The Swiss bank UBS AG was summoned before the court in connection with the case of Bernard Madoff. This was done by the initiative of the bankruptcy trustee Irving Picard, liquidating Bernard L.Madoff Investment Securities LLC. There were already two lawsuits against UBS AG lost by French bank BNP Paribas SA, which tried to force the bank to release 2.5 mln euros ($3.1 mln) invested with two Madoff-linked funds.
Currently, the bankruptcy trustee seeks information about the accounts of the arrested manager at UBS, as well as information about UBS accounts held by several Madoff feeder funds (some of them registered in the British Virgin Islands), and banks. The representatives of the Swiss bank complied with the third-party lawsuit. The subpoena for documents to UBS was issued March 17, just some days after Madoff pleaded guilty. One of companies in the UBS subpoena is British Virgin Islands company Plaza Investments International Ltd.; according to its investor, the BVI entity placed money with Madoff company.
By the prosecutors’ information, $170 billion moved through Madoff’s company since the fraud began in the 1980s. So far, there are more than $1 billion of assets recovered by the NY lawyer Picard who is conducting thorough investigation to find assets.
Besides the liquidator’s subpoena, U.S. tax authorities are seeking the identities of 52,000 UBS customers - Americans who evaded paying taxes placing their money in Swiss accounts. UBS avoided U.S. prosecution by paying $780 mln in penalties, and also admitted that in 2000 - 2007 Swiss private bankers helped Americans evade U.S. taxes through offshore companies in the British Virgin Islands, Panama, HK and other jurisdictions.
Investors are continuing to seek for $150 million linked to Bernard Madoff. On April 9, 2009 a British Virgin Islands company and a European bank of Gibraltar were sued by a special trustee who claimed it should go to reimburse investors who lost money in Madoff’s Ponzi scheme, estimated at $65 billion.
In papers filed in Manhattan federal bankruptcy court, the trustee alleged that in October 2008 Bernard L. Madoff Investment Securities Llc., owned by Madoff, wired $150 million to Banque Jacob Safra Ltd. of Gibraltar, apparently for the benefit of BVI-registered international company Vizcaya Partners Ltd. The transfer took place about a month and a half before Madoff was arrested, after admitting he initiated a Ponzi scheme for nearly 20 years.
In the suit, the trustee said that from early 2002 and until the arrest of Madoff, Safra or its affiliates invested $327.2 million with him in New York through his account at JPMorgan Chase & Co. on behalf of the BVI company. Now he is asking the bankruptcy court to wipe out the transfer and add the $150 million to the $1 billion in found customer assets to be used to repay Madoff victims, including the BVI-based Vizcaya.
The $150 million in Gibraltar is one of several transactions found by the staff of the trustee at the Manhattan law firm. Offshore money has been placed in Ireland, England, Luxembourg, Bermuda and the Cayman Islands, with potential cash on the Isle of Man.
It is known from the US legal source that BVI-registered Vizcaya sued Banque Jacob Safra in Gibraltar. The exact amount held in the Gibraltar account is still unclear.
Offshore tax havens that refused to pass information on tax dodgers faced an unprecedented economic sanctions by the world’s most powerful countries, which will be probably agreed at the G20 summit in London in April this year.
As a result of the campaign Britain could target some of its own offshore territories, including the Cayman and the British Virgin Islands, where British banks and corporations use scores of subsidiaries to avoid taxation. The blacklisting threat has come after opposition politicians in the UK called for a review of the tax haven dealings by banks.
After the G20 preparatory summit in Berlin, the new list of uncooperative tax havens will be prepared. Other leading offshore centers, among them Panama and Liechtenstein, are among more than 30 jurisdictions that have failed to sign agreement to pass over information about corporations and individuals who take advantage of their secrecy and their low taxes. British Virgin Islands are not among them.
Earlier lists which were prepared by the Organization for Economic Co-operation and Development (OECD) did not bring any changes, but now the G20 nations plan to promote a series of sanctions which are designed to deprive the tax havens of billions of dollars of their business.
