Tags: HSBC | Tax | Evasion | Probe

HSBC Hands US More Staff Names in Tax Evasion Probe

Wednesday, 15 Aug 2012 01:41 PM

 

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Global bank HSBC has handed over details of current and former employees to the U.S. authorities, it confirmed on Wednesday, as part of a tax probe that almost sank rival bank UBS in 2009.

As a result the bank could now face legal action from individuals whose details have been revealed, lawyers representing them said.

In a letter to them seen by Reuters, the bank said it had passed on documents, in which their names appear, on the request of U.S. authorities looking to hunt down U.S. citizens with untaxed money held in Swiss accounts.

After passing on a first set of documents earlier this year, HSBC has sent the new batch to the U.S. Department of Justice and the Securities and Exchange Commission in an effort to reach a settlement over the investigation.

HSBC lawyer Lenz & Staehelin has told lawyers acting for these employees that the documents included the minutes of executive, board and audit committee meetings, client visit reports, emails and other correspondence.

"We have submitted further information to the U.S. authorities but it concerns the initial enquiry from December 2011. Client information has clearly not been submitted," HSBC Private Bank spokesman Medard Schoenmaeckers said by telephone.

Banks including HSBC, Credit Suisse and Julius Baer have already passed on about 10,000 employee names in an attempt to avoid the fate of private bank Wegelin, which broke up in January under threat of indictment, bank employees and lawyers said.

Credit Suisse said its cooperation with the U.S. authorities was also in the interests of the bank and its employees. Baer declined to comment.

Lawyer Douglas Hornung, who has filed a complaint against HSBC on behalf of its former chief legal counsel, said banks who handed employee names to U.S. authorities infringed the criminal code and Swiss privacy laws.

HSBC has avoided breaching strict Swiss banking secrecy laws by redacting from the documents any information that could lead to the identification of clients, said Lenz & Staehelin in a letter to lawyers acting for current and former employees of the bank.

In 2009 the Swiss authorities reached a deal for UBS to pay a fine of $780 million to avert criminal charges, and ultimately agreed to allow the bank to reveal details of around 4,450 clients.

Hornung said banks that hand over employee data to U.S. officials are hoping to reduce the potentially huge fines they might face if they are found to have helped U.S. clients avoid tax.

"HSBC could face a much higher fine than UBS, $1.3 to 1.4 billion would be logical. In cooperating HSBC can expect the fine to be lowered significantly," said Hornung.

The benefit of such a reduction for cooperating would far outweigh anything the banks would have to pay for breaching obligations to employees in Switzerland, where the maximum fine is 5 million Swiss francs ($5.15 million) and there are no punitive damages, Hornung said.

A spokeswoman for the Swiss Attorney General confirmed that a legal complaint against HSBC had been received and said it was considering whether to open an investigation.

NO BIG LAW FIRMS

A former HSBC employee, who asked not to be named, told Reuters he had never dealt with U.S. clients and only realized U.S. officials had his name during a background check when he was shortlisted for a new banking job.

He was not offered the job.

"It can be difficult to inform former employees because as a company we don't keep records of their whereabouts. If they contact us, then we do inform them," Schoenmaeckers said.

But Hornung, a partner at Geneva-based Hornung Avocats, said allegations of professional damage might be hard to prove.

"I have spoken to five or six people in the same situation, which means there is some chance of demonstrating a direct link between being on the list and difficulties in finding further employment," said Hornung.

Bruno Seeman, a lawyer from small but locally renowned Zurich law firm Anwaltsbuero Landmann who is representing another former HSBC employee, said those wishing to sue the bank were unlikely to get any help from the largest law firms.

"The big five in Switzerland are all employed by the large banks, all the big commercial law firms with the capacity and know-how to act against big Swiss organizations cannot do so because it would be a conflict of interest," Seemann said.

"The effect is to prevent employees from approaching them because these law firms can't act against existing clients."

© 2014 Thomson/Reuters. All rights reserved.

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