[Infowarrior] - Swiss to reveal UBS accounts to settle U.S. tax fight

[Richard Forno]

Swiss to reveal UBS accounts to settle U.S. tax fight
Wed Aug 19, 2009 1:12pm EDT
  http://www.reuters.com/article/newsOne/idUSLJ59987220090819?sp=true
By Jason Rhodes and Kim Dixon

BERNE/WASHINGTON (Reuters) - Switzerland has agreed to hand over  
details of about 4,450 UBS AG bank accounts to U.S. authorities to  
settle a tax dispute that challenged Swiss banking secrecy and now  
threatens to spill over to other banks.

With Switzerland's famed banking secrecy under fire, the Swiss have  
also agreed to process requests by the United States seeking  
information from its banks besides UBS about account holders who may  
have tried to evade U.S. taxes.

"This announcement today should send a signal - no matter what  
institution you're with, the IRS is willing to pursue both the  
institution and the individual," Internal Revenue Service Commissioner  
Doug Shulman told reporters on Wednesday.

The accounts were at one time worth $18 billion, Shulman said, though  
he could not provide a current figure.

U.S. authorities would not name any other foreign banks under probe  
but the IRS is expected to use the Swiss deal as a template to pursue  
further prosecutions.

"The IRS is now gaining institutional skill and knowledge in how to  
pursue these types of cases and they're going to use that. This is, I  
believe, the beginning and not the end," said Peter Hardy, a former  
federal prosecutor and specialist in white-collar crime at Post &  
Schell in Philadelphia.

The UBS dispute had strained relations between the United States and  
Switzerland and challenged the latter's jealously guarded bank secrecy  
laws. The deal may add steam to a global effort among cash-strapped  
governments to crack down on tax-evading jurisdictions.

But the settlement could help UBS, the world's second-largest wealth  
manager, restore an image that has been battered by the financial  
crisis and the U.S. dispute, and may open the way for the Swiss  
government to sell its UBS stake.

"It's good to get this out of the way but the confidence of a lot of  
clients has been compromised so I'm not sure we will see inflows  
return in Q3. It will take time to recover reputation from this," said  
Jaap Meijer, an analyst at Evolution Securities in London.

Switzerland's Finance Minister Hans-Rudolf Merz said the government  
wants to sell its stake as quickly as possible and while it would be  
good business, it also has to consider other factors.

UBS shares closed down nearly one percent at 16.74 Swiss francs,  
having reversed some of their earlier losses. Swiss rival Credit  
Suisse ended down 1.3 percent and Julius Baer dropped 0.8 percent.

UBS Chairman Kaspar Villiger said the agreement helps resolve one of  
UBS' most pressing issues. "I am confident that the agreement will  
allow the bank to continue moving forward to rebuild its reputation  
through solid performance and client service."

In February, UBS agreed to pay $780 million and disclose about 250  
client names to settle a criminal probe by U.S. authorities. One  
former UBS banker testified that he smuggled a client's diamonds into  
the United States in a tube of toothpaste.

Wednesday's deal effectively ends a separate civil lawsuit by U.S.  
authorities that sought up to 52,000 account names.

OTHER BANKS

Other Swiss banks are fretting that the U.S. taxman's spotlight may  
now fall on them. The Wall Street Journal reported on Wednesday that  
more European banks have been identified in the U.S. tax probe,  
including Switzerland's Credit Suisse, Julius Baer, Zuercher  
Kantonalbank and Union Banque Privee (UBP).

Switzerland may claim its banking secrecy remains intact, but some  
private bankers say it is no longer a selling point for its banks,  
which will need to offer other skills like wealth management and  
legacy planning to attract clients.

"The majority of assets in Swiss private banks are from European Union  
citizens," said David Williams, an analyst at Fox-Pitt Kelton in  
London. "I think it won't be long before we see action from the  
European Union along similar lines."

The new treaty between the United States and Switzerland would allow  
action in the case of "tax fraud and the like" in the UBS case, the  
Swiss government said. Precise details will be published 90 days after  
the agreement comes into force.

The U.S. government retains the right to go back and use a summons to  
collect the names, which roughly equal the number of accounts, if the  
settlement process fails, said IRS chief Shulman.

The client accounts to be disclosed will likely belong to people  
suspected of committing tax fraud under the terms of a double taxation  
agreement that obliges Switzerland to provide help if Washington seeks  
it in a criminal investigation.

Shulman said notices from UBS to clients would go out in stages, but  
warned U.S. citizens to come forward now.

"Once the Swiss government turns over names, all bets are off,"  
Shulman said, noting these clients could face civil and criminal  
prosecution.

Under a temporary amnesty program in effect until September 23, U.S.  
citizens can come forward and declare accounts, pay fines and in  
general avoid criminal prosecutions.

The UBS case has added significant steam to that program. The agency  
saw about 400 people come forward during one week in July compared to  
about 100 during all of 2008 alone.

(Additional reporting by Steve Slater in London and Jeremy Pelofsky in  
Washington; Editing by Erica Billingham and Tim Dobbyn)


© Thomson Reuters 2009 All rights reserved


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