Senate report says wealthy use foreign banks to evade taxes

He told the subcommittee roughly 80 UBS bankers traveled to the U.S. four to six times per year to pitch the bank's secretive services to well-heeled clients at such upscale events as Miami's annual Art Basel fair.

"It's really, "Where do the rich people hang out, go and talk to them,' " Birkenfeld told the Senate staffers.

Many U.S. clients were motivated by "tax evasion," Birkenfeld told Senate investigators, adding that both sides "clearly understood" no U.S. taxes would be paid on the overseas accounts.

The bankers used encrypted computers, devised codes for their clients' identities, told Customs agents the trips were for vacations, not business, and advised clients to place jewelry, paintings and other assets in Swiss safe deposit boxes, Birkenfeld testified in June, when he pleaded guilty to helping California billionaire Igor Olenicoff evade $7.2 million in U.S. taxes.

Separately, the Senate panel reported that in 2001 and 2002 LGT's trust office in Liechtenstein managed roughly $7 billion in assets and more than 3,000 offshore entities for clients, including an unknown number of Americans.

Former LGT computer technician Heinrich Kieber helped tax investigators around the world flesh out those statistics by handing over data on approximately 1,400 of the bank's clients. In February, German authorities used the information to open tax probes of several individuals and arrest at least one businessman.

Kieber is in hiding as Liechtenstein authorities seek him on charges of violating secrecy laws. He took part in a pre-hearing interview with Senate investigators — who didn't identify him by name in the report.

Subcommittee investigators also obtained more than 12,000 pages of internal LGT documents from the mid-1990s through 2002 regarding some of the bank's clients with connections to the United States.

Some of them "appear to have used the accounts to hide assets and dodge U.S. taxes," the subcommittee said. Case studies released by the panel include:

•The Lowy family largely controls the Westfield Group, the self-described "world's largest listed retail property group by equity market capitalization." Frank Lowy, an Australian citizen the report said was once forced to pay a large settlement to that country's tax authorities, is the company's main shareholder and chairman. Three sons hold Westfield positions, including Peter Lowy, an American citizen who heads the firm's U.S. operations.

According to the Senate report, the Lowys had several offshore entities, including the Luperla Foundation, an LGT-created vehicle that in 2001 held about $68 million in assets. A Delaware corporation called Beverly Park was given authority to name Luperla's beneficiaries.

LGT records examined by Senate investigators showed the Frank Lowy Family Trust controlled Beverly Park through three other entities. Moreover, Beverly Park's address was the Westfield Group's U.S. headquarters in California.

IRS investigators contacted the Lowys about Beverly Park last year as part of an ongoing investigation, the subcommittee reported. Family members and Beverly Park officers told the IRS the corporation had no ties to any foreign entities, the Senate report said.

Although the subcommittee listed Peter Lowy as a witness for today's hearing, he is not expected to testify.

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