Update 3: The Myth of Trickle Down Economics is Shattered

by: Libby Shaw

Sat Feb 21, 2009 at 03:39 PM CST

This is a work in progress, folks. The updates follow at the bottom.

Next time a politician extols the virtues of trickle down economics put your hands over your ears and yell NO, NO, NO. Whether they know it or not, any politician who pitches the spin that unfettered fat cat wealth will trickle down to the masses is lying. Nothing is trickling anywhere. The fat cats are not spending their gazillions. They are hiding and hoarding their money for themselves.

It seems that the biggest fat cats of them all in this country and others, those who despise paying their taxes above everything else, have found safe havens in which they have hidden their treasures from the feds. A once renowned Swiss bank helped them do it. The whistle blower who outed the scheme at a U.S. Senate hearing last July, had feared for his life. He now lives in a
witness protection program.  The article reveals how the Senate hearing had all of the trappings of a Mafia movie.

Kieber, declared a fugitive by Liechtenstein, is living in an undisclosed location, reportedly as part of a witness protection program, after providing information to government officials in England, Germany, the United States and other countries on their citizens who hid billions in wealth through the bank. The German government has admitted to paying him millions for the data.  

In his videotaped testimony, Kieber described stumbling across the bank's secrecy schemes while working on a document conversion project several years ago.

"Going through thousands of documents. . . I got the very clear picture" of the "tricks" employed by the bank to help clients dodge tax collectors, creditors, even "international law enforcement agencies," he said.

According to the New York Times:

On Feb. 18, 2009, UBS, the largest bank in Switzerland, agreed to divulge the names of well-heeled Americans whom the authorities suspect of using offshore accounts at the bank to evade taxes. The bank admitted conspiring to defraud the Internal Revenue Service and agreed to pay $780 million to settle a sweeping federal investigation into its activities.

Phil Gramm, by the way, the guy who called us a nation of whiners, served as vice chairman of UBS until April, 2008.  Gramm also played a key role in obtaining a loophole, called the Commodity Futures Modernization Act, for Enron.
Wendy Gramm, Phil's wife, sat on the Board and served on the Audit Committee of Enron. Before the firm's meltdown, Gramm sold her 10,256 shares of Enron stock for $276,912.

The very thought that Phil Gramm the creep could now be the Treasury Secretary sends chills up my spine.

"We have sort of become a nation of whiners. You just hear this constant whining, complaining about a loss of competitiveness, America in decline," the former Texas senator said. "You've heard of mental depression; this is a mental recession."

Jackass. Gramm also thought CEO's and Wall Street bankers were underpaid.

Gramm's former bank, UBS located safe havens in the Caribbean where the tax dodgers could hide their money.  

A July 2004 UBS memo revealed in a court document filed by the Justice Department referred to a UBS plan to help rich customers evade taxes by hiding money in offshore havens like the Bahamas.

In a follow up article, the New York Times reveals that 52,000 Americans may be involved in this scheme.  Wow.  That is one hell of a lot of tax cheats.

That message, sent to the bank's executives in July 2004, referred to a UBS plan to help rich customers evade taxes by hiding money in offshore havens like the Bahamas.

The memo, along with dozens of e-mail messages like it, were disclosed on Thursday in a blistering court document filed by the Justice Department, which sought to compel UBS, based in Switzerland, to divulge the identities of 52,000 Americans whom the authorities suspect of using secret offshore accounts at the bank to dodge taxes.

The amount of money hidden is simply breathtaking in its scope.  

In the criminal investigation that led to this week's settlement, the Justice Department had zeroed in on about 19,000 wealthy Americans. Those UBS customers had a combined $20 billion in assets at the bank, and may have evaded $300 million a year in federal taxes through UBS's undeclared offshore private banking services.

The IRS wants UBS to disclose the identities and accounts of the tax cheaters.

But the I.R.S. has been conducting a parallel investigation, and on Thursday the Justice Department asked a federal judge to require UBS to disclose to the I.R.S. the identities and records of the 52,000 clients. In the past, UBS has suggested that the 19,000 accounts under investigation, which it is now closing, were the extent of its undeclared offshore banking services.

As can be expected, the UBS will work hard to protect its fat cat clients.

UBS, the world's largest private bank, said it would vigorously challenge the efforts.

The DOJ does have the names of 250 cheaters. As one would imagine there is much speculation in the netroots as to who these cheaters are.

As part of Wednesday's settlement, the Justice Department received the names and bank records of about 250 wealthy American clients of UBS.  According to people briefed on the matter, the department was preparing to indict several on charges of offshore tax evasion. A Florida federal judge is expected to approve the enforcement request in three to six months, which allows UBS time to appeal and ask for extensions.

UBS has found itself in one hell of a pickle.

If UBS does not comply with the approved summons, it could be in default of its deferred prosecution agreement, potentially opening itself and its senior executives to indictment.

Samuel Buell, who helped to prosecute Enron and now teaches criminal and securities law at Washington University in St. Louis, said that UBS's declaration that it would fight the government's latest efforts suggested the bank was caught in a bind. Federal prosecutors want it to lift the veil of Swiss banking secrecy, but Swiss financial privacy laws punish the disclosure of client names.

The scope of this fat cat theft is mind boggling.  If the feds can recoup all of the unpaid back taxes with added and significant penalties, our national treasury will be handsomely replenished after eight years of Bush Co. looting.  The DOJ Press release can be found here.

Now we finally know why trickle down economics is a myth.  The wealth does not trickle down because it is being hidden and therefore hoarded by the fat cats.  It isn't trickling anywhere.

Update 1: The Swiss and UBS stonewall to protect its fat cat clients.  According to CNN:

http://money.cnn.com/2009/02/2...

Swiss court halts turnover of UBS data
Attorney for Swiss regulators claims disclosure off account information by the Swiss banking giant accused of aiding U.S. tax evaders would harm customers.

Despite the fact that the "harmed customers" are U.S. criminal tax cheaters, the DOJ now has a huge fight on its hands.  Thanks a lot, Switzerland.

Update 2: In a diary posted by diarist Devilstower late this afternoon on Daily Kos it seems that the Bush Administration signed a "get out of jail free card" with UBS.  In other words, the Bush Administration gave UBS the green light to hide the names of the tax evaders.

In its filing, UBS argued that it signed an agreement with the IRS in 2001 that allowed it serve as a "Qualified Intermediary" that would permit it to withhold the identities of U.S. taxpayers from the federal tax collectors.

Phil Gramm made it happen.  

Ladies and gentlemen, Phil Gramm. Exemplar of Republican economic policy and the author of our economy.

I think we have a good idea of who these tax evaders might be.

When they're done, can we send Gramm the bill for our economy?

I'll keep you posted on further updates.