Wegelin & Co.

Wegelin & Company.
Kommanditgesellschaft
Industry Financial services
Founded 1741 (1741)
Founder Caspar Zyli
Defunct 2013 (2013)
Headquarters Museumstrasse 1, St. Gallen, Switzerland
Area served
 Global
Key people
 Konrad Hummler (Managing Partner)
Products
Number of employees
  • c. 700 (As of 2011)
  • 15 (As of 2012)

Wegelin & Co. is a now-defunct bank that was located in St. Gallen in the Canton of St. Gallen in Switzerland, and specialized in private banking and asset management.[1][2][3]

Between 2002 and 2010, Wegelin & Co. assisted citizens of the United States in evading taxes on assets totalling over $1.2 billion. In early 2012, Wegelin & Co. transferred all its non-US activities, clients, and assets, and almost its entire staff, to its subsidiary Notenstein Privatbank. Notenstein Privatbank was subsequently sold to the Raiffeisen banking group. [4][5]

In January 2013, the reduced Wegelin pleaded guilty to conspiracy in a New York court to assisting more than 100 American citizens to hide $1.2 billion from the Internal Revenue Service over a 10-year period. Although the bank's practice is legal under Swiss law, the bank agreed to pay $57.8 million (£36m; €44m, or about 5% of the $1.2 billion) in fines to US authorities. At about the same time that the plea agreement was announced, Wegelin & Co. declared that it would close. The Notenstein Privatbank continues to operate from the former Wegelin & Co. headquarters with its former 700 employees. conspiracy in helping Americans evade taxes on at least $1.2 billion for nearly a decade. Wegelin agreed to pay $57.8 million to the United States in restitution and fines. Otto Bruderer, a managing partner at the bank, said in court that "Wegelin was aware that this conduct was wrong." [6][4][7][8][9][10][11]

Founded by Caspar Zyli in 1741, the company was renamed Wegelin & Co. in 1893. The bank's legal name changed multiple times by incorporating the names of the senior personally liable partners. As of 2013, the bank's name was Wegelin & Co. Privatbankiers, Gesellschafter Bruderer, Hummler, Tolle & Co. [12] At the time of its closing, it was the oldest bank in Switzerland and the 13th oldest in the world.

History

Caspar Zyli
Emil Wegelin (c. 1880s)

The bank was founded as a partnership by a linen-cloth merchant by the name of Caspar Zyli (1717–1758), and was originally named Leinentuchhandel und Speditionshandlung ("Linen trade and freight forwarder"). The company provided banking services from the beginning. In 1798 Zyli's son acquired the Nothveststein building. In 1860 Zyli's nephew Emil Wegelin-Wild became a partner. He concentrated the firm's activities on asset management. The firm was converted to a Kommanditgesellschaft in 1893. It changed its name to the current name in 1893, which originated from Emil Wegelin-Wild. [13][14]

In 1913 a case involving an amount of about $250,000 owed to the bank reached the New York Supreme Court's Appellate Division.[15]

In the 1990s the bank underwent a management buyout orchestrated by one of its managing partners, Konrad Hummler. Eight partners controlled 80% of the bank, while the Wegelin family owned the other 20%.[14] This management structure was for the most part maintained until the bank closed. As of 2013 the personally liable partners were Otto Bruderer, Konrad Hummler, Steffen Tolle, Michele Moor, Christian Raubach and Christian Hafner.

The bank grew from a small bank with only 30 employees in 1990 to 700 employees and 13 offices as of 2011. New offices were opened in Zurich (1998), Lugano (2000), Bern (2002), Basel, Geneva and Locarno (all 2007), Chur (2009), Lucerne (2010), Winterthur (2011) and other cities.

