Swiss bank Wegelin to close after guilty plea

Updated 04 January 2013
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Swiss bank Wegelin to close after guilty plea

NEW YORK: Wegelin & Co., the oldest Swiss private bank, said on Thursday it would shut its doors permanently after more than 2 1/2 centuries, following its guilty plea to charges of helping wealthy Americans evade taxes through secret accounts.
The plea, in US District Court in Manhattan, marks the death knell for one of Switzerland's most storied banks, whose original European clients pre-date the American Revolution. It is also potentially a major turning point in a battle by US authorities against Swiss bank secrecy.
A major question was left hanging by the plea: Has the bank turned over, or does it plan to disclose, names of American clients to US authorities? That is a key demand in a broad U.S. investigation of tax evasion through Swiss banks.
"It is unclear whether the bank was required to turn over American client names who held secret Swiss bank accounts," said Jeffrey Neiman, a former federal prosecutor involved in other Swiss bank investigations who is now in private law practice in Fort Lauderdale, Florida.
"What is clear is that the Justice Department is aggressively pursuing foreign banks who have helped Americans commit overseas tax evasion," he said.
Charles Miller, a Justice Department spokesman, declined to comment immediately.
Wegelin admitted to charges of conspiracy in helping Americans evade taxes on at least $ 1.2 billion for nearly a decade. Wegelin agreed to pay $ 57.8 million to the United States in restitution and fines.
Otto Bruderer, a managing partner at the bank, said in court that "Wegelin was aware that this conduct was wrong."
He said that "from about 2002 through about 2010, Wegelin agreed with certain US taxpayers to evade the US tax obligations of these U.S. taxpayer clients, who filed false tax returns with the IRS."
When Wegelin last February became the first foreign bank in recent memory to be indicted by US authorities, it vowed to resist the charges. The bank, founded in 1741, was declared a fugitive from justice when its Swiss-based executives failed to appear in US court.
The surprise plea effectively ended the US case against Wegelin, one of the most aggressive bank crackdowns in US history.
"Once the matter is finally concluded, Wegelin will cease to operate as a bank," Wegelin said in a statement on Thursday from its headquarters in the remote, small town of St. Gallen next to the Appenzell Alps near the German-Austrian border.
But the fate of three Wegelin bankers, indicted in January 2012 on charges later modified to include the bank, remains up in the air. Under criminal procedural rules, the cases of the three bankers - Michael Berlinka, Urs Frei and Roger Keller - are still pending.,
Although Wegelin had about a dozen branches, all in Switzerland, at the time of its indictment, it moved quickly to wind down its business, partly through a sale of its non-US assets to regional Swiss bank Raiffeisen Gruppe.
A corporate indictment can be a death knell. In 2002, accounting firm Arthur Andersen went out of business after being found guilty over its role in failed energy company Enron Corp. A 2005 Supreme Court ruling later overturned the conviction, but it was too late to save the company.
Wegelin, a partnership of Swiss private bankers, was already a shadow of its former self - it effectively broke itself up following the indictment last year by selling the non-US portion of its business.
Dozens of Swiss bankers and their clients have been indicted in recent years, following a 2009 agreement by UBS AG, the largest Swiss bank, to enter into a deferred-prosecution agreement, turn over 4,450 client names and pay a $ 780 million fine after admitting to criminal wrongdoing in selling tax-evasion services to wealthy Americans.
William Sharp, a tax lawyer in Tampa, Florida, with many US clients of Swiss banks, said Wegelin's plea "should serve as a wake-up call" to the world banking community servicing US clients to takes steps to ensure compliance with US law.
Sharp called Wegelin's change of heart "shocking."
Banks under US criminal investigation in the wider probe include Credit Suisse, which disclosed last July it had received a target letter saying it was under a grand jury investigation.
Zurich-based Julius Baer and some cantonal, or regional, banks are also under scrutiny, sources familiar with the probes previously told Reuters. So are UK-based HSBC Holdings and three Israeli banks, Hapoalim, Mizrahi-Tefahot Bank Ltd. and Bank Leumi, sources also said previously.
Those banks have not commented on the inquiries.
In a statement after the plea, Assistant US Attorney General Kathryn Keneally said it was a top Justice Department priority "to find those who continue to shirk their tax obligations," as well as those who help them and profit from it.
"The best deal now for these folks is to come in and 'get right' with the IRS, before either the IRS or the Justice Department finds them," she said.
Under its plea, Wegelin agreed to pay the $ 20 million in restitution to the IRS as well a civil forfeiture of $ 15.8 million, the Justice Department said.
Wegelin also agreed to pay an additional $ 22.05 million fine, the Justice Department said. US District Judge Jed Rakoff, who must approve the monetary penalties, set a hearing in the case for March 4 for sentencing.
Last year, the US government separately seized more than $ 16 million of Wegelin funds in a UBS AG account in Stamford, Connecticut, via a civil forfeiture complaint.
Since Wegelin has no branches outside Switzerland, it used UBS for correspondent banking services, a standard industry practice, to handle money for US-based clients.
In court papers, Bruderer said that Wegelin "believed it would not be prosecuted in the United States for this conduct because it had no branches or offices in the United States and because of its understanding that it acted in accordance with, and not in violation of, Swiss law and that such conduct was common in the Swiss banking industry."


