The U.S. and Switzerland governments have initialed agreements and will later sign a final accord, Justice Department lawyer Stuart Gibson told U.S. District Judge Alan Gold in Miami today. Gibson didn’t disclose details of the settlement or say when it would be delivered to Gold. Gibson told the judge July 31 that the countries reached an agreement in principle to settle the case.
Tax lawyers said they expect UBS to disclose thousands of accounts. UBS, based in Zurich, agreed on Feb. 18 to pay $780 million to defer prosecution for aiding tax evasion and also gave data to the Internal Revenue Service on 250 clients. Since then, three UBS clients have pleaded guilty in the U.S. to hiding their bank assets from the IRS.
“They made an agreement that will reconcile the IRS’s desire to get this information as quickly as possible and the Swiss desire to respect their own legal procedures and process,” said Scott Michel, a tax attorney at Caplin & Drysdale in Washington, which represents UBS clients.
Thousands of UBS clients avoided prosecution by voluntarily disclosing their accounts to the IRS under a program that ends Sept. 23, tax lawyers said. The pace of future disclosures may hinge on the accord, according to lawyers for clients of UBS, the largest Swiss bank by assets.
UBS rose 16 centimes, or 1 percent, to 16.01 Swiss francs ($14.87) at 4:12 p.m. in Zurich trading. The shares earlier climbed as much as 3.3 percent. They had gained 6.8 percent this year before today.
In the past month, Switzerland negotiated on behalf of the bank, arguing that the U.S. demands would force UBS bankers to violate Swiss criminal laws protecting account secrecy. The Swiss also threatened to seize the data sought by the IRS if Gold ordered disclosures violating Swiss privacy law.
“We are pleased to have initialed an agreement with the Swiss government which protects the United States government’s interests,” IRS Commissioner Douglas Shulman said in a statement. “We will release more details when the Swiss government signs the agreement as early as next week.”
Tax attorney Bryan Skarlatos said the case is likely to have wider implications beyond any settlement stipulation between UBS and the IRS.
“Underlying that stipulation will be a broad agreement between the United States and the Swiss government that could affect all U.S. taxpayers who kept money in Swiss banks,” said Skarlatos of Kostelanetz & Fink LLP in New York. The firm’s clients include some UBS account holders.
The U.S. sued UBS for the account data on Feb. 19, a day after the bank admitted that its Swiss private bankers helped wealthy Americans evade U.S. taxes from 2000 to 2007. It admitted setting up sham offshore companies in havens like the British Virgin Islands, Hong Kong and Panama.
A UBS banker, Bradley Birkenfeld, pleaded guilty to helping wealthy Americans evade taxes and has cooperated with prosecutors. He is scheduled to be sentenced on Aug. 21 in federal court in Fort Lauderdale, Florida.
Another UBS banker, Raoul Weil, was indicted and declared a fugitive, and a third who ran the now-shuttered cross-border business, Martin Liechti, was held by the U.S. as a material witness for several months last year.
After closing its cross-border business, which operated without U.S. Securities and Exchange Commission approval, UBS urged those clients to leave or move their assets to an SEC- registered bank business in the U.S. or Switzerland.
Under the IRS voluntary disclosure program, taxpayers must pay taxes, interest and a 20 percent penalty on the highest balance of the preceding six years.
The case is U.S. v. UBS AG, 09-cv-20423, U.S. District Court, Southern District of Florida (Miami).