By 2003 the firm was privately owned by five people, and remained private as of January 2012. [16][17][18][19]

Organization

All of the offices and branches of Wegelin & Co. are located in Switzerland, and the bank is headquartered in St. Gallen. Until its 2012 restructuring, the bank employed about 700 staff and had offices in Basel, Bern, Chiasso, Chur, Geneva, Lausanne, Locarno, Lugano, Lucerne, Schaffhausen, Winterthur and Zurich. Many employees come from the local University of St. Gallen, which has a good relationship with the bank. The bank managed client assets of over CHF 24 billion (figures dated to January 2012), and according to another source was also managing CHF 3 billion in pensions and moneys of private clients. [20][21][22][14][23][24][25]

Headquarters of Notenstein Privatbank, successor to Wegelin & Co. in St. Gallen

In 2008 the firm was listed as an organisation whose size and manner of organisation suited the description of "boutique personal wealth management". The firm was relatively small, and accordingly operated within a specialized niche market. [26][27]

Court case

American courts convicted Wegelin & Co. of money-laundering and tax evasion, and accordingly the bank's correspondent account held by UBS AG in Connecticut was fined $16 million by the federal courts. The bank argued that it only had branches in Switzerland, not the United States, and was, therefore only subject to Swiss law. In January 2013, Wegelin & Co. admitted to allowing more than 100 American citizens to hide approximately $1.2 billion from the Internal Revenue Service for almost 10 years. The bank agreed to pay $57.8m (£36m; 44m euros) in fines to US authorities: a restitution of $20 million, asset forfeiture of $15.8 million, and $22.05 million in other fines. [3][28][8]

In the New York court, the bank's representatives said the bank's practice was legal under Swiss law and common practice in Swiss banking, but admitted that their US customers violated the US law.[6]

"Wegelin was aware that this conduct (of their customers) was wrong ... From about 2002 through to about 2010, Wegelin agreed with certain US taxpayers to evade the US tax obligations of these US taxpayer clients, who filed false tax returns with the IRS."—Otto Bruderer, a manager of Wegelin & Co. in NY court.[4]

After pleading guilty in a New York court to helping Americans evade their taxes, the bank announced that it would close permanently. It was the first non-American bank to plead guilty to tax evasion charges in the United States.[7]

Although it paid millions in fines, a lawyer involved in previous prosecutions of Swiss banks noted, "It is unclear whether the bank was required to turn over American client names who held secret Swiss bank accounts."[8]

Restructuring

According to Reuters, "At the end of [January 2012], 270-year-old Wegelin said it had moved most of its employees, along with clients and assets of 21 billion Swiss francs, to Notenstein Privatbank," just a week prior to being inculpated, on 3 February 2012. Thus, the bank managed to transfer most of its business activities and employees—all non US related—to a legally different entity, Notenstein Privatbank, established by Wegelin & Co. as a subsidiary in 1968, but legally distinct. This subsidiary was also based in the same Nothveststein building, as the Wegelin & Co.'s employees were. The Notenstein Privatbank continues to operate from the former Wegelin & Co. headquarters with Wegelin's former 700 employees.[29][9][10] Also, while under a different name and legal identity, the bank's business continues with little impact.

After the transfer of the bulk of its activities including about 700 employees to Notenstein Privatbank, Wegelin & Co. only had 15 remaining employees as of February 2012.[30]

Impact

Anthony Michael Sabino, professor at St. John's University's Peter J. Tobin College of Business noted, "Big banks have always been deemed off-limits for criminal prosecution. [The Wegelin case] teaches a lesson to small and mid-sized players but in sad contrast it sends the wrong message to big banks. That they can hide money, be caught, pay a fine and go back to business as usual."[31] In reality, larger banks such as UBS are also being investigated.

Some banks are considering route taken by banking giant UBS in 2009, in which the bank admitted encouraging tax evasion and gave the details of more than 4,000 US account holders to the US authorities, together with a hefty $780m compensation payment. "The message for other Swiss banks seems pretty clear. Either the secrecy goes, or the bank goes."[32]

