Justice Dept., UBS close to a deal on Swiss tax secrecy

— -- The Justice Department and Swiss banking giant UBS have struck a tentative deal on IRS demands for the names of 52,000 wealthy American clients of the bank, lawyers for both sides said Friday.

"The parties have reached an agreement in principle on the major issues," Stuart Gibson, a Justice Department tax division attorney, told U.S. District Judge Alan Gold during a morning phone conference.

Terms of the deal were not immediately announced. Gold said the parties would likely present a written breakdown at an Aug. 7 status conference, with a final agreement to be approved by the court three days later.

The announcement prompted Gold to cancel a key evidentiary hearing that had been scheduled for Monday on the closely watched tax standoff that has threatened to add new cracks to Switzerland's historic reputation for banking secrecy.

Swiss Foreign Minister Micheline Calmy-Rey is expected to meet with Secretary of State Hillary Clinton in Washington Friday in a session likely to include the UBS dispute.

Justice Department lawyers and the IRS have argued that the information on U.S. clients must be handed over because wealthy American account holders have evaded millions of dollars in federal taxes for years with the active assistance of UBS.

The bank in February agreed to pay $780,000 in a settlement that deferred prosecution of U.S. charges that the bank repeatedly sent employees on secret trips to the U.S. to show American customers how to put their assets in untraceable offshore accounts that would not be reported to the IRS.

UBS has contended that disclosing the client data would be a criminal violation of Swiss banking secrecy laws. Actively backing that argument, the Swiss government has raised the possibility that it would seize the client data to prevent a handover if such an action were ordered by a U.S. court.

Federal investigators have maintained pressure on UBS during the standoff by pursuing criminal cases against some of the estimated 250 American clients whose account data the bank previously agreed to give the IRS based on specific evidence of tax evasion. Three of those clients have pleaded guilty to filing false tax returns so far, most recently on Tuesday.