Legal

UBS Fires Fresh Broadside At French Court's Ruling

Tom Burroughes, Group Editor, London, 22 February 2019

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The Swiss bank has elaborated on why it is appealing the French court's judgment against it, which saw the authority recommend €3.7 billion in penalties.

A day after vowing to appeal a French court’s verdict that it illegally solicited and laundered tax fraud proceeds, UBS has again condemned the decision, reiterating that the ruling lacks factual evidence. It elaborated on why it contests the judgement. 

“The judgment is extremely superficial, inconsistent and contradictory. It does not address the vast majority of legal and factual arguments made by UBS,” the world’s largest wealth management firm said in a statement yesterday. It initially announced that it intended to appeal the matter earlier in the week.

The court this week assessed that UBS AG and UBS (France) SA should face penalties of €3.7 billion ($4.2 billion) and €15 million respectively, and also assessed civil damages of €800 million.

The vehemence of the Zurich-listed bank’s response suggests that while in the past Swiss banks have taken a diplomatic stance when settling cases, UBS is not in a mood to concede the case. It has already announced that it is appealing the French court’s decision. 

The case before the 32nd Chamber of the Paris Court of First Instance had lasted six weeks.

“UBS reiterates that it consistently contested any criminal wrongdoing in this case. The bank respected and followed its obligations under Swiss and French law as well as the European Tax Savings Directive. UBS has already announced and filed its appeal of the verdict,” it said in a statement yesterday. 

“The conviction is not supported by any concrete evidence. In addition, following a detailed review of the judgment, it is clear that the decision contains significant flaws that will need to be addressed by the Court of Appeals,” UBS said.

The bank said that the decision’s flaws include, but are not limited to, the following:

-- “The judgment is extremely superficial, inconsistent and contradictory. It does not address the vast majority of legal and factual arguments made by UBS”; and

-- “A technical document comparison reveals that the text of the decision against UBS AG is largely a copy and paste of documents issued by the prosecution and the investigating judge prior to the trial and the bank’s defence. It is completely unprecedented that the evidence, explanations and legal arguments put forward by UBS are not responded to in any depth. The verdict on the merits only contains generic legal reasoning that does not specifically address the points made on hundreds of pages by the defence."

The bank said charges were limited to three specific types of unpaid taxes (income tax, wealth tax and corporate tax). “Irrespective of the lack of any wrongdoing by the bank, UBS argued that consistent proof that only these three types of taxes were being considered for both a conviction and the calculation of any penalty needed to be provided. This argument was not addressed in the legal reasoning or the calculation of the penalty. It is just one of many examples in the verdict where the burden of proof is not met and no response is provided by the court to UBS’ arguments,” it said.

UBS said the court’s judgment “makes legal errors and draws conclusions of guilt based on assumptions that are mistaken”.

“During the investigation, the request of UBS to view the tax authority files of its regularised French clients who had paid back taxes to the French state was denied. In the verdict, the decision to deny this request is justified with the argument that all parties had access to the same level of information, which is simply not correct. Only the French state, as a party to the case, had full access to the files of the French tax authorities,” the bank said.

UBS added that “the calculation of the fine is contradictory”. 

“Even if liability in this case existed, which UBS strongly contests, the calculation of the fine is contradictory. The verdict initially argues correctly that the basis for the calculation of a fine in such matters must be the proceeds of tax evasion, which it explicitly defines as `the tax under the law, which was not paid’.

“However, two paragraphs later in the judgment, the fine is then incorrectly calculated based on the total regularized assets (€3.7 billion) as opposed to only the taxes which should have been paid on those assets, representing a fraction of the total amount,” it said. The bank said the court’s calculation of the civil damages is “completely unsupported”.
 

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