UBS to pay $780 million, open secret Swiss bank records

Cracking Switzerland's historic reputation for banking secrecy, UBS agreed Wednesday to a $780 million settlement of federal charges it helped about 19,000 wealthy American clients evade U.S. taxes and said it would disclose the identities of some of those customers.

UBS ubs, Switzerland's largest bank, also agreed to stop providing banking services to U.S. clients with undeclared accounts. The bank also admitted to conspiracy to defraud the IRS and agreed to report to U.S. authorities for at least 18 months on its compliance actions.

The bank could have faced even higher penalties, but investigators agreed to some leniency "in recognition of the current international financial crisis," the deferred prosecution deal filed Wednesday said.

The agreement ends a 2000-08 scheme in which UBS bankers using encrypted laptop computers and counter-spy tactics traveled to and from the U.S. and helped Americans secretly hide income.

Many of those clients are suspected of filing false federal tax returns that omitted income held in the Swiss bank. That income represents part of what a 2008 Senate hearing identified as a nearly $100 billion illegal offshore banking industry.

"The veil of secrecy has been pulled aside," John DiCicco, acting assistant attorney general of the Justice Department's tax division, said Wednesday.

Chairman Peter Kurer said in a statement the bank regretted the compliance failures and accepted "full responsibility for these improper activities."

"Client confidentiality, to which UBS remains committed, was never designed to protect fraudulent acts or the identity of those clients, who, with the active assistance of bank personnel, misused the confidentiality protections," Kurer said.

The deal doesn't specify how many of the estimated 19,000 American clients would be identified to U.S. investigators. But the deal states the IRS will continue to seek enforcement of so-called John Doe subpoenas demanding information about those customers.

While UBS is authorized to continue appeals of the subpoenas, the deal requires the bank to comply once legal challenges are exhausted.

"People who have hidden unreported income offshore need to get right with their government," IRS Commissioner Douglas Shulman said. "They should come forward and take advantage of our voluntary disclosure process."

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