Julius Baer says it will pay US$547 million to end US tax probe

 Julius Baer Group said it would pay about US$547 million (S$771.4 million) to settle a US investigation.
Julius Baer Group said it would pay about US$547 million (S$771.4 million) to settle a US investigation.PHOTO: BLOOMBERG

NEW JERSEY (BLOOMBERG) - Julius Baer Group Ltd, Switzerland's third- largest wealth manager, said it expects to pay about US$547 million (S$771.4 million) to settle a U.S. investigation of how it helped Americans evade taxes, clearing the way for other Swiss banks to resolve similar criminal probes.

Julius Baer reached an agreement in principle with the U.S. Justice Department, the bank said in a statement on Wednesday, as it earmarked another US$197 million beyond the US$350 million it set aside in June to resolve the probe. The Zurich-based company expects to conclude the agreement of the four-year investigation in the first quarter.

The provision will be included in its 2015 results, Julius Baer said. Even so, the bank expects to report a net profit for the year and remains "adequately capitalized," with a BIS total capital ratio of 18.6 per cent as per Oct. 31, 2015.

"Julius Baer remains committed to cooperating proactively with the DOJ's investigation," the company said in the statement. Jan Vonder Muehll, a spokesman for the bank, declined to comment further by telephone.

Julius Baer, founded in 1890, has grown through acquisitions in the past six years under Chief Executive Officer Boris Collardi, including the 2012 purchase of Bank of America Corp.'s non-U.S. wealth units. The company managed 297 billion francs ($299 billion) for wealthy individuals and families at the end of October and reported a 78 percent decline in first- half profit in July, mainly due to the initial provision for the U.S. tax settlement.

Capital-Management Plan Collardi had said he wanted to resolve the U.S. probe by the end of 2015. Uncertainty around the Justice Department investigation has hampered the company's ability to make deals, invest in renewing outdated information-technology platforms or return capital to shareholders. Julius Baer said in July it planned to outline a new capital-management plan in early 2016.

Julius Baer's announcement came as the Justice Department concludes a disclosure program in which about 75 Swiss banks have avoided prosecutions this year by paying more than $1 billion and disclosing how they helped U.S. clients cheat the Internal Revenue Service. Lawyers defending banks have said the Justice Department wouldn't resume prosecutions of Swiss banks until it completed the program.

About a dozen Swiss banks have been under U.S. criminal investigation since Switzerland's largest lender, UBS Group AG, settled with the U.S. UBS agreed in 2009 to pay US$780 million, while Credit Suisse Group AG, the No. 2 Swiss bank, paid $2.6 billion in 2014. Both admitted they helped Americans cheat the IRS.

Those still under investigation include the Swiss unit of HSBC Holdings Plc, Europe's biggest bank.

Offshore Accounts U.S. authorities have been aided in their investigations by 54,000 U.S. taxpayers who disclosed offshore accounts to the IRS since 2009, paying more than US$8 billion in back taxes, penalties and interest, according to the Justice Department.

More than three dozen offshore bankers, lawyers and advisers have also been charged. They include Daniela Casadei and Fabio Frazzetto, two Julius Baer bankers who were indicted in New York in 2011. They were accused of conspiring with more than 180 U.S. clients and others at the bank to hide at least $600 million in assets from the IRS.

Casadei worked at the bank from the early 1990s through 2010, and Frazzetto worked there from 2005 until 2010, according to the indictment. Both men, who live in Switzerland, are charged with conspiracy and face as long as five years in prison.