The U.S. loses about $100 billion annually due to offshore tax evasion, according to a Senate probe that is taking aim at Swiss bank UBS AG and Liechtenstein’s LGT Group for allegedly marketing tax-evasion strategies to wealthy Americans.
U.S. clients hold about 19,000 accounts at UBS, with an estimated $18 billion to $20 billion in assets, in Switzerland, according to the findings from the Senate probe and Justice Department prosecutors.
The findings by the Senate Permanent Subcommittee on Investigations come ahead of a hearing Thursday featuring testimony from senior officials from the Internal Revenue Service and the Justice Department related to investigations into alleged tax evasion.
The probe adds fuel to a burgeoning effort by tax authorities around the globe to shatter the veil of bank secrecy that tax havens hide behind in catering to the world’s elite.
Investigators weren’t able to obtain data about LGT, but said the IRS has identified at least 100 accounts with U.S. clients at the Liechtenstein bank.
Democratic Sen. Carl Levin, of Michigan, chairman of the subcommittee, is pushing legislation to tighten requirements that could force more disclosure by banks. “We are determined to tear down these walls of secrecy and to break through the iron rings of deception,” he said at a briefing Tuesday.
Documents highlighted in the Senate probe include one LGT memorandum that describes a client using accounts to move funds “to the USA and Panama and may be classified as bribes.”
An LGT spokesman said it provided information to the committee investigators, and characterizes as “dated” many of the documents.
The committee has subpoenaed several U.S. taxpayers, who, investigators say, maintained LGT accounts unknown to the IRS.
The four on the witness list are: Peter Lowy, of Beverly Hills, Calif., whose family controls Australian shopping-mall developer Westfield Group; Steven Greenfield, a toy importer from New York; Shannon Marsh, whose family owned a construction company in Fort Lauderdale, Fla.; and William Wu, of Forest Hills, N.Y.
According to documents cited in the investigation, the Lowy family once maintained through LGT a series of Liechtenstein-based foundations that in 2001 held $68 million in assets. The foundations are similar to trust accounts in U.S. and other jurisdictions. The Liechtenstein foundations were at the subject of a settlement between the Lowy family entity and Australian tax authorities more than a decade ago.
Attorneys for Messrs. Greenfield and Wu declined to comment. An attorney for Mr. Marsh didn’t return calls seeking comment.
Robert S. Bennett, an attorney for Mr. Lowy, said his client was traveling and couldn’t attend Thursday’s hearing. “The Lowy family has done nothing improper,” Mr. Bennett said, adding that the family believed the subcommittee report was a “rush to judgment.”
For investigators and prosecutors, the biggest break has come from testimony given by former employees of UBS and LGT. UBS banker Bradley Birkenfeld pleaded guilty June 19 to helping his U.S. clients evade taxes. He told U.S. prosecutors that the Swiss bank generates some $200 million a year in revenue from U.S. clients, prosecutors say.
Investigators also have been aided by information from Heinrich Kieber, a former employee of LGT, who has turned over account data to tax authorities in Germany, Australia, the U.S. and other nations.
The data have aided investigations in several countries; in Spain Tuesday, police raided offices of several financial firms accused by prosecutors of aiding rich Spanish citizens connect with bankers in Liechtenstein.
UBS is in talks with the IRS and Justice Department. Authorities are having a tougher time seeking help from Liechtenstein, which is clinging to its secrecy laws. UBS is sending a senior wealth-management official to testify; LGT declined to offer testimony Thursday, saying its client-secrecy laws would prevent any official from answering the questions senators have.
A UBS spokeswoman said the company continues to work with authorities to correct any improprieties found by the investigation.