
UBS Is Fined $4.2B in French Tax-Evasion Case - bryanwbh
https://www.wsj.com/articles/ubs-is-fined-4-2-billion-in-french-tax-evasion-case-11550668920
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misiti3780
Another slap on the wrist. No one goes to jail because of Deferred Prosecution
Agreements

HSBC got fined about half that when they caught laundering money for the
Mexican cartels a few years back. True story: HSBC had to design special
teller windows because the standard ones were too small to fit the sacks of
money that were being brought in and laundered. If you want to know why these
guys don't go to jail, pull up a bottle of lithium and sit down with The
Chickenshit Club.

~~~
missedthecue
HSBC allegedly laundered (not revenue, not profit, they _laundered_ ) $880
million.

They were fined $1.9 billion.

Not "fined about half"

~~~
thefounder
They were caught with $880 millions. That doesn't mean they laundered only
that.

~~~
HenryBemis
People and 'the News' most times don't read the details, which is logical
since we never get the full reports on our hands. The scope of the
audit/examination should document the limitations/boundaries of the
examination. E.g. X, Y, and Z, countries, A, B, and C subsidiaries, for the
period of dd/mm/yyyy to dd/mm/yyyy. And which transactions where checked? All
deposits? From all business lines? E.g. bank deposits OR their investment
brokers?

There are many ways to get money in a large Banking group like UBS, HSBC, and
others. They have become Lernaea Hydras and for a good reason.

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ghostDancer
No paywall [https://outline.com/YSFyPN](https://outline.com/YSFyPN)

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arama471
Does anyone know what the likelyhood of the 4.2B being paid out is? I imagine
that UBS will go through all possible appeals processes.

Also if the article is right in that this was affected by the protests, then
that is a big win for protesting.

~~~
smallgovt
UBS's market cap is $46B. After this was announced, their stock fell 4%. This
drop, if permanent, would equate to a loss of ~$1.84B in market cap.

There are many factors that could be influencing price, but if we attribute
this 4% delta entirely to the announcement, the market is guessing the actual
penalty will amount to $1.84B. This could be bc the market thinks UBS can
appeal with a 50% success rate, or can negotiate the penalty down by 50% with
high certainty.

Edit: I hadn't considered tax implications. If UBS is able to deduct these
penalties pre-tax (which I'd assume they would), then it suggests that they
are very likely going to have to pay the full penalty. Of course, this is all
guess work. e.g. the market could be scared that this sets a precedent for
future additional penalties which would decrease the signalling towards full
payment on this penalty.

~~~
mikeyouse
This isn't quite right -- The 4% loss could just represent the delta between
what was already priced in and the actual loss. This case has been a long time
coming so the expectation of the penalty should have been priced in long ago.

Secondly, and it depends on the jurisdiction, but penalties and fees
associated with wrongdoing generally aren't tax deductible.

The US clarified this during the TCJA but most countries agree:
[https://www.clearyenforcementwatch.com/2018/02/1962/](https://www.clearyenforcementwatch.com/2018/02/1962/)

~~~
repsilat
There's also that weirdness of financial companies having price-to-book less
than one... (For UBS it's around 0.9. Don't ask me how it makes sense.)

~~~
cm2187
There may be good reasons for that.

First, there are two ways to value companies, depending on what kind of
companies they are. The two extremes are on one side a consulting firm, where
the value is worth only the present value of the future fees to be earned by
the consultants. But the company itself has no asset, very little debt, and
its balance sheet is pretty much irrelevant to its valuation. The other
extreme is an investment fund, where the company is worth exactly the current
market value of its assets, it has no other future revenues other than the
expected incomes from these assets.

A bank is somewhere in the middle. It is kind of an investment fund in the
sense that all its assets are financial assets that can be sold pretty much at
their book value (unlike a factory where the book value may mean very little
in term of how much the asset is really worth). But the book value may differ
from the fair market value (that's often the case if there are bad loans). But
part of the value will also be generated from profits that are unrelated to
these assets: fees on payment processing, advisory fees, trading income, etc.
So part of the value is also a PV of future revenues.

And these future revenues may be negative. If you look at the past 10 years,
banks have experienced huge revenue volatility. From trading losses, fraud
(Kerviel style), fines (like UBS here), bad loans (RBS and HBOS style), etc.

And then you can have all sort of weird technicalities. Like the book value
may be increased for gains on own credit (if the company fair values part of
its liabilities). That's a paper gain that the market is unlikely to give any
credit for.

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laser
What happens if a fine is greater than the value of a multi-national company's
operations in a country? As $4.2 billion is ~10% of UBS's market cap, does UBS
derive more than 10% of its value from within France? If not, might they just
abandon operations in the country for the government to seize and avoid paying
the fine, or would EU or international-level agreements or courts enforce
payment? Anyone know of any precedent regarding such a scenario?

~~~
ovi256
Court orders can, and are, routinely enforced in other countries. The
interested agent goes to country B courts with a decision from country A and
asks for a local enforcement order. When granted, this has the same power as a
court order from country B. Even if UBS decides to abandon all assets in
France and never do business there again, agents of the French state can get
the fine from UBS assets in other countries.

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juozas
€3.7B ($4.2B) is last year profit. Fine is €4.5B($5.1) Here is link to not
paywalled article [https://www.reuters.com/article/us-ubs-trial-fraud/ubs-to-
ap...](https://www.reuters.com/article/us-ubs-trial-fraud/ubs-to-appeal-after-
fined-4-5-billion-euros-in-french-tax-fraud-case-idUSKCN1Q91DR)

EDIT: Actually fine is €3.7 + €800m in damages.