See also

References

  1. ↑ Van Voris, Rob (25 April 2012). "Wegelin & Co. Must Forfeit $16 Million, U.S. Judge Rules". Bloomberg. Retrieved 4 January 2013.
  2. ↑ "US tax scandal brings down Wegelin". Swiss Broadcasting Corporation. 27 January 2012. Retrieved 10 July 2012.
  3. 1 2 "Raiffeisen Buys Bank Wegelin's Non-US Operation". The Wall Street Journal. 27 January 2012. Retrieved 10 July 2012.
  4. 1 2 3 Neate, Ruper (4 January 2013), "Oldest Swiss bank Wegelin to close after admitting aiding US tax evasion", The Guardian
  5. ↑ "Wegelin buyer Raiffeisen cuts US client ties". Reuters. 5 February 2012. Retrieved 4 January 2013.
  6. 1 2 Foulkes, Imogen. "Swiss banks' unease over Wegelin". BBC. Retrieved 6 January 2013.
  7. 1 2 "Swiss bank Wegelin to close after US tax evasion fine". BBC. 4 January 2013. Retrieved 4 January 2013.
  8. 1 2 3 "Switzerland's oldest bank Wegelin to close after pleading guilty to aiding US tax evasion". The Daily Telegraph. 4 January 2013. Retrieved 4 January 2013.
  9. 1 2 History: From "Nothveststeain" to Notestein Private Bank, Notestein.ch, 2013
  10. 1 2 Notenstein at a Glance, Notestein, 2013
  11. ↑ http://www.reuters.com/article/2013/01/04/us-swissbank-wegelin-idUSBRE9020O020130104#81HsYlpb0bTmBS1O.99
  12. ↑ "Handelsregister des Kantons St. Gallen". Powernet. Retrieved 7 January 2013.
  13. ↑ The Bankers' almanac and year book: Volume 2 1992 - Retrieved 11 July 2012 →
  14. 1 2 3 Bain, David (14 April 2008). "Wegelin emerges as Switzerland's best-kept secret". Financial News. Retrieved 11 July 2012.
  15. ↑ New York (State). Supreme Court. Appellate Division - Reports of cases heard and determined in the Appellate Division of ...: Volume 154; Volume 154 (1913) - "DEAR SIRS. — We wish to inform you for your own benefit that the firm as per attached slip, is in a bad financial condition, they owe their bankers (commission house) nearly $250000, ..."
  16. ↑ A Thierstein, EW Schamp - Innovation, finance, and space Institut für Wirtschafts- und Sozialgeographie, Johann Wolfgang Goethe-Universität, 2003 →
  17. ↑ S Blankson - The Practical Guide to Total Financial Freedom, Volume 5 Lulu Press Incorporated, 30 June 2005. Retrieved 17 July 2012 ISBN 1411620542
  18. ↑ CUREM (Center for Urban & Real Estate Management) Zurich - Immobilienwirtschaft aktuell: Beiträge zur immobilienwirtschaftlichen Forschung 2011 vdf Hochschulverlag AG, 2011. Retrieved 17 July 2012 ISBN 3728133876
  19. ↑ The united States Dept. of Justice 2 February 2012. Retrieved 17 July 2012
  20. ↑ The united States Dept. of Justice - 2 February 2012
  21. ↑ schweizer-banken.info. Retrieved 10 July 2012
  22. ↑ "Company Overview of Wegelin & Co.". Bloomberg. 2012. Retrieved 10 July 2012.
  23. ↑ website citing www.swift-switzerland.ch as source of information. Retrieved 11 July 2012
  24. ↑ "Wegelin & Co.". BanksDaily. 25 January 2012. Retrieved 11 January 2012.
  25. ↑ D Stevenson - The Financial Times Guide to Exchange Traded Funds and Index Funds: How to Use Tracker Funds in Your Investment Portfolio Pearson Education, 16 February 2010. Retrieved 11 July 2012 ISBN 0273727834
  26. ↑ written and published by the Essvale Corporation Limited 2008 - Business Knowledge for I.T. in Private Wealth Management Bizle professional series Retrieved 17 July 2012 ISBN 0955412498
  27. ↑ D Maude - Global Private Banking and Wealth Management: The New Realities John Wiley & Sons, 2 March 2010. Retrieved 17 July 2012 ISBN 0470687819
  28. ↑ L Browning 3 February 2012 Reuters. Retrieved 10 July 2012
  29. ↑ "Wegelin buyer Raiffeisen cuts US client ties". Reuters. 5 February 2012. Retrieved 4 January 2013.
  30. ↑ "213 Schritte in den Untergang" (in German). WOZ. 2012. Retrieved 6 January 2013.
  31. ↑ Touryalai, Halah (4 January 2013), "Tale Of Two Swiss Banks: Why Wegelin Failed And UBS Survived Tax Evasion Charges", Forbes
  32. ↑ http://www.bbc.com/news/business-20909168

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