(Bloomberg) Two client advisers from Julius Baer Group Ltd. accused of helping Americans evade taxes are expected to plead guilty in New York on Thursday, when the Swiss bank will resolve its own criminal case by agreeing to pay $547 million, according to two people familiar with the matter.
The bank’s deferred-prosecution agreement with the U.S. Department of Justice is part of a broad probe of tax evasion and undeclared offshore accounts by U.S. citizens helped by Swiss banks. Julius Baer follows larger rivals UBS Group AG and Credit Suisse Group AG in resolving U.S. tax probes.
Julius Baer advisers Daniela Casadei and Fabio Frazzetto were indicted in 2011 on a conspiracy charge. They are expected to enter their pleas on the same day the U.S. presents the deferred-prosecution pact for the bank to a judge in New York, said the people, who aren’t authorized to discuss the matter because it isn’t public.
The U.S. couldn’t extradite the Swiss bankers because tax evasion isn’t considered a crime in Switzerland.
U.S. Clients
Casadei and Frazzetto, accused of helping more than 180 U.S. clients hide at least $600 million in assets from the Internal Revenue Service, face as long as five years in prison. They made their first appearance Tuesday in a Manhattan federal court, where they pleaded not guilty to a conspiracy charge, and were released on a $1 million bond secured by $250,000 in cash. Prosecutors said they are scheduled to appear Thursday before U.S. District Judge Laura Taylor Swain in Manhattan.
Lloyd Liu, an attorney for Casadei, and David B. Weinstein, a lawyer for Frazzetto, declined to comment on whether their clients will plead guilty. Christian Saint-Vil, a spokesman for U.S. Attorney Preet Bharara, also declined to comment.
Julius Baer, Switzerland’s third-largest wealth manager, has agreed to the deferred-prosecution agreement to resolve the investigation, according to the people familiar with the matter. Under such an agreement, a company is charged with a crime that is later dismissed if the firm makes a payment, complies with specified conditions and makes a detailed statement of facts about its wrongdoing.
The bank, founded in 1890, will not plead guilty or have a monitor installed, and none of its senior executives will be prosecuted, according to one of the people. The bank will admit that it helped Americans hide money from the Internal Revenue Service through sham offshore entities and other means, the person said.
Offshore Bankers
More than three dozen offshore bankers, lawyers and advisers have been charged since 2008 as part of a broad probe of tax evasion and undeclared offshore accounts. Several bankers have come to the U.S. to plead guilty, including those who worked at UBS and Credit Suisse.
UBS resolved its tax probes by agreeing in 2009 to pay $780 million; Credit Suisse, by agreeing to pay $2.6 billion in 2014. A dozen or so Swiss banks, such as Pictet & Cie. Group SCA and the Swiss unit of HSBC Holdings Plc, are still waiting to end criminal tax investigations by the U.S.
Another 80 Swiss banks avoided prosecution by voluntarily disclosing their wrongdoing in the past year as part of a Justice Department disclosure program. BSI SA and Union Bancaire, which weren’t placed under criminal investigation, paid $211 million and $188 million respectively.
Julius Baer disclosed in December it had increased its provision for the Justice Department penalty and had reached an agreement in principle. Uncertainty around the Justice Department investigation has hampered the company in making deals, investing in renewing outdated information-technology platforms and returning capital to shareholders. The bank has grown through acquisitions in the past six years under Chief Executive Officer Boris Collardi, including the 2012 purchase of Bank of America Corp.’s non-U.S. wealth units.
Julius Baer said it had set aside $547 million to cover the U.S. penalty and expected an agreement in the first quarter. The bank said Monday that its gross margin fell in the second half of 2015 to the worst since Collardi took the helm in 2009.
Net income slumped 67 percent to 121 million francs in 2015, mainly due to the expected cost of the U.S. case, the company said in a statement. Operating income rose to 2.69 billion francs from 2.55 billion francs a year earlier, missing an average estimate of 2.73 billion francs by 20 analysts surveyed by Bloomberg.
The company was managing 297 billion francs ($292 billion) for wealthy individuals and families at the end of October and reported a 78 percent decline in first-half profit in July, mainly due to the initial provision for the U.S. tax settlement.