------
Hermel
We are shifting more and more towards a legal system where not only those who
actually did something wrong (here the tax evaders), but also those whose
services have been used to do so are considered guilty. Another example is
copyright, where websites are increasingly held liable for user uploads. I'm
not convinced that this is a good development.

~~~
vkou
If a stranger walks up to you, and gives you $10,000 to drive a large, heavy,
body-sized bag to the outskirts of town, and dump it in a river, I think most
reasonable people would consider you to be at least an accessory to murder. On
the other hand, if you were a department store clerk who sold that bag, most
reasonable people would consider you in the clear.

There's a spectrum for this sort of thing, and I think UBS was clearly on the
'knowingly profiting from crime' side of it.

~~~
nraynaud
I think we are talking about a company calling people to ask them if they have
a bag to dispose of and organizing conferences on the fine art of bag
disposal, a primer on material science, some workshops on bag design and the
intricacies of selecting rivers.

They were cold calling the customers accross the border, not closing their
eyes on the paperwork associated with the money.

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contingencies
I wonder if they will rethink their "fat billboards at Beijing airport"
marketing strategy. Who wouldn't love to see China fine a Swiss bank?

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rb808
Big banks a such an easy target these days. Everyone in hates them and
politicians love that because they can extract big fines. win-win-win. Until
all the banks go under at least - US banks are mostly solvent still, European
ones look like all the big ones will go under.

~~~
freeflight
> Until all the banks go under

If 2008 taught us anything it is the fact that big banks don't "go under"
because they are considered "too big to fail" and as such will not be allowed
to fail.

The German term for this is "systemrelevant", (systemically important) which
imho fits way better than "too big to fail" because it's way blunter.

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easytiger
The predicate for this dates back a long way. I believe UBS were offered an
initial sum of $1.1b to settle a few years ago and took it to trial [1]

> The judges’ move followed a failed plea bargain between national financial
> prosecutors and UBS representatives, the first time such an out-of-court
> settlement was tested in France. French magistrates reportedly offered UBS
> to settle the case for 1.1 billion euros ($1.2 billion), after considering
> an initial deal of 2.2 billion euros ($2.4 billion). - 2017

However the basis was

> The assets illegally concealed by French clients in Switzerland between 2004
> and 2012 allegedly amounted some 10 billion euros ($10.75 billion).

Another quote puts it at $600billion[2]

I'd love to know the definition of "illegally concealed" in these
circumstances

The chances of it being reasonable I'd consider very slim; France is not a
reasonable country nor is it run by reasonable people. France is a failing
protection racket running out of people to shake down, by and large. When the
people who run the socialist party government budget are offshoring their
wealth - perhaps your country is fundamentally broken.[3]

[1]
[https://www.apnews.com/2c7032c7d75a40728395587fd917517e](https://www.apnews.com/2c7032c7d75a40728395587fd917517e)

[2] [http://www.ipsnews.net/2012/04/europe-loses-billions-to-
tax-...](http://www.ipsnews.net/2012/04/europe-loses-billions-to-tax-evasion/)

[3] [https://www.bloomberg.com/news/articles/2015-02-17/three-
ex-...](https://www.bloomberg.com/news/articles/2015-02-17/three-ex-ubs-
officials-said-to-face-arrest-in-french-tax-probe)

Edit: Downvotes without comment. Not exactly productive conversation.

~~~
mruts
I can see why you are being downvoted, but you are right, France isn't a very
reasonable country. France has some of the most absurd, protectionist,
socialist, anti-market laws the world has ever seen. Hopefully they are
getting the message that their stodgy old world socialist world-view is self-
defeating and unproductive.

America has some problems, but there's a reason why they have a GDP 40x larger
than France with only 5x the population.

~~~
ArnoVW
I won't enter into the policy discussions about wealth distribution, and you
are right that the GDP per capita of the US is larger than that of Franc, but.
The difference is more that of 43K vs 59K. So not 900%.

In fact, the GDP per capita is 100$ less than that of the UK, and more than
that of, for example, Japan or South Korea.

Also of note may be that France, unlike the US, does not dispose of oil
resources, which makes comparisons not quite as simple.

[https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)...](https://en.wikipedia.org/wiki/List_of_countries_by_GDP_\(PPP\)_per_capita)

~~~
mruts
Sorry it's not 40x it's more like 10x for GDP. But there is a difference
between GDP/capita and PPP. If we're talking about standard of living PPP is a
good measure. But if we're just talking about "wealth" then I think GDP/capita
is a better measure. Or actually, just total GDP is probably a better measure
than per person.

~~~
ArnoVW
Even at nominal GDP it is 59k vs 39k, so 50% difference and not 100%.

And I'm not sure to understand why you prefer one mesure over the other. Pure
GDP does not take into account systemic issues, such as the cost of health
care or education. And the point of the discussion was the relevant merit of
various economical systems.

But I did not post in order to correct some semantic point. But rather to
explain the non-commented down votes.

In your original post you made an extraordinary claim, that was off by an
order of magnitude. I pointed this out, and instead of checking facts, you
downgraded your claim, even though a simple Google lookup would have been
enough to know that even that was wrong by 100%.

[https://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_(no...](https://en.m.wikipedia.org/wiki/List_of_countries_by_GDP_\(nominal\)_per_capita)

In my mind this is an example of why it is difficult to have meaningful debate
in our society. There is no point in debating if one or both parties are not
willing to challenge their understanding of the facts.

~~~
mruts
I’m not the one who originally posted. The 10x GDP is just based on raw GDP
numbers. I don’t think they’re biased. As are the population numbers.

~~~
marsokod
As of 2018, the US GDP is 7.34x the one of France, not 10x. And in 2019, the
US population is 4.91x bigger that France population, leading to a GDP per
capita being 1.50x higher, not 2x.

You cannot round numbers at 1 significant digit and use them for further
computations, that's butchering math.

