Are The U.S. And Switzerland Set For A Grand Bargain In Tax Fraud Probe?

The reassigning of US prosecutors away from foreign tax fraud cases is the latest sign that the standoff between Washington and Bern may be moving rapidly toward a final, negotiated settlement. Heads rolling at top Swiss banks may have helped pave the way

Rolling in the right direction? (LKM)
Rolling in the right direction? (LKM)
Walter Niederberger and Arthur Rutishauser

ZURICH - Tensions have eased in the Swiss-American tax conflict, with Washington -- at least for the time being -- putting its vast tax-fraud proceedings against Swiss banks on ice.

Of the 95 prosecutors at the Department of Justice (DOJ) who deal with tax matters, 25 are being relocated for six months, and three others have been assigned to other tasks. What is remarkable is that the prosecutors concerned are those who were working on tax evasion issues concerning foreign banks -- notably those in Switzerland.

Although a DOJ spokesperson told the Bloomberg news agency that those cases were still being pursued, in practice the removal of the prosecutors means that many of the Swiss cases are on hold – and that means a window of opportunity has opened for a broader agreement over the conflict.

At the moment, it can also be assumed that the U.S. tax authorities are not preparing a major attack on Swiss banks. They simply don't have the staff capacity. Florida-based attorney Jeffrey Neiman, the former lead prosecutor in the UBS case, confirms: "How much priority is given to tax fraud at the DOJ can be measured by how many prosecutors they assign to it. And if a lot of specialists are on it, there's less time for other pending cases."

William Sharp, a tax lawyer with many Swiss clients, goes further: "The brakes have been put on the on-going investigations of Swiss banks, bankers and clients. The Justice Department is fully occupied with other investigations."

Well-informed sources in the Swiss capital Bern say that negotiations between Switzerland and the U.S. have reached a decisive phase. Officially Bern is not commenting on the withdrawal of the U.S. prosecutors from the Swiss tax cases. Mario Tuor, spokesman for the Swiss State Secretariat for International Financial Matters (SIF), declined to address the issue. But behind the scenes the information is that SIF head Michael Ambühl is planning an imminent trip to the States to negotiate a final agreement.

Swiss president Eveline Widmer-Schlumpf may also meet with U.S. Secretary of the Treasury Timothy Geithner when she goes to Washington to attend the spring meeting of the International Monetary Fund. Because of this rapprochement between the Americans and the Swiss, any hard-nosed action taken by U.S. authorities would torpedo the possible agreement.

Swiss concessions

Another indication that an agreement may be imminent are the numerous concessions that the Swiss have already made. Both Houses of Parliament have approved a new interpretation of the double taxation agreement with the U.S. that makes it possible for U.S. authorities to request information about thousands of possible tax evaders without having to deliver specific details such as the names of the persons or the banks concerned. A task force to deal with the legalities of questionable cases has also been created. The Swiss Bankers Association has been sounding out the eleven most targeted banks with regard to how much each would contribute to the expected billions, either in fines or settlement if a global solution was found.

It has also been observed that all eleven banks in question have seen recent changes in top management. The latest is the retirement of Raymond Bär as chairman of Julius Bär. At 52, he is now the country's youngest honorary bank chairman, and his only task is to work towards finding a solution to the Swiss-American tax conflict.

Last summer, Walter Berchtold of Credit Suisse was removed as head of private banking and relegated to the relatively unimportant post of chairman. In February, Alexandre Zeller, CEO of HSBC (Schweiz), left the bank. At the Basler Kantonalbank the top private banking manager left in May 2011, and the departure of their private banking head in Zurich was announced in December. At Bank Wegelin, the head of the Zurich branch was removed before the bank started selling off most of its business to Raiffeisen.

The changes also affected the Swiss branches of foreign banks, such as Israeli bank Leumi, which is also on the list of eleven banks. Its chairman and CEO resigned earlier this year. The chairman of the United Mizrahi Bank (Switzerland) had already resigned in November 2011.

Asked about the resignations by the Swiss paper Neue Zürcher Zeitung, all the banks concerned stated that they were not connected to the tax conflict. But nobody on the market believes in that many coincidences.

Observers generally point to the example of UBS: an agreement with the U.S. followed immediately after Marcel Rohner and Peter Kurer, the most controversial members of management, took their leave. The other banks are hoping their management changes will have a similar effect.

Read the original article in German

Photo - LKM

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Ecological Angst In India, A Mining Dumpsite As Neighbor

Local villagers in western India have been forced to live with a mining waste site on the edge of town. What happens when you wake up one day and the giant mound of industrial waste has imploded?

The mining dumpsite is situated just outside of the Badi village in the coastal state of Gujarat

Sukanya Shantha

BADI — Last week, when the men and women from the Bharwad community in this small village in western India stepped out for their daily work to herd livestock, they were greeted with a strange sight.

The 20-meter-high small hill that had formed at the open-cast mining dumpsite had suddenly sunk. Unsure of the reason behind the sudden caving-in, they immediately informed other villagers. In no time, word had traveled far, even drawing the attention of environment specialists and activists from outside town.

This mining dumpsite situated less than 500 meters outside of the Badi village in the coastal state of Gujarat has been a matter of serious concern ever since the Gujarat Power Corporation Limited began lignite mining work here in early 2017. The power plant is run by the Power Gujarat State Electricity Corporation Limited, which was previously known as the Bhavnagar Energy Company Ltd.

