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Time running out for UBS settlement

Keystone

A damaging legal showdown between UBS and the United States authorities over tax evasion is edging closer to realisation with negotiators reaching deadlock.

This content was published on July 29, 2009 - 17:09

A Miami judge has heard that the Swiss and US governments cannot agree on how to settle a demand for the confidential information of 52,000 UBS clients. The court case will open on Monday if the impasse continues.

Judge Alan Gold had already delayed the case three weeks to allow all parties to reach an out of court settlement. But a review meeting on Wednesday found that these negotiations have so far proved fruitless, with the US side doubting an agreement can be reached at all.

The US authorities earlier this year demanded the confidential UBS client data after the Swiss bank admitted some of its employees had actively helped US citizens illegally evade taxes.

But the Swiss government maintains that this would break banking secrecy laws and has vowed to prevent such a transfer of information.

Lawyer Stuart Gibson, representing the US Department of Justice, told Judge Gold that it was "uncertain whether an agreement will be reached". He called for the case to proceed on Monday as planned.

UBS lawyer Eugene Stearns asked the judge to delay making such a decision until Friday to give both sides more time. While admitting that UBS was a "passenger" in the negotiations, Stearns believed that a means to unlock the dispute could be "literally minutes away" – an assertion that Gibson rejected.

UBS client admits guilt

Judge Gold at one point offered to postpone the case by another week, to August 10, but agreed to hold another review meeting on Friday morning to agree on a course of action once and for all.

Also on Friday, Swiss Foreign Minister Micheline Calmy-Rey will meet her US counterpart, Hillary Clinton, in Washington for talks that are expected to include the UBS case.

A protracted court hearing would be both expensive and highly damaging for UBS's reputation and would focus solely on upholding US law without taking into account Swiss rules.

Meanwhile, a businessman has pleaded guilty to US tax charges stemming from a wide-ranging investigation into secret accounts at Swiss bank UBS.

The New York owner of a company that represents Chinese and Hong Kong toy manufacturers faces up to three years in prison after entering his plea at the federal court in Florida, on Tuesday.

He is the third US client of UBS to plead guilty to charges of hiding $8 million (SFr8.71 million) in a UBS account and one of a small, unnamed Swiss bank. A statement of facts he signed said he sought in 2008 to reveal these details to the IRS, file amended tax returns and pay back taxes. But he was talked out of it by a lawyer named only as "Swiss Attorney" in the court documents.

Swiss official "bribed"

This attorney told him that a high-ranking Swiss government official had provided assurances that his name was not scheduled to be turned over to US authorities investigating tax evasion by wealthy American clients.

But his name was disclosed earlier this year on a list of about 300 UBS clients.

The attorney later told the US client that this unidentified Swiss official had been paid $45,000 (SFr48,400).

The Swiss Federal Tax Administration has now brought criminal charges against unknown persons in a bid to clarify if there is any truth to the accusations. A finance ministry spokesman said the decision to press charges was done with the approval of Finance Minister, Hans-Rudolf Merz.

The Federal Prosecutor's Office is expected to take up the investigation.

The US client's name was disclosed earlier this year on a list of about 300 UBS customers as part of a deferred prosecution agreement in which the bank also agreed to pay a $780 million penalty.

The client met frequently with UBS advisers and executives, who "would dress as tourists to avoid detection", according to the factual statement.

One unnamed UBS executive falsely claimed to customs agents that he was coming to the US to visit his brother, court documents show. UBS officials also physically cut the man's name and account number from bank statements so they could not be linked to him.

Matthew Allen, 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.

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Conference call voyeurism

A conference call between lawyers and the judge presiding over the UBS legal case was swamped by voyeurs on Wednesday after a Swiss newspaper printed the phone number and reference code that allowed people to listen in.

The details had been given out to allow the media to hear the proceedings of the status review of negotiations between the sides. But Blick newspaper decided to give all its readers the chance to listen in.

US operators battled to deal with the number of calls and disruption was caused as some put their line on hold, flooding the judge's chamber with recorded music.

The initial problems were soon resolved and many listeners may have been disappointed with the rather dry and inconclusive proceedings.

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