Swiss Banker Pleads Guilty Days Before Trial In Fla.

Law360, Miami (April 2, 2015, 6:24 PM EDT) -- A Swiss banker and key witness in the United States' unsuccessful criminal prosecution of ex-UBS AG executive Raoul Weil pled guilty Wednesday in Florida federal court to charges of conspiring with U.S. clients to conceal assets and income from American tax authorities.

Hansruedi Schumacher, former head of the Swiss banking giant's cross-border division, was set to go on trial Monday in West Palm Beach on charges of conspiracy to defraud the United States. He had returned to the U.S. in October to face a 2009 indictment and appeared later that month as a prosecution witness in Weil's trial in in Fort Lauderdale, Florida under an agreement that his testimony could not be used against him in his case as long as it was truthful.

During several days of testimony in the Weil trial, Schumacher described in detail a culture of code words and discrete communications at the Swiss bank, saying it provided tax shelter for thousands of U.S. clients and even more around the world. Schumacher also described efforts to keep those hidden accounts running in the face of mounting pressure from the Internal Revenue Service as the offshore accounts became more popular with the rise of American stock markets during the Internet boom at the turn of the century.

“I knew what we were doing. Everyone [at UBS] knew what we were doing ... aiding U.S. clients to cheat on their taxes,” he testified.

Weil, who was once the third-highest-ranking executive at UBS, was ultimately acquitted by a jury on criminal charges that he hid the alleged massive tax conspiracy that provided offshore tax shelters to nearly 20,000 U.S. citizens with assets totaling $20 billion.

Weil's counsel suggested during cross-examination that Schumacher was testifying out of self-interest to try to ease the consequences of his own pending indictment in the conspiracy.

“You, as you sit here today, have not accepted any legal responsibility for all the crimes you committed at UBS,” said defense counsel Mathew I. Menchel of Kobre & Kim LLP.

Schumacher admitted he committed crimes but said some of the ideas came from others at the bank.

“I was put in charge of the dirty business,” he said.

Schumacher conceded he had manipulated legal advice he received in seeking “innovative solutions” from his subordinate client advisers, but he denied Menchel's assertion that a proposal he unsuccessfully pushed to the bank's top executives, including Weil, to remove its investment advisory business for U.S. clients to a separate entity that he would have led was fueled by the potential for him to earn huge amounts of money for himself.

A superseding information filed Thursday by prosecutors in Schumacher's case details allegations of his actions regarding two U.S. clients as part the conspiracy charges.

In 2003, Schumacher transferred funds for Jeffrey Chernick from UBS in Zurich, Switzerland, to Neue Zurcher Bank, a Zurich-based asset management firm, telling him that it would be beyond the reach of the U.S. government, according to the filing.

Chernick then fraudulently omitted income earned from offshore assets or stated that he did not have interest or authority over a foreign financial account when he filed his 2007 tax return, prosecutors said.

The information also alleges that in 2005 Schumacher and another co-conspirator advised an client identified only as “J.E.” to transfer her mother's assets into an account in the name of Schumacher's father to hide them from the IRS.

In 2005, J.E. transferred about $7 million into a fraudulent entity caller Klaerly-Stiftung, which Schumacher created but was purportedly owned by his father, the filing claims

And in 2007, Schumacher arranged $5,000 to be transported from Switzerland to John F. Kennedy Airport in New York for delivery to J.E., according to prosecutors.

Schumacher's attorney, Peter Raben, had no comment when reached by Law360 on Thursday.

In his testimony at the Weil trial, Schumacher recounted how he climbed from a checkered adolescence helping at his family's restaurant “in the hills above Zurich” to a stint at a Jesuit boarding school, where he improved his grades and earned an apprenticeship with Swiss Banking Corp.

It was there that he first met Weil, who served as his supervisor for about two years in New York and instructed him to consolidate the bank's American clients on three desks in Zurich, Geneva and Lugano. Both men retained their jobs when the smaller but more nimble and aggressive SBC merged with UBS in 1998-99, he said.

Schumacher entered his guilty plea before U.S. Magistrate Judge James M. Hopkins. A sentencing date will be set by U.S. District Court Judge Daniel T. K. Hurley.

The United States is represented by Mark F. Daly and Greg Tortella of the U.S. Department of Justice Tax Division and Jeffrey Adam Neiman of Marcus Neiman & Rashbaum LLP.

Schumacher is represented by Peter Raben.

The case is U.S. v. Schumacher et al., case number 0:09-cr-60210, in the U.S. District Court for the Southern District of Florida.

— Editing by Ben Guilfoy.

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