The names of American UBS AG clients who've hidden money overseas to avoid paying millions taxes has begun to trickle in. But the details of just how far UBS went to encourage its clients to hide income in foreign bank accounts are also emerging.
As the Wall Street Journal reports, UBS pushed its clients to use Hong Kong's lax regulatory environment to set up shell companies in order to skip out on millions in tax liabilities. Here's the Journal:
"Hong Kong, of course, can be used as a legitimate tax-planning jurisdiction and gateway to mainland China. But tax lawyers say the former British colony's corporate legal system allows structures to be assembled with ease, mirroring in many ways how corporations are formed in the U.S. or Europe. These lawyers say the IRS might also face challenges investigating corporations set up in Hong Kong, which has come under fire in the past for not sharing tax information with other jurisdictions."
Yesterday, news surfaced that John McCarthy of Malibu, California, the fourth person charged in the UBS investigation, plead guilty to shifting more than $1 million from his Los Angeles company into an account in Hong Kong. From there, McCarthy moved the funds into a Swiss UBS account.
Bloomberg reports that, according to McCarthy's plea agreement, while banking with UBS in the Cayman Islands, UBS bankers told him: "a lot of United States' clients don't report their income and just take it off the top."
UBS has cooperated with the U.S. Department of Justice, and has said that some 250 names of U.S. clients will be released in coming weeks. McCarthy's tax evasion began in 2003, but he had some serious help and encouragement from UBS employees, who reportedly pushed him to set up fake foundations in far-flung locales. Here's Bloomberg's report:
"McCarthy...met with UBS bankers and his Swiss lawyers over the next five years [From 2003 on] to discuss UBS accounts, the agreement said. His Swiss lawyer advised him to set up a Liechtenstein foundation or a Panamanian or Hong Kong corporation to "create an extra layer of privacy" and help hide his identity, according to the plea agreement. "