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Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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Speaker 1: day we bring you insight and analysis into the most

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Speaker 1: important legal news of the day. You can find more

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Speaker 1: episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud

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Speaker 1: and on Bloomberg dot com slash podcasts. UBS has been

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Speaker 1: ordered to pay a record five point one billion dollars

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Speaker 1: after a Paris court found the bank guilty of helping

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Speaker 1: wealthy French clients stash funds in undeclared Swiss accounts safe

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Speaker 1: from tax collectors. Joining me is Peter Handing, a professor

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Speaker 1: at Wayne State University Law School. Peter some of the

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Speaker 1: allegations seem pretty outrageous, for example, that UBS bankers help

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Speaker 1: launder funds by returning to France with wads of cash

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Speaker 1: for clients with undeclared Swiss accounts. Tell us more about

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Speaker 1: the case, Well, Ubs back when it's settled with the

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Speaker 1: United States back in two thousand nine, said we're out

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Speaker 1: of the business of hiding accounts, and apparently they're not,

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Speaker 1: and so, um, you know, that's one of the more

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Speaker 1: salacious aspects of this that you know, they were willing

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Speaker 1: to trade cash, but that's not really anything new when

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Speaker 1: you're trying to hide money from the tax collector, that

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Speaker 1: you have to stay off of um the grid. You're

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Speaker 1: not going to send a bank wire, You're gonna deal

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Speaker 1: in cash UM coming and going. And so what this

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Speaker 1: does show is that maybe UBS has not really reformed

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Speaker 1: itself all that much and is still willing to help

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Speaker 1: hide assets and keep them away from the tax collector.

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Speaker 1: The fine here was more than twice as much as

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Speaker 1: the heaviest fine imposed by US, British and Swiss regulators

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Speaker 1: against Swiss banks. It's about five times the amount expected

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Speaker 1: in estimates. Is the court sending a message in the

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Speaker 1: French crackdown on tax fraud. Oh, I certainly think that's

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Speaker 1: what's going on here, that now it's not just France

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Speaker 1: but also Germany and other European countries are tired of

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Speaker 1: seeing assets shifted over into Switzerland and hidden. And so

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Speaker 1: I think the real goal here by the French court

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Speaker 1: was to send a message that, um, you know, if

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Speaker 1: you take this case to trial and we find a violation,

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Speaker 1: you're really going to pay. And that may send a

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Speaker 1: message to other Swiss banks that come in and settle,

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Speaker 1: make a payment and put this behind you. And get

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Speaker 1: it over with. But Ubs is the one that has

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Speaker 1: really taken it in the nose here and now whether

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Speaker 1: their appeal will be successful they vowed an appeal, but

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Speaker 1: whether they're able to convince a higher French court to

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Speaker 1: overturn this kind of a penalty, I think it's really

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Speaker 1: an open question at this point. And they rejected and

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Speaker 1: out of court settlement reportedly of one point one billion

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Speaker 1: euros as two price e. So you mentioned an appeal,

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Speaker 1: they said they're going to appeal, and they said that

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Speaker 1: this was the case was driven by French prejudice against

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Speaker 1: Swiss tax practices, and there was no wrongdoing. In the

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Speaker 1: first three weeks of the trial, everything seemed to be

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Speaker 1: going well for UBS, but then the judge began to

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Speaker 1: clash with the bank officials defense counsel. She told defendants

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Speaker 1: she didn't buy their explanations and even yelled at one point.

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Speaker 1: Can that be used to UBS's advantage and an appeal, Well,

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Speaker 1: it might be, but my my bet is that the

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Speaker 1: French government is not supportive of tax evasion, and so

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Speaker 1: the concern that the Swiss banks are helping people hide

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Speaker 1: and there was quite a bit of testimony about how

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Speaker 1: they want about doing that, especially with the five individuals

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Speaker 1: who were convicted that I don't know how much weight

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Speaker 1: that's going to carry, UM in any kind of an appeal.

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Speaker 1: Because the judge is allowed to assess the credibility of

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Speaker 1: the witnesses and finding that witnesses are presenting something a

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Speaker 1: bit on the fantastical side, um, it isn't going to

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Speaker 1: play well in any courtroom, whether you're talking about the

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Speaker 1: United States, France, Germany or any place. So I don't

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Speaker 1: know how much weight that is ultimately going to carry

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Speaker 1: in UBS as appeal. I think they're greater hope is

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Speaker 1: that the penalties and fine here are excessive, and whether

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Speaker 1: they are or not really is going to be an

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Speaker 1: open question. As as you mentioned, six former top UBS

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Speaker 1: managers were also on trial in the case. Five were convicted,

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Speaker 1: one was cleared. What stood out in the testimony and

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Speaker 1: did you see the line for why why one was acquitted?

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Speaker 1: It's not clear why one was acquitted, although I suspect

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Speaker 1: it was someone who was lowered down in the chain.

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Speaker 1: But you'll you'll note here that the penalties in this case,

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Speaker 1: all of the prison sentences were suspended for the individual defendants,

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Speaker 1: which is not something you would likely see in the

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Speaker 1: United States prosecution that prosecutors typically would ask for at

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Speaker 1: least some prison time for defendants who violate the tax laws.

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Speaker 1: So there were penalties imposed on the individual defendants. But

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Speaker 1: I really do think this is more a reflection of

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Speaker 1: what we see in the European system where um criminal

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Speaker 1: punishment sending someone to prison is much less likely for

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Speaker 1: this type of a white collar crime. So we we

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Speaker 1: mentioned that there is a crackdown on tax fraud in Switzerland.

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Speaker 1: Is UBS seen as just part of the of the

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Speaker 1: way the banks operate or operating there, or it stand

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Speaker 1: out well. I think UBS had hoped that it had

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Speaker 1: turned a cornerback when it settled with the United States

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Speaker 1: almost ten years ago, but now it is really a

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Speaker 1: question of have they mended their ways because one of

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Speaker 1: the more lucrative areas in banking, especially for the Swiss banks,

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Speaker 1: has been wealth management, and um wealth management might be

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Speaker 1: a different label for tax evasion, and so has UBS

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Speaker 1: Have they really changed their stripes or are they continuing

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Speaker 1: to do what they did before, which was helped people

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Speaker 1: avoid paying taxes by hiding their assets. Uh, this is

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Speaker 1: certainly a blow to UBS, and so I think it

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Speaker 1: will also send a message to the other Swiss banks

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Speaker 1: that don't do this. We are watching you, and we're

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Speaker 1: going to make our best efforts to ensure that you're

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Speaker 1: not allowed to help our citizens hide their as Thank

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Speaker 1: you so much, Peter. As always, that's Peter Handing, a

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Speaker 1: professor at Wayne State University Law School. Thanks for listening

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Speaker 1: to the Bloomberg Law Podcast. You can subscribe and listen

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Speaker 1: to the show on Apple podcast, SoundCloud, and on Bloomberg

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Speaker 1: dot com slash podcast. I'm June Brosso. This is Bloomberg