Legal News

UBS, Feds, Swiss Reach Deal in Huge Tax Case; Names Likely to Follow

By Ashby Jones

This just in: In a major break in a massive tax-evasion investigation, UBS AG and the governments of Switzerland and the U.S. have reached a settlement that could force UBS to turn over identities of thousands of account holders, a Justice Department attorney told a U.S. District Court judge Friday morning. Click here for the WSJ story; Here for the NYT story; here, here and here for previous LB coverage.

Stuart Gibson, a Justice Department tax division attorney, didn’t detail the settlement in a conference call with Judge Alan Gold that included lawyers for UBS and the Swiss government.

A hearing scheduled for Monday in Miami was postponed until Aug. 10, at which point more details are expected to be released. The judge scheduled another conference call with parties in the case for next Friday.

The Internal Revenue Service has demanded the identities of 52,000 U.S. account holders at UBS. UBS and the Swiss government have claimed that turning over those names would violate Swiss bank secrecy provisions.

The settlement is the second break in the government’s case against UBS. The case has pierced the veil of decades of Swiss private banking. In February, UBS agreed to a $780 million criminal settlement and said it would turn over some 250 names. In a parallel civil case, the IRS has been seeking for a year the identities of UBS account holders who allegedly received aid from UBS in evading taxes.

The settlement is expected to result in UBS turning over account information, though likely not as many as 52,000 accounts. UBS and the Swiss government, which has been heavily involved in the settlement talks, are expected to cite violations of Swiss law as reasons why UBS can turn over the names and still not break Swiss bank-secrecy laws. Swiss laws don’t provide confidentiality if people engage in fraudulent activities such as setting up accounts with shell companies that lack business substance.

Some 7,000 accounts are expected to be the focus of the settlement because they are tied to offshore companies and trusts that are susceptible to fraud.

Full post as published by Law Blog - WSJ.com on July 31, 2009 (boomark / email).