Ethics,
Sustainability, and Social Responsibility
UBS, a venerable Swiss banking institution
with global business activities, experienced the significant implications that
political factors can have on the bottom line. The U.S. government alleged that
by advertising its “tax savings” advantages to U.S. clients, UBS aided
wealthyAmericans in siphoning off billions of dollars to a safe haven that the
IRS cannot touch. The government requested from UBS the names of 52,000 U.S.
citizens who it suspected were tax evaders.
Initially, UBS declined to release
names, citing Swiss banking laws and regulations thatguarantee the privacy of
customers. However, UBS was in a lose–lose situation: If it resisted the IRS,
it risked losing its U.S. banking license. If it disclosed names of its
customers, it would break the traditional Swiss banking secrecy and potentially
violate Swiss law, which makes it a felony to improperly disclose client
information. In 2009, after multiple rounds of intense negotiations, UBS
finally relented to significant pressure by the U.S. government and released
the names of 4,450 U.S. citizens who are suspected to have evaded taxes.
The
U.S. government’s case against UBS was helped immensely by a former employee at
UBS who cooperated with prosecutors on details of how such transactions occur.
The “whistle- blower,” a U.S. citizen, has been lauded for his help in the
investigation.
Yet, in January 2010 he also began serving a 40-month prison
sentence for his own guilty plea for helping his clients at UBS evade taxes.46
Some in the industry believe such a surprisingly long prison term, despite his
cooperation with investigators, will dramatically reduce motivation for other
potential whistle- blowers to come forward.
a. What
is the proper role for a multinational firm in cases where government
regulations across countries are in conflict?
For example, UBS executives
claimed that releasing any names of U.S. customers would violate Swiss banking
laws. A compromise was laterreached that only the names of customers suspected
of illegal activity were released.
b. What
is the responsibility of individual employees to their employers and to their
governments when there seems to be a conflict?
