labels: Banks general
US tax-fraud settlement adds $1.2 billion more to UBS losses for 2008 news
12 March 2009

Switzerland's largest bank, UBS yesterday said that it lost $1.2 billion more than declared earlier because of its settlement with US authorities under charges for facilitating tax evasion by its American customers through the use of offshore tax havens as well as a write-down on securities being transferred to the Swiss National Bank.

In February the Geneva-based bank had made Swiss corporate history by losing record  19.7 billion Swiss francs after running up a further net loss of 8.1 billion Swiss francs in the final quarter of last year, including 3.7 billion Swiss francs in exposures to toxic assets. (See: $27-billion Q4 loss compels UBS to slash 2,200 investment-banking positions)

Yesterday, it declared a 20.9 billion Swiss franc ($18 billion) loss for 2008, $1.2 billion more than earlier reported, and warned that it was still exposed to illiquid and volatile markets and will remain ''extremely cautious'' for this year.

A major part of the additional $1.2 billion loss was due to the $780 million settlement it made with the US authorities over charges of UBS employees helping wealthy Americans to conceal their ownership of assets held offshore by creating bogus entities and then filing IRS forms falsely claiming the entities owned the accounts.

But it is still facing a lawsuit in the Miami federal court to disclose the names of as many as 52,000 Americans who evaded paying tax in the US by not disclosing their accounts that held cash and securities in secret accounts in UBS. (See: US justice dept hauls UBS to court to force disclosures)

The rest of the additional losses came from write-downs on securities not yet transferred to the Swiss National Bank Fund, which was created by the Swiss government to remove toxic assets from the banks balance sheet.

After reporting huge losses and under the scanner for breaking several laws and accused of frauds in the US, (See: New York attorney general charges UBS with securities fraud)  UBS hired Gruebel, the former head of rival Credit Suisse Group AG, to ward off the US authorities and restore customer confidence.

The current financial crisis saw UBS raising more than $32 billion in capital from Swiss authorities and / or outside investors, including the Qatar Investment Authority. (See: Credit Suisse rescues itself, UBS gets funds infusion)

In December, UBS agreed to sell its agricultural and Canadian energy-commodities units to JPMorgan Chase & Co and in January announced that it was selling parts of its commodities business to Barclays Bank PLC.

To make matters worse for the bank, its clients from the money-managing units withdrew 226 billion francs from the bank in 2008.

Newly appointed CEO Oswald Gruebel and outgoing chairman Peter Kurer said in the annual financial report that "Our near-term outlook remains extremely cautious. For 2009, we will continue to implement our program to strengthen our financial position by reducing our risk positions, our overall balance sheet size and our operating costs."

The UBS annual report on the pay packages awarded to board members and executives showed chairman Peter Kurer received 1.57 million francs towards pay and pension benefits for the eight months.

Independent board member, David Sidwell, chairman of the risk committee, and Sergio Marchionne, the senior independent director, each received 775,000 francs.

Former CEO Marcel Rohner was paid 1.81 billion francs for 2008 while Jerker Johansson chairman and CEO of the group's investment bank and Markus Diethelm, group general counsel, collectively received 10.7 million francs in shares and 370,000 francs in cash.

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US tax-fraud settlement adds $1.2 billion more to UBS losses for 2008