US and Switzerland will ask for postponement of UBS tax hearing
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The US and Swiss governments and Swiss bank UBS will ask Monday for a delay in court proceedings to force the bank to reveal details of offshore accounts held by US citizens. The hearing could be delayed for three weeks while the parties negotiate.
AFP - The US and Swiss governments Sunday called for the postponement of a court showdown seeking to force Swiss financial giant UBS to reveal thousands of offshore accounts held by US clients.
"The Department of Justice, UBS and the Swiss government have requested a stay with a rescheduled hearing date of August 3, 2009," the Department of Justice said in a statement.
UBS said it "welcomes the announcement that the US and Swiss governments have agreed to negotiations for the purpose of resolving the John Doe Summons litigation."
UBS said the parties would submit the request in court on Monday before Judge Alan Gold, who is in charge of the case.
Monday was scheduled to be the first day of proceedings in a case pitting UBS against American tax authorities in a key test for Switzerland's long tradition of bank secrecy.
US authorities are asking a federal court to order UBS to reveal the names of American offshore account holders, saying the Swiss bank "systematically and deliberately" violated US laws.
The case stems from a lawsuit filed earlier this year and affects as many as 52,000 US taxpayers suspected of holding UBS offshore accounts to avoid paying US taxes.
But both sides have recently hardened their positions, and the Swiss government has vowed to prevent UBS from releasing client data, arguing the effort aimed to "provoke international conflict" because it could force UBS to violate Swiss laws.
The US Justice Department urged the judge to make his ruling independent of threats from Switzerland.
It argued courts could not allow foreign states to "freely insulate their banks or companies including those doing substantial business in the United States from complying with valid enforcement orders seeking information relating to ongoing criminal investigations. That is not the law."
The Justice Department said the parties "have agreed that any alternative resolution reached would necessarily include a provision requiring UBS to provide the Internal Revenue Service 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."
UBS employed 26,934 people in the United States at the end of March this year, 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.
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.
Ross Albert, a former Securities and Exchange Commission enforcement lawyer who practices with the Atlanta firm Morris, Manning & Martin, argued that "both countries have a strong interest in reaching a mutual accommodation."
"What is frightening is that this is the financial equivalent of Armageddon," Albert said.
"UBS is one of the largest financial institutions in the world and if it loses the ability to conduct business in the United States, it's going to fail."