Delay requested in UBS tax hearing

Keystone

The United States, UBS and Switzerland have requested a delay ahead of Monday's hearing in Miami over the Swiss bank's tax dealings in the US.

The US Justice Department suit is seeking to force UBS to hand over details of up to 52,000 secret bank accounts suspected of being used by Americans to avoid taxes.

The proceedings presided over by judge Alan Gold are scheduled to start in a Miami federal court at 9am local time (1pm GMT).

However, a statement posted on the US Department of Justice website on Sunday said that it, UBS and Switzerland had requested a stay to August 3.

“The stay was requested in order to provide the parties additional time to discuss a possible alternative resolution of the matter,” it said.

The statement continued that the parties had agreed, “that any alternative resolution reached would necessarily include a provision requiring UBS to provide the Internal Revenue Service (IRS) information on a significant number of individuals with UBS accounts”.

“If an alternative resolution is not reached, the Department of Justice will continue to vigorously pursue enforcement of the summons through the court.”

The motion was confirmed on Sunday by the Swiss Justice Ministry. It said that the delay request was the result of justice and foreign ministry talks with the US authorities.

Both ministeries supported this step, it added, but no further details could be given because, “the already ongoing settlement negotiations between the US and Swiss governments are confidential”.

For its part, UBS welcomed both the negotiations and the motion in a short communiqué.

No reaction had been reported from Gold by early Sunday evening Swiss time. But UBS said that the motion would be officially presented for the Miami court’s approval on Monday morning.

Delicate question

The client data question is a delicate one for big bank UBS. Bern has already forbidden UBS from releasing the names to the US tax authorities, saying this would run contrary to Swiss banking secrecy regulations.

The Swiss government has also said that it would seize the client data, if necessary, to stop this happening.

Washington has accused UBS of hiding nearly $15 billion (SFr16.3 billion) in assets in secret accounts.

The case has undoubtedly damaged the UBS brand and there are fears over its implications for cross-border commerce.

But UBS chairman and former Swiss Finance Minister Kaspar Villiger has said that he believed that it was now also a question of the relationship between two states and acceptance of their respective legislations.

Speculation over the trial’s outcome has been rife. Some observers believe that UBS could be in for a hefty fine. There have also been rumours that the two sides would seek an out of court settlement.

Deal possible?

Scott Michel, a lawyer for UBS clients in the United States, told swissinfo.ch ahead of the trial that while it was understandable to aim for such a deal, both sides had irreconcilable positions.

“I would be surprised if the IRS decided to give up, even if UBS accepted to pay a fine,” he said. “To arrive at this, the American government would have to decide, based on its foreign policy, that it had a supreme interest in resolving the affair amicably.”

Michel said that if an amicable settlement was negotiated by the IRS and US Department of Justice they would insist on having some names. But if it was up to the foreign ministry or White House, this might not be the case.

Asked whether it was unusual for a trial in the US to be settled amicably, Michel said deals could be reached before, during or even after a legal decision.

“What is not usual at all is for the IRS to ask the justice authorities for an injunction,” Michel explained.

“An out of court agreement would be extremely unusual in such an affair where the IRS wants a formal summons to force the bank to deliver client names and where there is no demand for compensation or prosecution.”

Concessions

UBS and Bern have already made concessions on banking secrecy. UBS agreed in February to pay $780 million, admitted wrongdoing and disclosed about 250 client names to avert tax fraud criminal charges which the Swiss government said threatened the bank’s survival.

And faced with the threat of possible sanctions from the G20 group of countries, Switzerland and other countries agreed to renegotiate tax treaties with the US and other countries and cooperate more on tax evasion.

In a previous court brief, the US Justice Department said that UBS had already acknowledged that its bankers committed “very serious crimes on US soil” and had therefore subjected the bank to the full jurisdiction of US law.

“Swiss banking secrecy is not an impenetrable wall,” it said.

However, Bern said the fact that UBS had released some names in settling the criminal case and admitted wrongdoing did not undermine the legitimacy of Swiss banking secrecy as a whole.

swissinfo.ch and agencies

UBS and the US

On May 14, 2008, former UBS employee Bradley Birkenfeld and a Liechtenstein businessman were charged by the US authorities with helping an American billionaire avoid paying taxes on $200 million of assets deposited in Swiss and Liechtenstein bank accounts.

Birkenfeld turned whistleblower, giving details of UBS private banking practices to US prosecutors.

In July, a Miami court authorised the Internal Revenue Service to issue a summons on UBS demanding the release of confidential information on clients the agency suspected of tax evasion.

In the same month, UBS told a congressional hearing that it would stop offshore banking activities for US clients.

UBS agreed to pay $780 million and name some United States clients to resolve criminal fraud charges against it.