U.S. wants names of 52,000 customers of Swiss bank UBS

— -- Federal authorities have filed a lawsuit against Swiss-based bank UBS, seeking the identities of up to 52,000 U.S. customers.

The suit filed in Miami Thursday seeks to force the firm to turn over information on customers who hid their accounts from the U.S. government in violation of tax laws.

According to U.S. officials, an acquisition in 2000 of a U.S. company brought UBS a host of new American clients. The bank then set about evading new reporting requirements for those clients. To do so, UBS executives helped U.S. taxpayers open accounts in the names of sham entities.

Prosecutors contend that UBS executives used encrypted software and other counter-surveillance techniques to prevent anyone from detecting that they were actively marketing such Swiss bank secrecy — and tax evasion — to American taxpayers.

The clients, in turn, filed false tax returns that omitted the income they earned in their Swiss accounts, according to the court papers.

According to the government's lawsuit, the accounts in question held about $14.8 billion in assets the past decade. UBS says it will fight in court to keep the names private, arguing Swiss bank secrecy laws shield those customers.

The suit comes a day after the Justice Department struck a deal with UBS to get access to some of its customers who used Swiss bank secrecy law to hide billions of dollars in assets.

After that settlement of a criminal case was announced, the bank's chairman, Peter Kurer, said in a statement the firm accepted "full responsibility" for helping its U.S. clients hide assets from the IRS. But that does not mean the bank is about to fork over information on thousands of accounts.

"This shows the big fight is yet to come," said George Clarke, a tax attorney based in Washington who is not involved in the UBS case.

On Wednesday, cracking Switzerland's historic reputation for banking secrecy, UBS agreed 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."

The UBS case has caused a furor in Switzerland, where the president declared Thursday that his country will hold onto its treasured tradition of confidential bank accounts, even as it took the unprecedented step of revealing more than 250 tax cheats to U.S. authorities.

"Banking secrecy, ladies and gentlemen, remains intact," President Hans-Rudolf Merz told reporters.

Merz said Swiss authorities handed over files on 250 to 300 American clients of Swiss bank UBS who are suspected of committing tax fraud. The transfer took place in the middle of the night in the Swiss capital Bern, just ahead of a U.S. deadline for Swiss cooperation, he said.

Merz, UBS and Switzerland's financial regulator all insist that the handover is not a retreat from the principle of banking secrecy because it concerns only a small number of files that are linked to tax fraud, and not tax evasion.