(Bloomberg) A Swiss banker charged three years ago in New York with helping Americans evade taxes was arrested in Germany and faces extradition to the U.S., two people familiar with the matter said.
Roger Keller was one of three Wegelin & Co. bankers indicted in January 2012 and accused of conspiring to help U.S. clients hide more than $1.2 billion from American tax authorities. Keller, a Swiss resident, was arrested on Feb. 2 in Frankfurt, according to the people who asked not to be identified because the matter isn’t public.
Keller is among 38 offshore bankers, lawyers and advisers charged in the U.S. since 2008 with tax crimes. About two dozen have yet to answer the charges in court. They include bankers from Switzerland’s top three wealth managers—UBS Group AG, Credit Suisse Group AG and Julius Baer Group Ltd. Most live in Switzerland, where they remain off-limits to U.S. prosecutors because the Swiss don’t extradite people for tax crimes. They risk arrest if they cross into other countries.
“Swiss bankers under indictment are in a situation where their lifestyle is in jeopardy and they’re under a form of detention,” said Bruce Zagaris, a Washington attorney not involved in the case. “They’re used to traveling worldwide. Suddenly, they’re faced with a choice of remaining in Switzerland or traveling abroad and being arrested.”
Frankfurt prosecutors said they arrested a 50-year old Swiss citizen based on an international search alert by the U.S. seeking his extradition, Alexander Badle, a spokesman for the Frankfurt General Prosecutor’s Office, said in an e-mail. Keller was 47 when he was indicted three years ago.
Badle said a Frankfurt court ruled on Feb. 2 that he must remain in custody. The Higher Regional Court of Frankfurt hasn’t rule on whether he will be placed in extradition custody, Badle said. It wasn’t immediately clear whether Keller has a lawyer.
Wegelin, Switzerland’s oldest private bank, pleaded guilty in 2013 in New York to helping taxpayers hide as much as $1.5 billion from the Internal Revenue Service. The bank was charged in February 2012, a month after prosecutors accused Keller of conspiring with Wegelin bankers Urs Frei and Michael Berlinka.
Prosecutors accused them of helping Americans open dozens of accounts and hide them from the IRS after a U.S. probe led clients to flee bigger Swiss banks in 2008 and 2009.
That probe picked up after the U.S. charged UBS in 2009 with helping Americans cheat the IRS. UBS avoided prosecution by admitting it aided tax evasion, paying $780 million and handing over data on 250 accounts. It later disclosed another 4,450 accounts, causing U.S. customers to seek new banks.
As those clients fled UBS and another large Swiss bank, Berlinka, Frei and Keller and “Managing Partner A” wooed them, according to the indictment. The bank also solicited accounts through a third-party website, prosecutors said.
In pleading guilty, Wegelin paid and forfeited $74 million to the U.S., admitting it helped hundreds of taxpayers evade taxes from 2002 to 2010. It no longer operates.
The U.S. has a mixed record of success in prosecuting offshore enablers of tax evasion.
On Nov. 3, federal jurors in Fort Lauderdale, Florida, acquitted Raoul Weil, the former head of wealth management for UBS, who was accused of conspiring to help thousands of U.S. clients use Swiss banking secrecy to evade taxes. Weil was the highest-ranking bank executive charged by the U.S.
Of the 38, seven pleaded guilty, two were convicted at trial, two await trial and two were acquitted, including Weil.
The indictment said the Wegelin bankers told clients their undeclared accounts would stay hidden from the IRS because the bank “had a long tradition of bank secrecy, and, unlike UBS, did not have offices outside Switzerland,” making it “less vulnerable to United States law enforcement pressure.”
“In or about 2008, the managing partners affirmatively decided to take advantage of the flight of U.S. taxpayers with undeclared accounts by opening new undeclared accounts for many of them at Swiss Bank A,” the indictment said. “Swiss Bank A opened new undeclared accounts for at least 70 U.S. taxpayers.”
Berlinka began working at the bank in 2008, Frei started in 2006 and Keller began in 2007, according to a statement by U.S. Attorney Preet Bharara at the time. The men face as long as five years in prison if convicted.
The indictment details how Berlinka, Frei and Keller allegedly helped 23 U.S. clients open undeclared accounts at their bank. Kenneth Heller, a disbarred New York maritime attorney who pleaded guilty to hiding more than $26.4 million in accounts at UBS and Wegelin, also is referred to in the indictment.
The three bankers conspired with two other Swiss financial advisers already under indictment, Gian Gisler and Beda Singenberger, according to the charges.
The Swiss bankers under indictment face adverse social consequences beyond their legal exposure, Zagaris said.
“Their reputation is sullied,” he said. “They have difficulty traveling to see family and close friends outside of Switzerland. Some people draw a line and say they don’t want to associate with someone under indictment.”
The case is U.S. v. Berlinka, 12-cr-00002, U.S. District Court, Southern District of New York (Manhattan).
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