Email Article Print Article

It's Like Déjà-Vu All Over Again

By Michael B. Nelson, Esq. - Email Editor

Date : September 15, 2009

Yogi Berra: “It's like déjà-vu, all over again."

Now with the Swiss Agreement signed and names of U.S. citizens destined for release to the U.S. Treasury Department and the U.S. Department of Justice (article and agreement can be found here), Canada is getting into the fray. In hindsight, Canada may well be regretting not joining the United States in a unified effort against UBS. Whether Canada had such an opportunity is unknown publically; strategically now going alone, and without the huge leverage of John Doe Summons and the U.S. political and international presence, may be its own downfall. Last year, the U.S. Senate Subcommittee investigated the UBS involvement of soliciting wealthy Americans to deposit money into a Swiss bank, UBS, which actively assisted depositors with concealment of their foreign bank accounts and non-payment of their U.S. tax on bank interest income. During this Subcommittee’s investigations, information was uncovered about a “Canada Desk” that is rapidly gaining interest to the Canadian Revenue.

The Subcommittee uncovered an email from Michael Guignard, a senior UBS banker, who assisted in co-authoring many similar emails, which stated, “…we would like to conduct a review of the structures/vehicles that you offer to have or set up for our U.S. and Canadian clients. We invite you to make a short presentation on the structures/vehicles that you recommend to U.S. and Canadian clients who do not appear to declare income/capital gains to their respective tax authorities…" The Subcommittee determined that UBS was running a similar tax evasion campaign in Canada at the same time it was operating its program in the United States. The Subcommittee also obtained additional documentation that supported the allegation that UBS ran "the Canada Desk” as a licensed subsidiary in Canada, managing the portfolios of affluent Canadians, specifically in UBS’s Calgary, Montreal, Vancouver and Toronto offices. It is interesting to note that UBS’s private bankers who made more than 3,500 trips across the Atlantic to North American in 2004 never crossed the boarder into Canada. However, they still managed to successfully run these offices in Canada.

Surprisingly, the Canada Desk operations had a much more robust operation than UBS’s U.S. operation. Internal financial statements, specifically its balance sheets that were secured by U.S. Government investigators indicated that as of October, 2005, found that the Canada Desk managed $5.6-billion Canadian. Of course, the Revenue Department of Canada is eagerly seeking information on the number of Canadians who comprised the clientele of the Canada Desk and whether their UBS accounts were reported to the Canada Revenue Agency. Similarly to the United States and its U.S. citizens, Canadian residents are required by law to declare their worldwide income.

Canada's Revenue Minister, Jean-Pierre Blackburn, has repeatedly declined to comment about how the Canada Revenue Agency is responding to the revelations from the investigations south of the border, except to say through a spokeswoman that the agency is committed to clamping down on offshore tax abuse. Adding to the complications for Canada, UBS retained high caliber of political hires, surprisingly including; former Republican Senator Phil Gramm, the Vice-Chairman of UBS's investment bank operations in the U.S. Michael Wilson, Canada's Ambassador to the United States and a former Canadian Federal Finance Minister; also served as the chair of all UBS operations in Canada before his appointment to Washington, D.C. in 2006.

“We want to obtain information. How much money is involved?” Blackburn said in an interview with Canada’s Globe and Mail newspaper. “UBS tried to delay, but in the beginning of September, we will have a meeting between our lawyers and them to obtain that information.” If the bank does not cooperate, “we’ll go to court to get the information,” the Minister told Agence France Presse.

Canada’s tax collector, much like the U.S. Internal Revenue Service, has a voluntary disclosure program that allows taxpayers to declare offshore holdings to avoid prosecution. However, while thousands have reportedly benefited from the American program, just seven individuals have taken advantage of the Canadian program.

“I know it’s not enough,” Blackbum stated to the Globe and Mail. “There’s a lot more.” However, Canada has not had access to the same evidence as in the U.S. nor is Canada in the same position to force an agreement with UBS or the Swiss government. As you may recall, the John Doe Summons of the U.S. Department of Justice was a significant leverage of the U.S. Canada, on the other hand, has not experienced UBS private bankers actually visiting its shores and if the number of Canadians utilizing the Voluntary Disclosures Program is any indication of Canada's anxiety over non-reporting taxable income from UBS; then Canada may not be in a position to obtain a similar Agreement that the U.S. secured last month.

If you have questions, please email us at info@trustmakers.com.

By Michael B. Nelson
TrustMakers.com

RELATED ARTICLES:

• Protect the equity in your home
• Asset Protection Plans
• C.A.L.M. Introduction
• Get educated on Asset Protection