Archive for April, 2009

Switzerland asks U.S. court to halt UBS tax case (Reuters)

Thursday, April 30th, 2009 | Finance News

MIAMI (Reuters) –
Switzerland urged a U.S. court on Thursday to reject demands by U.S. tax authorities for information about U.S. clients of UBS AG, saying disclosure would violate its sovereignty and international law.

The Swiss government's petition came in a federal court filing in Miami, where the U.S. Internal Revenue Service is seeking to force UBS (UBSN.VX) (UBS.N) to reveal the identities of 52,000 Americans suspected of using accounts at the bank to hide about $14.8 billion of assets and evade U.S. taxes.

"Switzerland's laws prohibit the release of confidential information to foreign governments when the request has not been made through authorized intergovernmental channels," the government said in its filing.

"If the court were to order UBS to produce evidence from Switzerland, and backed that order with coercive powers, the court would be substituting its own authority for that of the competent Swiss authorities, and therefore would violate Swiss sovereignty and international law," it said.

Echoing a similar filing earlier in the day from UBS, it said Swiss government law also specifically prohibits release of the information demanded by the IRS.

UBS acknowledged in February that it helped U.S. clients conceal assets from their government. It agreed to pay a $780 million fine and has since identified about 320 of its American clients.

In its high-profile legal showdown with the Zurich bank, the IRS is employing a legal tool known as a John Doe summons, which allows it to investigate tax fraud by individuals whose identities are unknown because of bank secrecy.


"UBS does not dispute the legitimacy of the IRS's interest in tax enforcement," the bank said in its court filing. It said exchange of banking information should be handled through pre-existing legal treaties and not through the courts, however.

The bank said the summons, which it called unprecedented in its breadth, risked disrupting "the careful balance between the U.S. interest in receiving tax related information from Switzerland and the Swiss interest in preserving its long tradition of financial privacy."

In its separate filing, the Swiss government branded the summons an overly broad "fishing expedition" type request that was clearly inconsistent with existing treaties.

Federal District Court Judge Alan Gold in Miami will determine whether the summons should be enforced. The case could set an important legal precedent, since UBS is the first foreign bank to be served with a John Doe summons.

The IRS has pushed ahead with its demand for enforcement at a time when political leaders in the United States and elsewhere, and even Pope Benedict, have called for a crackdown on secretive tax havens and offshore financial centers.

Switzerland, which is trying to defend its jealousy guarded tradition of bank secrecy, asked the United States last weekend to drop the case against UBS in return for a new tax accord with Washington.

Negotiations on the new agreement began on Tuesday. But in its statement to the court, the Swiss government said it had already warned the U.S. State Department that the threatened enforcement of the summons against UBS could scuttle the negotiations.

"The court should refrain from issuing an order that would interfere with those negotiations and the more general intergovernmental relations between Switzerland and the United States," the Swiss government told the court.

(Additional reporting by Pascal Fletcher and Jim Loney; Editing by Bernard Orr)


Freddie Mac pays $700K to former exec’s survivors (AP)

Thursday, April 30th, 2009 | Finance News

WASHINGTON – Freddie Mac is paying out more than $700,000 to the family of David Kellermann, the mortgage finance company's former acting chief financial officer who died last week in an apparent suicide, the company disclosed Thursday.

The McLean, Va.-based company said in a Securities and Exchange Commission filing that Kellermann's survivors are due to receive $703,400 in retention and stock awards.

Freddie Mac was seized by the government last September. The company, which owns or guarantees about 13 million mortgages, lost more than $50 billion last year, and the Treasury Department has pumped in $45 billion to keep the company afloat.

Richard Syron, Freddie Mac's chief executive until he was ousted by the government last September, received compensation valued at $13.1 million last year, according to Associated Press calculations of data filed with regulators. However, the bulk of that package came in the form of stock awards valued at about $10 million when they were granted in March 2008, when the company's shares were trading around $20 per share.

Their value has dropped precipitously, closing at 79 cents per share on Thursday.

Syron received combined salary and bonus of $2.6 million last year, down from $4.65 million in 2007. Syron also received retirement benefits and other "perks" valued at more than $500,000, down from about $664,000 a year earlier.

The AP formula is designed to isolate the value the company's board placed on the executive's total compensation during the last fiscal year. It includes salary, bonus, performance-related bonuses, perks, above-market returns on deferred compensation and the estimated value of stock options and awards granted during the year.

The calculations don't include changes in the present value of pension benefits, and they sometimes differ from the totals companies list in the summary compensation table of proxy statements filed with the Securities and Exchange Commission. Those totals reflect the size of the accounting charge taken for the executive's compensation in the previous fiscal year.

The company's first government-appointed chief executive, David Moffett, received $338,000 in salary and perks for his work in the September-through-December period. He later left the company in March 2009, Freddie Mac said, but will return as a consultant in the wake of Kellermann's death.


Freddie Mac pays 2008 bonuses, honors Kellermann’s (Reuters)

Thursday, April 30th, 2009 | Finance News

NEW YORK (Reuters) –
Freddie Mac, the U.S. mortgage finance giant, on Thursday said it paid $1.3 million in retention bonuses to three executives in late 2008 and so far this year, including a full payout of the award promised to its acting chief financial officer before his shocking death, according to a Securities and Exchange Commission filing.

Freddie Mac paid CFO David Kellermann the first $170,000 installment of the $850,000 bonus in 2008, and honored the rest of the agreement following his apparent suicide on April 22, according to a spokeswoman.

Paul George, executive vice president of human resources and corporate services, and Robert Bostrom, executive vice president and general counsel, received the first installments of controversial retention bonuses approved by Freddie Mac's regulator of $260,000 and $180,000, respectively. Their full bonus payouts through 2010 would be $1.3 million and $900,000.

The retention bonuses came amid an exodus of top management at Freddie Mac after the government forced the company into conservatorship, fearing deep losses from the housing crisis would hurt its ability to support the U.S. housing market. The company is the second-largest provider of residential mortgage money, and now a top provider of many commercial properties.

Executives that left the firm took home millions of dollars in compensation in 2008.

Former Chief Executive Officer Richard Syron earned $4.1 million in total compensation last year, down from more than $18 million in 2007, according to the filing. Gary Kain, the senior vice president of investments and capital markets, quit in January after receiving $3.7 million in 2008.

Among others who no longer work at the McLean, Virginia-based company, Kellermann earned $1.2 million in 2008, and Anthony "Buddy" Piszel, his predecessor, earned $909,051. Patricia Cook, former chief business officer, took home nearly $2 million, and Kirk Die, former auditor, earned $2.2 million.

David Moffett, who replaced Syron in September and resigned six months later, drew $283,269 of his $900,000 annual salary in 2008, plus $54,812 in other compensation. John Koskinen, who was non-executive chairman, replaced Moffett as interim CEO.

Kellermann, 41, and a 16-year veteran of Freddie Mac, played a key role in navigating past accounting troubles and answering queries of regulators and investors as the company struggled to extricate itself from the grips of the housing downturn. Just before his death, he told company officials he felt overwhelmed and was granted time off just before he died.

Of current executives, Bostrom earned a total $1.9 million in 2008, and George's compensation totaled $2.3 million.

Executives' pay includes no cash bonuses or incentive awards for 2008, the company said.

(Reporting by Al Yoon; Editing Bernard Orr)