One of California’s wealthiest residents and the owner of a New York toy manufacturer were among the moguls identified by Senate investigators today as allegedly using foreign accounts to avoid paying U.S. taxes.
Peter Lowy, 48, of Los Angeles, owner of the Westfield shopping-center fortune along with his family, was one of those named in the bipartisan report by the Senate Permanent Subcommittee on Investigations. Lowy, whose company will lease space in the rebuilt World Trade Center in New York, is a deep-pocket contributor to both Democratic and Republican campaigns.
The 110-page report says that Lowy’s father, Frank Lowy, an Australian citizen, used Liechtenstein-based LGT Group to set up a series of shell companies, including a U.S. based foundation, to divert $68 million in assets. LGT removed any traces to the family to avoid detection by U.S. or Australian authorities, according to the report. Although Frank Lowy is Australian, his son, Peter, who is CEO of Westfield LLC, is a U.S. citizen living in California.
Lowy’s attorney, Robert Bennett, told ABC News that his client’s name was on the list of owners of secret accounts set up by the Liechtenstein bank, but that he had done nothing wrong.
Also identified as having set up offshore accounts were Harvey and Steven Greenfield, who run New York-based Commonwealth Toy and Novelty Company Inc, a leading manufacturer of stuffed dolls and animals. The report said that private bankers from LGT, including Prince Philipp of Liechtenstein, met with the father and son to urge them to transfer $30 million of their assets from Bank of Bermuda to LGT. It said the Greenfields are currently in negotiation with the IRS and the Department of Justice over tax liability issues.
The release of the report kicked off a surreal hearing at the Capitol with testimony about secret codes, alleged intrigue by a royal family and one witness, a former employee of LGT bank, testifying via videotape because he said he feared for his life.
Subcommittee Chairman Carl Levin contended that UBS, the world’s largest private bank catering to wealthy individuals, arranged “undeclared” accounts for 19,000 US citizens with an estimated $18 billion in assets, seeking tax evasion strategies.
Levin suggested that federal regulators consider revoking the US banking license of UBS because of its role in helping wealthy Americans evade the law.
“I don’t think that any bank that goes to the extent that UBS has gone through to avoid doing what their agreements with the United States require them to do, should be allowed to continue to do business unless they clean up their act,” he said.
The role of LGT bank, owned by the royal family of Liechtenstein, was also investigated through videotaped testimony from Heinrich Kieber, a former bank employee, who said he was the source of 12,000 pages of bank documents detailing secret, multi-million-dollar accounts held by “many, many, many” U.S. citizens.
Kieber, declared a fugitive by Liechtenstein, is living in an undisclosed location, reportedly as part of a witness protection program, after providing information to government officials in England, Germany, the United States and other countries on their citizens who hid billions in wealth through the bank. The German government has admitted to paying him millions for the data.
UBS, meanwhile, released a statement today saying that it “has been working diligently with U.S. and Swiss authorities” to provide information to US investigators.
UBS executive Mark Branson said the bank will no longer provide “undeclared” accounts to Americans and is “winding down” its business involving already existing accounts.
The statement noted that information about tax fraud ‘is not protected by Swiss bank client confidentiality,” suggesting it may turn over the names and account details of Americans once been promised secrecy.
One of UBS’s bankers, Bradley Birkenfeld, has already pleaded guilty in the U.S. to tax evasion and fraud and is cooperating with federal prosecutors in Miami.
In a plea agreement, Birkenfeld detailed how he said he had been trained by UBS to help wealthy Americans evade taxes. In one case, he told prosecutors he purchased diamonds using a US client’s Swiss bank account and smuggled the diamonds into the United States in a toothpaste tube.
- Report by the Senate Permanent Subcommittee on Investigations
- Muckety post on how the investigation could bode ill for Phil Gramm
- TaxProf Blog