UBS UPDATE: Swiss & US Government Reach Confidential Settlement In Tax Evasion/Bank Secrecy Case Involving 52,000 Names

An agreement reached Friday between the Swiss and US governments prevents an interesting trial proceeding today. On Friday, U.S. District Judge Alan S. Gold told the parties at a hearing that it was the last chance for to strike a deal before trial would begin Monday.

Just a few weeks ago, the Swiss government made it clear that their long-standing bank secrecy laws do not allow UBS to disclose information wanted by the Americans; Swiss bank account holders who are American citizens.

"The US civil proceedings against UBS are to be settled out of court after Switzerland and the USA reached an Agreement in Principle on Friday," Swiss Federal Department of Foreign Affairs (FDFA) said in a statement on Friday.

The dispute involves about 52,000 Americans the U.S. believes are hiding billions of dollars of assets possibly evading taxes. Swiss government and the UBS bank say the names cannot be disclosed without violating long-standing Swiss bank secrecy laws.

In February, UBS had paid USD 780 million to the US government to settle criminal charges related allegations of the bank helping Americans in tax evasion.



Check out the LA Times article describing the time line of legal events this past year.
http://www.latimes.com/business/nationworld/wire/sns-ap-eu-ubs-timeline,0,7323298.story


May 2008: Authorities in the United States begin investigating the Switzerland-based services UBS offers to customers living in the United States. UBS manager Martin Liechti is detained as a witness in the United States.

June 19, 2008: Former UBS client adviser Bradley Birkenfeld admits to a U.S. District Court in Fort Lauderdale, Florida, to assisting tax evasion.

June 30, 2008: The U.S. Department of Justice applies to a U.S. court in Miami for the Internal Revenue Service to be allowed to issue a "John Doe" summons for the Swiss to provide information about American clients of UBS without singling them out by name. The court approves the request a day later.

July 17, 2008: The Swiss government receives a formal request for assistance from the IRS to help uncover UBS clients involved in tax fraud. UBS manager Mark Branson apologizes to a U.S. Senate panel for the bank's failings and announces that UBS will accelerate its withdrawal from
the U.S. cross-border business.

Nov. 12, 2008: A U.S. court in Miami charges senior UBS manager Raoul Weil with conspiracy to commit tax fraud.

Feb. 18, 2009: UBS reaches a settlement with the Justice Department and the U.S. Securities and Exchange Commission in a U.S. District Court, agreeing to pay $780 million dollars in fines, penalties, interest and restitution. On the same day Swiss officials give U.S. authorities files on 255 American clients suspected by the U.S. of tax fraud without allowing for the right of appeal required under Switzerland's banking secrecy law.

Feb. 19, 2009: The IRS submits the John Doe summons in a civil lawsuit in Miami, asking for the details on 52,000 UBS clients to be handed over.

March 13, 2009: Threatened with international sanctions, the Swiss government agrees to drop the distinction between tax fraud and tax evasion when dealing with foreign requests for legal assistance. Until then Switzerland had refused to provide information to other countries in cases of alleged tax evasion, which is an administrative offense in Switzerland but not a felony.

June 18, 2009: Switzerland and the United States agree on a new double taxation accord to increase Swiss cooperation in U.S. tax evasion probes.

July 2009: UBS freezes the accounts of U.S. offshore clients who failed to act on a letter asking them to close their accounts or transfer funds to a U.S.-supervised unit of the bank.

July 7, 2009: The Swiss government announces that it may seize UBS customer files to prevent them from being handed over to the United States.

July 8, 2009: Federal Judge Alan Gold in Miami asks the U.S. government whether it would consider seizing the U.S. assets of UBS in order to enforce the outcome of the case.

July 13, 2009: Judge Gold postpones until Aug. 3 the trial at the request of the U.S. and Swiss government and UBS in order to give the governments more time to negotiate a settlement.

July 31, 2009: The U.S. and Swiss governments say they have agreed on most major disputes in the U.S. effort to get names of thousands of wealthy Americans suspected of evading taxes by hiding billions in assets with UBS. The trial is postponed.

UBS Case Update: Justice Department Continues Its Pursuit to Obtain American Swiss Bank Account Holders Who Evaded Taxes

In the case U.S. v. UBS AG, 09-cv-20423, the Justice Department argued in U.S. District Court, Southern District of Florida (Miami), that UBS should be forced to divulge the private and long-time regarded secret account information of Americans with Swiss Bank accounts who are evading taxes.

The DOJ argues approximately 52,000 names should no longer be held secret since UBS violated US laws on American soil, providing jurisdiction to authorities to pursue legal action in American courts against the tax evaders.

Justice Department filling stated “UBS has systematically and deliberately violated the laws of the United States on U.S. soil.” It further said UBS “regularly conducted business in secret” in the U.S. and routinely sent private bankers into the U.S. to solicit business." The UBS business “cost the U.S. Treasury hundreds of millions of dollars in unpaid taxes.”

Contrary to reports earlier this week about a settlement, the DOJ pushed forward with a lawsuit to force the Swiss bank giant to identify offshore clients since the estimated 52,000 Americans are suspected of using secret foreign accounts to hide nearly $15 billion in assets from the IRS.

The DOJ filing says UBS earned more than $100 million in fees in helping US clients set up secret offshore accounts and that the business cost the US Treasury hundreds of million of dollars in unpaid taxes.

UBS has resisted the request because it says it would violate Swiss bank secrecy laws. The lawsuit against UBS is being closely watched by the offshore banking industry amid a global crackdown on tax cheats.

UBS and the Swiss government have argued that any exchange of confidential banking information should be handled through existing legal treaties rather than in the courts. The Swiss government has said the lawsuit would “seriously jeopardize” efforts to revise a 1996 tax treaty. Under that treaty, Switzerland can turn over account data only on a reasonable suspicion of “tax fraud or the like,” according to a UBS court filing.

Unlike the U.S., the Swiss don’t view tax evasion as a crime.

UBS is facing a first court hearing July 13.

UBS agreed in February to pay $780m to avert criminal charges related to the tax dispute while UBS admitted it helped taxpayers hide money in Swiss accounts and provided the IRS more than 250 clients’ names. UBS also admitted that its private bankers marketed securities and banking services in the U.S., even though it didn’t have the required license from the Securities and Exchange Commission. Those bankers, UBS admitted, met with clients in the U.S. and communicated with them regularly as they traded securities in their accounts or transferred assets.

The Justice Department filing stated “UBS must disclose the identity of every U.S. taxpayer with an undisclosed UBS account” so they can “get right with their government." It further said “the United States has a strong national interest in making sure that all U.S. taxpayers comply with the tax laws.”

UBS is hoping for a settlement, which would be the bank's second with US authorities and would allow the world's biggest wealth manager to concentrate on a badly needed restructuring after it lost billions of dollars in the global financial crisis and had to be rescued by the Swiss state.

Sources:
Bloomberg News

Gulf DailyNews