HSBC CEO Gulliver kept millions in Swiss account while paying low HK taxes

Gulliver’s Swiss account had a balance of USD7.6 million in 2007

HSBC Holdings Plc, struggling to contain a political storm over the bank’s facilitation of tax evasion through its Swiss unit, said Chief Executive Officer Stuart Gulliver paid taxes after setting up his own Swiss account and keeping his legal residence in Hong Kong.
The bank, reacting to an article in the Guardian late Sunday, said in an e-mailed statement that Gulliver opened the account in 1998 to hold bonus payments while working in Hong Kong. He paid Hong Kong taxes on the bonuses there, and since moving to the U.K. in 2003, he has paid U.K. taxes on his earnings globally, it said.
“Mr. Gulliver voluntarily declared his Swiss account to U.K. tax authorities for a number of years,” HSBC said, without specifying when that began. A company spokesman declined to elaborate. The bank was set to report earnings yesterday in London.
HSBC has come under political fire after the publication of a report by the International Consortium of Investigative Journalists this month showed details of how its Swiss unit handled accounts for tax evaders and criminals in past years. Gulliver, 55, offered the company’s “sincerest apologies” in full-page ads in British newspapers last week. He said Europe’s largest lender has since toughened internal controls and cut some clients at the Swiss private bank.
Gulliver was listed as the beneficial owner of an account at HSBC Suisse in the name of Worcester Equities Inc, a company registered in Panama, the Guardian reported Sunday. His bonuses were paid through that entity until 2003, and the account had a balance of USD7.6 million in 2007, the newspaper said. While the publication detailed the account and his continuing use of Hong Kong as a residence, it didn’t accuse him of breaking laws.
“The Swiss account was set up in 1998 in the name of a Panamanian company for reasons of confidentiality, and this had no other purpose and provided no tax or other advantage,” HSBC said in the statement. “Full tax was paid in Hong Kong on the bonus payments.”
Since leaving Hong Kong for the U.K. in 2003, Gulliver has paid U.K. taxes on his worldwide earnings, minus a credit for taxes paid in the Asian city, according to the bank. In 2011, he moved the CEO’s office to London “in the best interests of the company,” rather than keeping it in Hong Kong where he would have ceased being a U.K. tax resident, the bank said.
HSBC is among a handful of banks to face probes in recent years for their roles in a Swiss banking system that let depositors conceal identities, and in many cases dodge taxes or launder ill-gotten cash. In 2013, HSBC reached a $1.9 billion deferred-prosecution deal with the U.S. Justice Department to resolve claims it enabled Latin American drug cartels to launder money.
The firm’s most recent woes stem from seven-year-old data stolen by Herve Falciani, a self-described whistle-blower. The information-technology worker pilfered client account details from HSBC’s Geneva office in 2008 and passed them to the French government. More detail about the data was released this month, prompting local authorities to search HSBC’s Geneva private-banking office last week.
Chairman Douglas Flint is set to face questions on Wednesday at a U.K. Parliament hearing over his role as finance director when the bank was found helping customers avoid taxes.
The company has multiplied its compliance workforce to more than 7,000 from 1,500 four years ago and is spending as much as $1 billion each year to boost internal controls, Flint has estimated. Staff were hired to ferret out wrongdoing and introduce automated systems to detect suspicious transactions.
HSBC, which traces its roots to the Hongkong and Shanghai Banking Corp., was required by British regulators to move to London from Hong Kong more than two decades ago following its acquisition of Midland Bank Plc as part of a push westward. Gulliver had moved to Hong Kong in 1980, becoming a permanent legal resident along with his wife, an Australian.
“It should not be a surprise that Mr. Gulliver, who has spent the majority of his nearly 35-year career at HSBC in Hong Kong, has made his home there,” the bank said. David Scheer, Bloomberg