Under Agreement, UBS to Give Up Over 4,000 Names

Under Agreement, UBS to Give Up Over 4,000 Names
By LYNNLEY BROWNING
Copyright by Reuters
Published: August 19, 2009
http://www.nytimes.com/2009/08/20/business/global/20ubs.html?ref=global-home


The Swiss banking giant UBS on Wednesday reached a final deal with the Justice Department and the Internal Revenue Service in which it will ultimately disclose names and account details for more than 4,450 wealthy Americans suspected of tax evasion.

Details of the settlement were unveiled Wednesday by the I.R.S. commissioner, Douglas Shulman.

The agreement, he said, also allows the Swiss government to work with other Swiss financial institutions to disclose the identities of other Americans who have hidden money offshore.

UBS will notify the clients whose names are to be disclosed in coming weeks, Mr. Shulman said. Clients still have time to reveal themselves before a voluntary disclosure program ends Sept. 23 to potentially avoid prosecution and steeper penalties and fines, he said.

Scores of Americans have come forward in recent months to disclose their secret accounts to the I.R.S. That group of people, along with the “thousands” of names Mr. Shulman said that UBS would disclose, brings the total of UBS-related names to be disclosed to the I.R.S. to “more than 10,000,” he said. The accounts at one point held over $18 billion, he said.

“These are the accounts we most wanted,” Mr. Shulman said. But he said the United States government retained the right to resume its legal efforts to force banks to turn over names.

The settlement marks a turning point in a closely watched battle between UBS, the world’s largest private bank, and federal prosecutors and tax investigators who suspect it of selling tax evasion services to tens of thousands of wealthy Americans.

The landmark settlement peels back layers of Swiss banking secrecy, and is expected to provide a road map for the authorities as they try to crack down on tax evasion by Americans who, through private banks and other Swiss-based financial intermediaries, use offshore accounts that go undeclared to the I.R.S.

The agreement “will result in us receiving what we wanted all along,” Mr. Shulman said. He said the I.R.S. would receive “a unprecedented amount of information on taxpayers” who evade taxes by hiding money offshore through UBS.

“There is no mere keyhole into the world of bank secrecy,” he said, but instead represents “a major step forward in piercing the veil of bank secrecy.”

Eveline Widmer-Schlumpf, the head of the Swiss federal justice department and police, said at a press conference in Bern on Wednesday that Switzerland was “happy” and “relieved” about the outcome of the two months of negotiations. The agreement avoids a conflict between the sovereignty of Switzerland and that of the United States, and ends a threat to the existence of UBS and any consequences for Switzerland as a financial center, she said.

“We are convinced that the agreement is a good solution and the only solution,” Ms. Widmer-Schlumpf said. The settlement does not rule out any possible lawsuits against individual UBS employees, she said.

Switzerland has 370 days to examine the accounts of the 4,450 clients and plans to allocate about 70 lawyers and accountants to the task. The effort will cost the government about 40 million Swiss francs, or $37 million, said Hans-Rudolf Merz, the Swiss president and finance minister. Mr. Merz called on other Swiss banks to stick to the law and regulations in light of the UBS case.

The settlement brings to a close a civil case filed by the Justice Department, on behalf of the I.R.S., in February against UBS that sought to force the bank to turn over the names and account details of 52,000 American clients. UBS fiercely resisted that effort, arguing that it violated Swiss financial secrecy laws, as it lobbied senior Washington officials.

That month, UBS paid $780 million to settle criminal charges that it helped American clients evade taxes on nearly $20 billion stashed in offshore accounts. UBS turned over approximately 250 client names as part of that deal, and will turn over more in coming months. Some 150 Americans are under criminal investigation for tax evasion as part of the investigation.

Julia Werdigier contributed reporting.