US, UBS settle tax secrecy case

13th August 2009, Comments 0 comments

The US government and Swiss banking giant UBS finalised an out-of-court settlement on Wednesday.

Miami -- The US government and Swiss banking giant UBS finalised a long-delayed out-of-court settlement to end a tax secrecy case, attorneys said Wednesday.

No details of the agreement were released in the case in which the US government is seeking the names of thousands of Americans with offshore UBS accounts who could face tax evasion charges.

US Justice Department lawyer Stuart Gibson told a conference call with the judge overseeing the case and lawyers for the UBS and the Swiss government that an agreement had been initialed, without disclosing further details.

"The parties have initialled agreements," Gibson said. "It will take a little time for the agreements to be signed in final form."

After several delays, the case had been set for a trial to open Monday aimed at forcing UBS to disclose the names as many as 52,000 American account holders.

Gibson said the parties had asked the court to cancel Monday's trial date and that "when the documents are filed, the parties will submit a petition for dismissal" of the case.

UBS lawyer Eugene Stearns thanked Judge Alan Gold for his handling of the case and said it would "allow a very difficult matter to be brought to a successful conclusion."

In Switzerland, UBS called the deal a "definitive" settlement to end the case.

"The UBS board and management are grateful to the two governments for having reached an accord allowing the resolution of this matter," said UBS chairman Kaspar Villiger.

UBS had argued that it cannot fulfil the US demand without violating Swiss banking secrecy law, which would make it liable for prosecution in Switzerland.

An agreement in principle had been announced on 31 July, but reaching a final deal took longer than expected.

US authorities had been asking the court to order UBS to reveal the names of American offshore account holders, saying the Swiss bank "systematically and deliberately" violated American laws in promoting offshore accounts.

It was not immediately clear what fine, if any,  would be imposed on UBS and what procedures would be used to identify American account holders.

The case could also relate to other offshore banking centres around the world that protect the identities of their customers.

It also likely preserves the massive US presence of the Swiss banking group on US soil. UBS employed 26,934 people in the United States as of 31 March, more than in its home country of Switzerland, where 25,889 were employed.

Jacob Frenkel, a securities lawyer and former US prosecutor, said he had anticipated an out-of-court settlement to prevent trial because of conflicting national laws.

"I've always expected there would be a political solution because it's not the kind of case that lends itself to litigation, given the strong national interests involved," he said.

"The bottom-line positions for each party will be the US getting access in some form or fashion to financial records (of offshore account holders), and UBS remaining fully compliant with Swiss financial secrecy laws."

Ross Albert, a former US government prosecutor who now practices with the law firm Morris, Manning & Martin, said the settlement prevented a potential financial and political disaster that could have destroyed UBS.

"The parties have moved away from the abyss," he said. "We didn't need another major international financial institution to fail."

He said the deal probably calls for UBS to reveal "a substantial portion" of the names, which would accomplish the goals of US tax authorities of deterring people from seeking offshore tax havens.

One possible compromise could include a procedure to allow account holders to appeal the decision to disclose their identities, Albert said. Another possibility is extending a pardon that would allow taxpayers to pay back taxes without facing criminal prosecution, he added.

The case originates from a settlement earlier in 2009 in which UBS admitted to tax fraud by inviting wealthy US clients to open accounts in Switzerland and thus avoid declaring their income to the US. The bank paid USD 780 million (CHF 838 million) to settle that case.

AFP / Expatica

0 Comments To This Article