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.

"There has been agreement reached in the litigation that was just reported to the court in Florida, that confirms there has been an understanding between the Swiss government and our government with the ongoing litigation concerning UBS," U.S. Secretary of State Hilary Clinton said before a meeting with Switzerland's foreign minister, Micheline Calmy-Rey.

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Asked if there were outstanding issues in the case, Clinton said the agreement had been reached in principle and did not elaborate.

Clinton and Calmy-Rey said they were pleased with the outcome and Clinton said the two governments had worked hard to reach an agreement on the tax 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.