Swiss banker describes secrecy from IRS in US tax evasion trial of ex-UBS executive Raoul Weil

They were known as the prized "black accounts," those held in Swiss banks by wealthy Americans who wanted to make sure their billions of dollars in assets were securely hidden from the IRS, a longtime banker testified Wednesday in the trial of a former senior executive at UBS AG.

Hans Schumacher, who also worked at UBS and other Swiss banks, was the first important prosecution witness against Raoul Weil, once the No. 3 executive at UBS. Weil is accused of conspiracy to defraud the U.S. government by helping thousands of rich Americans conceal some $20 billion in assets from the IRS between 2002 and 2008.

Schumacher has also been indicted in the U.S. on the same charge and appeared in the Weil trial under an agreement that his testimony can't be used against him in his own criminal case. Schumacher voluntarily flew from Switzerland to Miami last week to surrender to U.S. authorities and is free on $500,000 bail.

At UBS and other Swiss banks, Schumacher testified, there was an ingrained culture of secrecy that included use of code names, numbers and fake foreign corporations to hide the true account holders' identities. The Americans who didn't want their names disclosed to the IRS where known as the "black accounts," he said, and those who allowed disclosure were "white accounts."

"It was very confidential. Very wealthy individuals came to Switzerland to get that secrecy," Schumacher testified. "If you want to see Mickey Mouse, you have to go to Disney World. Switzerland was the safest place to hide their money."

UBS bankers never called their U.S. clients from Switzerland, which would leave a trail of phone numbers, he testified. They didn't send clients any mail. When they traveled to the U.S. for client meetings, they either sent hard-to-decipher bank statements ahead to hotels or hid them in luggage. Bankers changed hotels frequently to avoid suspicion and prying eyes. They had a second set of business cards bearing no trace of UBS.

"You tried to stay under the radar," Schumacher testified. "You don't want to be known. You didn't want to be detected."

For the rich clients, the reward was no taxes on profits for investments UBS was making for them with their hidden assets. For UBS, it was the steep fees for all these special services that made it all worthwhile.

"It was a win-win-win," Schumacher told jurors.

Weil, 54, faces up to five years in prison if convicted. He is the highest-ranking Swiss banker to be prosecuted under an ongoing IRS effort to crack down on tax evasion by U.S. taxpayers using foreign accounts. UBS itself paid a $780 million fine in 2009 to the U.S. and agreed to disclose the names of thousands of American account holders, many of whom have since been prosecuted.

Weil's attorneys contend that it was a rogue group of UBS bankers who handled the secret American accounts without his knowledge or direction.

Typically, federal prosecutors offer reduced prison time to criminal suspects who cooperate such as Schumacher. But on the witness stand Wednesday, he said no plea deal had been struck.

"No, I don't have any agreement. I'm just here to tell the truth. I know what I did. I have to face up to it," he said.

Weil's trial is expected to last several more weeks.

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