Microsoft beats Wall Street targets on cloud services revenue

A Microsoft logo is seen in Los Angeles, California US, in this November 7, 2017 photo. (REUTERS)
Updated 20 July 2018
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Microsoft beats Wall Street targets on cloud services revenue

  • Revenue for the company’s LinkedIn business and job network grew 37 percent from the year-ago quarter, while its Dynamics 365 online business application suite posted a 61 percent increase
  • Net income rose to $8.87 billion, or $1.14 per share, from $8.07 billion, or $1.03 per share, in the year-ago fourth quarter

NEW YORK: Microsoft Corp. on Thursday posted quarterly profit and revenue that beat analysts’ estimates, as more businesses signed up for its Azure cloud computing services and Office 365 productivity suite.
The company’s flagship Azure cloud product recorded revenue growth of 89 percent in the fourth quarter ended June 30. Its shares rose nearly 4 percent in after-hours trading.
Much of Microsoft’s recent growth has been fueled by its cloud computing business, which has benefited from companies rushing to shift their workloads to the cloud to cut data storage and software costs.
“The combination of the cloud, which is a megatrend that’s going to last for years to come, and the execution, this is company that knows how to sell and be innovative — it’s hard to argue with anything here,” said Tom Taulli, InvestorPlace.com analyst.
Microsoft shares have risen 180 percent since Satya Nadella took over as chief executive in 2014, refocusing the company on cloud computing rather than PC software. Its market cap edged above $800 billion for the first time earlier this month.
Azure has a 16 percent share of the global cloud infrastructure market, making it the second-biggest provider of cloud services after Amazon.com Inc’s Amazon Web Services, according to April estimates by research firm Canalys.
Revenue at Microsoft’s productivity and business processes unit, which includes Office 365, rose 13.1 percent to $9.67 billion, topping analysts’ average expectation of $9.65 billion, according to Thomson Reuters I/B/E/S.
“This was another gem of a quarter from Microsoft as Nadella’s cloud vision is coming to fruit on the heels of massive Azure growth and secular tailwinds,” said Daniel Ives at research firm GBH Insights.
Revenue for the company’s LinkedIn business and job network grew 37 percent from the year-ago quarter, while its Dynamics 365 online business application suite posted a 61 percent increase.
The combination of those two services highlights Microsoft’s rise as an alternative to Salesforce.com Inc, which dominates the customer relationship management market, said Johnny Won, founder of Hyperstop, a tech consultancy firm.
“It seems like this is actually a formidable threat to Salesforce,” Won said.
Overall, the Redmond, Washington-based software maker’s revenue rose 17.5 percent to $30.09 billion, above expectations of $29.21 billion.
Net income rose to $8.87 billion, or $1.14 per share, from $8.07 billion, or $1.03 per share, in the year-ago fourth quarter. https://bit.ly/2uOF9W1
Excluding certain items, Microsoft earned $1.13 per share, while analysts had expected $1.08.