UBS Case Update: Judge Turns Heat Up on UBS to Get Disclosure

On Monday, July 13, 2009 we will know the Swiss response to the US governments demand to obtain approximately 52,000 Swiss Bank account holders names, that the IRS is accusing of skirting taxes and not reporting accurate financial information in violation of federal law.

The IRS believes that Americans shelter approximately 15 billion dollars in UBS Swiss Bank accounts, who have a strong US presence which the government argues subjects UBS to American law.

In February, the DOJ sued UBS for access to some 52,000 accounts belonging to it U.S. clients, widening a probe that initially had targeted an estimated 19,000 accounts.

A day earlier, the agency announced a settlement with UBS in which the bank agreed to pay $780 million in fines and give names and account information for a group of clients to avoid prosecution. Swiss authorities said that group numbers between 250 and 300 clients.

On Monday, the U.S. government is likely to make it clear that it expects UBS to comply with the summons, and that in the event they don't, a very hard line stance will follow.

The options available to the Government are: seizure of property, staggering fees, or potential arrests and imprisonment of UBS decision makers.

UBS might reach a settlement with U.S. regulators on the turning over of confidential client data, even as public positions harden between the Swiss and U.S. government days before the landmark court case begins in Florida.

Arguments between the parties and government have intensified this past week as reported in the media.

The chief executive of UBS, Oswald J. Grubel, sent a memo on Thursday to the bank's top executives saying that disclosing the names of the account holders would require UBS to violate Swiss criminal law, and that it couldn't comply.

On Wednesday, the Swiss government said it would block any move by UBS to turn over the names.

Meanwhile, Swiss bank account holders have been turning themselves in to the Internal Revenue Service in the past months, in hopes of finding leniency under a voluntary disclosure program at the agency. This is true especially since the IRS has a civil penalty deal on the table right now that for some people may be too good to pass up, and it expires in nine weeks.

The IRS is cracking down on people who hold U.S. securities in offshore accounts but don't declare the accounts or pay taxes on income from the securities.

http://online.wsj.com/article/BT-CO-20090710-712796.html

http://www.thisislondon.co.uk/standard-business/article-23717478-details/US+judge+turns+up+the+heat+in+UBS+disclosure+case/article.do

http://www.bloomberg.com/apps/news?pid=20601085&sid=a5YQivGDnNjA

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