France’s biggest bank, BNP Paribas SA, lost two lawsuits seeking to force UBS AG to release a combined 2.5 million euros ($3.1 million) that had been invested with two funds linked to the arrested manager Bernard Madoff, who is accused of running a $50 billion fraud.
The representative of BNP Paribas in Paris refused to immediately comment this, when reached by phone. Judge said in her ruling that BNP’s requests were “completely inadmissible”. UBS spokeswoman said the bank was “pleased” with the decisions.
A Luxembourg court rejected BNP’s requests in two rulings. BNP had sought the return of money that were held by UBS for separate funds that had invested money with Madoff. The rulings are among those four from Luxembourg courts that ruled that UBS did not have to immediately pay investors’ claims for redemptions from funds linked to Madoff. UBS had argued it cannot make payments on pending requests while investigations into Madoff are continuing.
More than 15 Madoff-related cases have been filed in Luxembourg courts by investors seeking repayments or documents to establish liability, and the majority of the cases are against UBS. In one of the lawsuits, BNP targeted UBS for a payment from an account it holds for the British Virgin Islands-registered Groupement Financier fund. The company sought 1.5 million euros from UBS from the Groupement Financier account, which has about 250,000 euros left.
Many of the largest publicly traded corporations in the U.S., including major banks that now receive federal bailout money from the Government, are using subsidiaries in offshore tax havens, which let them avoid paying U.S. taxes. This information can be found in the new report by the Government Accountability Office (GAO) published last week.
GAO searched publicly available data on the companies filed with SEC, and found that 83 of the 100 largest publicly traded corporations and 63 of the 100 largest federal contractors maintain subsidiaries in countries considered to be tax havens. Citigroup has set up 427 tax haven subsidiaries in offshore tax havens including 35 in the British Virgin Islands and 90 in the Cayman Islands. In this list there are also Bank of America which has 115 subsidiaries in offshore countries, Morgan Stanley with 273 subsidiaries, the American International Group, etc. There are other well-known companies in the list including Pepsi, Coca Cola and Ceterpillar. Other offshore tax havens mentioned in the report are Switzerland, Luxembourg, Hong Kong, Panama and Mauritius.
Meanwhile, Citigroup is expected to receive $50 billion from Government. Bank of America has already received additional $20 billion of Government aid, on top of previous $25 billion.
This report was severely criticized by the Treasury Department. In a letter included in the report it was noticed by the deputy assistant secretary for international tax affairs that there was no universal definition for an offshore tax haven. Thus, any list of tax havens may be considered a blacklist and used for applying sanctions or other negative measures that would “inappropriately negatively affect our economic and other relations with listed countries.”
It should be said that GAO auditors did not verify the companies’ transactions in the named offshore jurisdictions including BVI, that the subsidiaries really helped the companies reduce their tax burden. The results of the report were based just on the fact that subsidiaries are located in the jurisdictions considered tax havens, and on the traditional purpose of those subsidiaries to cut tax costs.
BVI-registered company Repex Ventures SA filed a lawsuit in Manhattan federal court against Bank Medici AG, an Austrian private bank that was taken over by regulators. The BVI company invested $700,000 in Herald (LUX) U.S. Absolute Return Fund, which was controlled by the Austrian offshore bank, and now Repex alleges Medici of misleading investors by not disclosing that it was pouring money into funds run by Bernard Madoff – the money manager arrested last month for $50 billion Ponzi scheme. According to the complaint, 100% of the Herald Funds were transferred to Madoff without informing investors.
Bank Medici, which is 25% owned by UniCredit SpA, is the European bank with the largest potential losses related to the Madoff investments. Its clients invested $3.2 billion in funds run by the alleged manager. Last week, after the offshore bank was taken under control by Austrian regulator, the new management board was appointed.
The lawsuit of the BVI company against Bank Medici, which now seeks class action, or group status, is the latest to seek damages from the funds that invested in Madoff’s scheme.