Vasudev Gohil, a 43-year-old resident of Badi village says that though the dumping site is technically situated outside the village, locals must pass the area on a daily basis.

"We are constantly on tenterhooks and looking for danger signs," he says. Indeed, their state of alert is how the sudden change in the shape of the dumpsite was noticed in the first place.

Can you trust environmental officials?

For someone visiting the place for the first time, the changes may not stand out. "But we have lived all our lives here, we know every little detail of this village. And when a 150-meter-long stretch cave-in by over 25-30 feet, the change can't be overlooked," Gohil adds.

This is not the first time that the dumpsite has worried local residents. Last November, a large part of the flattened part of the dumpsite had developed deep cracks and several flat areas had suddenly got elevated. While the officials had attributed this significant elevation to the high pressure of water in the upper strata of soil in the region, environment experts had pointed to seismic activities. The change is evident even today, nearly a year since it happened.

It could have sunk because of the rain.

After the recent incident, when the villagers raised an alarm and sent a written complaint to the regional Gujarat Pollution Control Board, an official visit to the site was arranged, along with the district administration and the mining department.

The regional pollution board officer Bhavnagar, A.G. Oza, insists the changes "aren't worrisome" and attributes it to the weather.

"The area received heavy rain this time. It is possible that the soil could have sunk in because of the rain," he tells The Wire. The Board, he says, along with the mining department, is now trying to assess if the caving-in had any impact on the ground surface.

"We visited the site as soon as a complaint was made. Samples have already been sent to the laboratory and we will have a clear idea only once the reports are made available," Oza adds.

Women from the Surkha village have to travel several kilometers to find potable water

Sukanya Shantha/The Wire

A questionable claim

That the dumpsite had sunk in was noticeable for at least three days between October 1 and 3, but Rohit Prajapati of an environmental watchdog group Paryavaran Suraksha Samiti, noted that it was not the first time.

"This is the third time in four years that something so strange is happening. It is a disaster in the making and the authorities ought to examine the root cause of the problem," Prajapati says, adding that the department has repeatedly failed to properly address the issue.

He also contests the GPCB's claim that excess rain could lead to something so drastic. "Then why was similar impact not seen on other dumping sites in the region? One cannot arrive at conclusions for geological changes without a deeper study of them," he says. "It can have deadly implications."

Living in pollution

The villagers have also accused the GPCB of overlooking their complaint of water pollution which has rendered a large part of the land, most importantly, the gauchar or grazing land, useless.

"In the absence of a wall or a barrier, the pollutant has freely mixed with the water bodies here and has slowly started polluting both our soil and water," complains 23- year-old Nikul Kantharia.

He says ever since the mining project took off in the region, he, like most other villagers has been forced to take his livestock farther away to graze. "Nothing grows on the grazing land anymore and the grass closer to the dumpsite makes our cattle ill," Kantharia claims.

The mining work should have been stopped long ago

Prajapati and Bharat Jambucha, a well-known environmental activist and proponent of organic farming from the region, both point to blatant violations of environmental laws in the execution of mining work, with at least 12 violations cited by local officials. "But nothing happened after that. Mining work has continued without any hassles," Jambucha says. Among some glaring violations include the absence of a boundary wall around the dumping site and proper disposal of mining effluents.

The mining work has also continued without a most basic requirement – effluent treatment plant and sewage treatment plant at the mining site, Prajapati points out. "The mining work should have been stopped long ago. And the company should have been levied a heavy fine. But no such thing happened," he adds.

In some villages, the groundwater level has depleted over the past few years and villagers attribute it to the mining project. Women from Surkha village travel several kilometers outside for potable water. "This is new. Until five years ago, we had some water in the village and did not have to lug water every day," says Shilaben Kantharia.

The mine has affected the landscape around the villages

Sukanya Shantha/The Wire

Resisting lignite mining

The lignite mining project has a long history of resistance. Agricultural land, along with grazing land were acquired from the cluster of 12 adjoining villages in the coastal Ghogha taluka between 1994 and 1997. The locals estimate that villagers here lost anything between 40-100% of their land to the project. "We were paid a standard Rs 40,000 per bigha," Narendra, a local photographer, says.

The money, Narendra says, felt decent in 1994 but for those who had been dependent on this land, the years to come proved very challenging. "Several villagers have now taken a small patch of land in the neighboring villages on lease and are cultivating cotton and groundnut there," Narendra says.

They were dependent on others' land for work.

Bharat Jambucha says things get further complicated for the communities which were historically landless. "Most families belonging to the Dalit or other marginalized populations in the region never owned any land. They were dependent on others' land for work. Once villagers lost their land to the project, the landless were pushed out of the village," he adds. His organization, Prakrutik Kheti Juth, has been at the forefront, fighting for the rights of the villages affected in the lignite mining project.

In 2017, when the mining project finally took off, villagers from across 12 villages protested. The demonstration was disrupted after police used force and beat many protesters. More than 350 of them were booked for rioting.

The villagers, however, did not give up. Protests and hunger strikes have continued from time to time. A few villagers even sent a letter to the President of India threatening that they would commit suicide if the government did not return their land.

"We let them have our land for over 20 years," says Gohil.

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