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A logo of the Swiss bank Wegelin is pictured at a building in Bern, in this Jan. 27, 2012 file photo. (MICHAEL BUHOLZER/REUTERS)
A logo of the Swiss bank Wegelin is pictured at a building in Bern, in this Jan. 27, 2012 file photo. (MICHAEL BUHOLZER/REUTERS)

Storied Swiss bank to close after pleading guilty in U.S. tax evasion case Add to ...

Wegelin & Co., the oldest Swiss private bank, said Thursday it would shut its doors permanently after more than two and a half centuries following its guilty plea to charges of helping wealthy Americans evade taxes through secret accounts.

The plea, in U.S. District Court in Manhattan, marks the death knell for one of Switzerland’s most storied banks. It is also a potentially major turning point in the battle by U.S. authorities against Swiss bank secrecy.

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The bank admitted to charges of conspiracy in helping Americans evade taxes on at least $1.2-billion (U.S.) for nearly a decade. Wegelin agreed to pay $57.8-million to the United States, including $20-million in restitution to the Internal Revenue Service.

Otto Bruderer, a managing partner at the bank, said in court that “Wegelin was aware that this conduct was wrong.”

Speaking in a thick Swiss-German accent, he said that “from about 2002 through about 2010, Wegelin agreed with certain U.S. taxpayers to evade the U.S. tax obligations of these U.S. taxpayer clients, who filed false tax returns with the IRS.”

When indicted last February, the first indictment of a foreign bank by U.S. authorities in recent history, Wegelin vowed to resist the charges. The bank, founded in 1741, was declared a fugitive from justice when its Swiss-based executives failed to appear in U.S. court.

The surprise plea effectively ends the U.S. case against Wegelin, one of the most aggressive bank crackdowns in U.S. history.

“Once the matter is finally concluded, Wegelin will cease to operate as a bank,” Wegelin said in a statement Thursday from its headquarters in the remote, small town of St. Gallen next to the Appenzell Alps near the German-Austrian border.

Wegelin, a partnership of Swiss private bankers, was already a shadow of its former self – it effectively broke itself up following the indictment last year by selling the non-U.S. portion of its business.

Dozens of Swiss bankers and their clients have been indicted in recent years, following a 2009 agreement by UBS AG, the largest Swiss bank, to enter into a deferred-prosecution agreement and pay a $780-million fine after admitting to criminal wrongdoing in selling tax-evasion services to wealthy Americans.

William Sharp, a tax lawyer in Tampa, Florida, with many American clients of Swiss banks, said Wegelin’s plea “should serve as a wake-up call” to the international banking community servicing U.S. clients to adopt measures to ensure compliance with U.S. law.

Sharp called Wegelin’s change of heart “shocking.”

Banks under criminal investigation by U.S. authorities in the wider probe include Credit Suisse Group, which disclosed last July it had received a target letter saying it was under a U.S. grand jury investigation.

Zurich-based Bank Julius Baer & Co. Ltd. and some cantonal, or regional, banks are also under scrutiny, sources familiar with the probes have previously told Reuters. So are U.K.-based HSBC Holdings PLC and three Israeli banks, Bank Hapoalim BM, Mizrahi-Tefahot Bank Ltd. and Bank Leumi Le-Israel BM, sources have also said previously. Those banks have not commented on the inquiries.

In a statement after the plea, Assistant U.S. Attorney General Kathryn Keneally said it was a top priority of the Justice Department “to find those who continue to shirk their tax obligations,” as well as those who help them and profit from it.

“The best deal now for these folks is to come in and ‘get right’ with the IRS, before either the IRS or the Justice Department finds them,” she said.

As part of the plea, Wegelin agreed to pay the $20-million in restitution to the IRS as well a civil forfeiture of $15.8-million, the U.S. Justice Department said.

Wegelin also agreed to pay an additional $22.05-million fine, the Justice Department said. U.S. District Judge Jed Rakoff, who must approve the monetary penalties, set a hearing in the case for March 4 for sentencing.

Last year, the U.S. government separately seized more than $16-million of Wegelin funds held in a UBS AG account in Stamford, Conn., via a separate civil forfeiture complaint.

Because Wegelin has no branches outside Switzerland, it used UBS for correspondent banking services, a standard industry practice, to handle money for U.S.-based clients.

In court papers, Mr. Bruderer said that Wegelin “believed it would not be prosecuted in the United States for this conduct because it had no branches or offices in the United States and because of its understanding that it acted in accordance with, and not in violation of, Swiss law and that such conduct was common in the Swiss banking industry.”

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