide $20 billion from thousands of US customers from the IRS. UBS, agreed to communicate a small number of names of their 52,000 US customers, thereby breaking Swiss secrecy laws. UBS and the Swiss Government are still fighting a US request to communicate the remaining 50,000(+) names.

Any offshore center should be aware that this latest episode is the end of banking secrecy and of the type of tax evasion it encouraged. A US citizen would be out of his mind to go that slippery slope from now on. Swiss banks actually too, and they shun the American client like fire. This development will not stay confined to the only Swiss and US parties. The operation is on its way, OECD providing the vehicle.

But the question remains for the existing client, still hiding from the tax man, and who gets caught in this storm. He is guilty of course, and will get caught. But what about the bank, which encouraged this, the jurisdiction which advertised the scheme and protected it by its own laws, supervision and regulations?

I would not be surprised to see legal actions from both sides: the US Government as it did already with UBS, and the clients who were falsely promised no taxes, secrecy, shelter and impunity. Those clients are mad as hell. Offshore centers beware!

Egide Thein
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(1) http://www.usdoj.gov/usao/fls/PressReleases/Attachments/090402-01.ComplaintAndAffidavit.pdf