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Business

UBS and US agree on 'major issues' in tax secrecy case

Video by Claire PRYDE

Text by NEWS WIRES

Latest update : 2009-07-31

UBS and the US government have reached agreement in principle on the "major issues" in a tax secrecy case. The trial that the US Government initiated against the Swiss bank for the identities of Americans holding offshore accounts will be delayed.

AFP - The US government and Swiss banking giant UBS reached agreement in principle on "major issues" in a tax secrecy case, attorneys said Friday as they agreed to delay the start of a diplomatically sensitive trial.
  
The case, which was scheduled to go to trial on Monday, stems from a US lawsuit filed earlier this year seeking to force the Swiss bank to identify Americans holding offshore bank accounts to evade taxes.
  
The case could affect as many as 52,000 Americans who hold UBS accounts and could be prosecuted for tax evasion.
  
"The parties have reached an agreement in principle on the major issues," Justice Department lawyer Stuart Gibson told US District Judge Alan Gold in a conference call monitored by reporters, without elaborating.
  
UBS attorney Eugene Stearns also was on the call.
  
The judge postponed the trial set to open Monday until August 10 at the request of the lawyers, and set another status conference call for next Friday.
  
Gold asked if the lawyers anticipated having anything in writing, and both Gibson and Stearns said they were hopeful.
  
The judge had already postponed the case once at the request of the bank and the two governments to allow negotiations in a case with massive political and diplomatic repercussions.
  
UBS has argued that it cannot comply with the US demand without violating Swiss banking secrecy law, which would make it liable for prosecution in Switzerland.
  
US Secretary of State Hillary Clinton, who was meeting in Washington with Swiss Foreign Minister Micheline Calmy-Rey, said the news "confirms there has been an understanding between the Swiss government and our government" over the litigation.
  
"Our governments worked very hard on this to reach that point, and so we are very pleased that the announcement was made this morning," Clinton said.
  
Calmy-Rey said, "We are very of course satisfied today with the news .. concerning UBS."
  
US authorities are asking the court to order UBS to reveal the names of American offshore account holders, saying the Swiss bank "systematically and deliberately" violated US laws in promoting offshore accounts.
  
Legal analysts say the case calls for a diplomatic rather than courtroom solution because it involves conflicting laws from two countries, but that a settlement will be difficult.
  
The US government could in theory ask the court to seize UBS assets in the United States until the bank complies, but some analysts argue this would send a chilling message to international financial institutions.
  
The case also has implications for American jobs. UBS employed 26,934 people in the United States at the end of March, more than in its home country of Switzerland, where 25,889 were employed.
  
Its Wealth Management Americas division managed a massive 618 billion dollars (673 Swiss francs, 444 billion euros) worth of assets at the end of the first three months of this year, making up about 30 percent of total assets managed by the bank.
  
In early July, the Swiss government said it would "use its legal authority" to prevent UBS from handing over information in violation of Swiss bank serecy laws.
  
This includes "if necessary by issuing an order taking effective control of the data at UBS that is the subject of the summons and expressly prohibiting UBS from attempting to comply" with the US authorities, the government said on July 8.
  
Under a settlement earlier this year with the Justice Department, UBS admitted to tax fraud by inviting rich US clients to open accounts in Switzerland and thus avoiding declaring their income to the US. It paid 780 million dollars (571 million euros) to settle the case.

Date created : 2009-07-31

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