Tax Cheat Trail Leads to Hong Kong

The tax man is widening his probe against Swiss bank UBS, now targeting tax cheats allegedly hiding their income in Hong Kong, the Wall Street Journal writes this morning, scooping the field. "The U.S. crackdown on clients of UBS AG is widening into a global hunt," the newspaper writes, using the latest court documents to portray how the Swiss banking giant helped wealthy clients evade tax authorities by parking their money overseas and subsequently hiding the tracks. The newspaper says UBS went to "sophisticated efforts" to keep the income trail hidden from IRS auditors, for example, by funneling client funds "to a Swiss UBS account held in the name of a Hong Kong entity." The newspaper adds, "The Hong Kong link is important because the Justice Department and Internal Revenue Service are apparently using that as a clue of wrongdoing as they plow through some 250 names that UBS turned over to the U.S. government, say people familiar with the Justice Department probe."

Meanwhile, some Swiss banking experts are still grumbling over the deal cut last week between UBS and U.S. authorities. Their beef? After caving to the Americans, Swiss banks will be under pressure from other countries now to break the vaunted Swiss banking secrecy pact, they grouse. "There are two winners [from the deal]," Swiss banking expert Hans Geiger told Swiss weekly Sonntag, as quoted by Marketwatch.com. "UBS ... and the U.S. Internal Revenue Service [IRS]. Switzerland and our market place have lost. Now it's clear that Germany and Italy will increase pressure."

Staying overseas, this morning Japan reported it is the latest G8 economy to emerge from a recession—but just barely—thanks to a turnaround in exports and the benign effects of the government stimulus spending. The New York Times reports Japan's 0.9 percent second-quarter expansion (or, 3.7 percent growth on an annualized basis) is smack in line with forecasts (at least "in line" with the NYT forecast; Bloomberg says at that rate Japan failed to hit its target of surveyed economists). The NYT once again sounds an optimistic note that Japan's recovery, even if slight, signals "the possible end of the country’s deepest recession since World War II and brighten[s] prospects for a widespread global recovery." The Financial Times tallies which economic powers have joined the recovery club. After Japan, they include France, Germany, and Hong Kong. But nobody is banking on spectacular growth from Japan, noting that employment figures there still look weak for sustained growth. "We can safely say that Japan is out of recession but the strong growth of 3.7 per cent is not sustainable," Kyohei Morita, chief economist at Barclays Capital, tells the FT.

New York state's attorney general, Andrew Cuomo, has set his sights on a new scalp—the brokerage firm Charles Schwab Corp (SCHW). According to the WSJ, Cuomo's office is expected to file a lawsuit as soon as today against Schwab, "alleging civil fraud related to the brokerage firm's marketing and sales of auction-rate securities according to people familiar with the situation." The NY state AG's office approached Schwab a month ago, saying it would sue unless Schwab bought back the dud securities from investors "who were stuck with them when the market froze last year." Schwab, for its part, is already fighting back, saying nobody could have known the auction-rate securities market would tank. "The attorney general's approach is inconsistent with the law, basic fairness, and common sense," a Charles Schwab spokesman told the WSJ.

The Fiat 500, the subcompact automobile known in its home country simply as "la cinquecento," appears another step closer to hitting the streets of North America. The WSJ reports this morning that Fiat and Chrysler are "devising plans to produce the Italian auto maker's Fiat 500 subcompact at a Chrysler plant in Mexico, according to people familiar with the matter, while considering what other Fiat models to introduce to the U.S. market." Among the plans under consideration would be the production of "a Fiat-derived compact car slightly larger than the 500." If the Mexican plant is chosen as the center for production for the 500, the move would certainly not sit well with the UAW, the newspaper adds, particularly after the union ultimately lost $6 billion in health-care payments after Chrysler emerged from bankruptcy protection. "There is going to be political fall-out on anything in this kind of environment related to jobs," David Cole, chairman of the Center for Automotive Research, warned.

And finally, 3-D viewing technology is making a comeback, the WSJ writes, this time on the small screen. Satellite TV operator British Sky Broadcasting PLC is preparing to debut a specially dedicated 3-D television channel next year; experts say U.S. couch potatoes could also have a high-def 3-D channel in the next year. There are just a few catches—viewers will need specially-equipped TV sets, and, yes, the 3-D glasses are required.