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By Zachary Fagenson
FORT LAUDERDALE Fla. (Reuters) - A former top UBS executive on trial in South Florida for tax fraud was on a committee in charge of managing U.S. demands that the Swiss bank disclose secret offshore accounts, UBS's former head of cross-border business testified on Wednesday.
Raoul Weil, 54, who headed wealth management at Zurich-based UBS (VX:UBSN) (N:UBS) until his indictment, is charged in a Fort Lauderdale federal court with helping thousands of U.S. taxpayers hide up to $20 billion in assets in offshore accounts.
Weil, who faces up to five years in prison if convicted, is by far the highest-ranking Swiss banker to be charged in the United States. His trial culminates a more than 7-year battle with Switzerland on the abuse of its bank secrecy laws to help Americans avoid paying billions of dollars in taxes.
Prosecutors say Weil was fully aware of illegal offshore operations at Switzerland's largest bank and did nothing to stop them.
Weil's attorneys blame rogue bankers under him for the illegal activity and said offshore private banking was only a tiny fraction of his job. While UBS's offshore business totalled $20 billion in assets, the private banking unit overall manages several trillion globally.
Since 2009, the Justice Department has charged more than 70 taxpayers and 30 bankers and advisers in the probe, including several Swiss bankers who are set to testify at Weil's trial.
Hansruedi Schumacher, who formerly ran UBS's cross-border business, testified on Wednesday that Weil was part of a UBS committee overseeing efforts to handle an Internal Revenue Service programme launched in early 2000 to identify U.S. securities holders worldwide.
Under the programme, which scared many of the Swiss bank's clients, those who did not declare their holdings to U.S. tax authorities had to sell their U.S. securities or have 31 percent of their assets withheld by UBS.
Weil's name appeared in several emails between Schumacher and managers outlining ways to deal with the new regulation, according to evidence introduced by prosecutors on Wednesday.
"Is this something you thought he should be aware of?" asked prosecutor Jason Poole from the Justice Department's tax division.
"Yes, I did," said Schumacher, who told jurors he met Weil in 1996 and worked at UBS from the late 1990s until 2002.
Schumacher was indicted in August 2009 in South Florida for helping Americans evade taxes at UBS and Neue Zuercher Bank (NZB). He was initially declared a fugitive but is cooperating with the Justice Department, court documents show.
Weil was arrested in October 2013 while on vacation with his wife at an upscale hotel in the northern Italian city of Bologna. He pleaded not guilty last year after being extradited to the United States.
The trial, which is being closely watched by international media, is expected to last about four weeks, according to Judge James I. Cohn.
Defence attorney Aaron Marcu has slammed the credibility of government witnesses, including UBS's former top private banker for the Americas, Martin Liechti, who was ousted in 2009 after providing evidence to the United States.
Swiss bankers face a conundrum when they agree to aid U.S. prosecutors. Cooperating to get lighter sentences means violating Switzerland's strict banking secrecy and data privacy laws.
(Additional reporting by David Adams in Miami, and Joshua Franklin and Katherina Bart in Zurich; Editing by Richard Chang)