Probers Irked Over Holdout By Aide at UBS

By MEGHAN CLYNE
Staff Reporter
New York Sun
October 13, 2005

Frustrating and puzzling congressional investigators, a high-ranking Treasury Department official who later assumed a top post at the world's largest "wealth management" firm, UBS, has not been made available by the Swiss bank to answer questions about whether the firm possibly laundered billions of dollars for state sponsors of terrorism, congressional staff said yesterday.

The official, David Aufhauser, served as the Treasury Department's general counsel from March 2001 to November 2003, according to a UBS press release announcing his hiring at the firm. During that time, Mr. Aufhauser supervised 1,600 lawyers in several divisions of the department, including, among others, the Financial Crimes Enforcement Network, the Office of Terrorist Financing, and the Office of Foreign Assets Control, which, among its many activities, ensures adherence to the terms of America's economic sanctions, including the Cuban embargo.

It was in violation of those sanctions that Mr. Aufhauser's current employer, UBS, procured $5 billion in American banknotes for Cuba, Iran, Libya, and Yugoslavia as part of the Extended Custodial Inventory Program, run by the Federal Reserve Bank of New York. The Federal Reserve program, in cooperation with international banks, allowed clients to exchange old banknotes for new ones. One condition of the program was that American currency neither be distributed to nor accepted from nations against which America maintains economic sanctions.

When, in April 2003, American troops liberating Iraq found $762 million in American cash in hideouts belonging to Saddam Hussein, the banknotes were traced to UBS and the ECI program. In the process of probing the origins of the Iraqi cash - which UBS has told congressional investigators was initially sent to the Central Bank of Iran - American investigators subsequently discovered that the Swiss bank had also provided $3.9 billion in American currency for Cuba, $1 billion for Iran, $30 million for Libya, and less than $1 million for Yugoslavia. Cuba, Iran, and Libya appear on the State Department's official list of state sponsors of terrorism.

As a result of an investigation by the Federal Reserve Bank of New York in cooperation with the Department of the Treasury, UBS was censured by the Swiss Banking Commission, and paid a $100 million fine to the Federal Reserve in May 2004. The next month, Mr. Aufhauser was announced as the new global general counsel for UBS's investment bank and UBS's general counsel for North America.

Mr. Aufhauser had left the Treasury Department in November 2003, according to materials distributed by UBS, seven months after the discovery of the American cash in Iraq. He worked briefly for a Washington law firm, William & Connolly LLP - where he had spent his career between 1977 and 2001 as a securities litigator before joining the Treasury Department - before being brought on by UBS in June 2004.

Prior to his departure from the Treasury Department, Mr. Aufhauser had earned a reputation as a committed foe of money laundering and terrorist financing operations...

Labels: money laundering