U.S., UBS say they have a deal in tax-evasion dispute
NEW YORK -- The U.S. Justice Department and Swiss banking giant UBS have reached an agreement on the IRS's demands for the names of an estimated 52,000 wealthy American bank clients suspected of tax evasion, both sides told a federal judge Wednesday.
"The parties have initialed agreements," Stuart Gibson, a Justice Department tax division attorney, told U.S. District Judge Alan Gold during a morning phone conference. "It will take a little time for the agreements to be signed in final form … and when the final documents are signed, the parties will file a stipulation" to dismiss the case against UBS.
Neither Gibson nor attorneys for UBS provided details on the deal, which settles the closely watched case that has threatened to add new cracks to Switzerland's historic reputation for banking secrecy.
IRS Commissioner Douglas Shulman said the agreement "protects the United States government's interests" and that details would be released "when the Swiss government signs the agreement, as early as next week."
UBS Chairman Kaspar Villiger said bank officials "are grateful that the two governments reached this agreement to resolve this issue." He also thanked the Swiss government and its representatives involved in negotiating the deal.
William Sharp, a Florida tax lawyer who represents American UBS clients, said he expects the agreement to allow Swiss authorities to interpret bank secrecy laws more broadly and allow a "substantial handover" of names.
"I would guess that the U.S. would not enter into this agreement in the absence of a major fine and penalty without having at least several hundred if not thousands of names turned over," Sharp said.
The case hinges on Justice Dept. and IRS contentions that UBS must provide the financial data because the clients in question have evaded millions of dollars in U.S. taxes with secret help from the bank.
UBS in February agreed to pay $780 million in a settlement that deferred prosecution of charges that it had repeatedly sent bankers on clandestine trips to the U.S. to help American customers hide assets in offshore accounts that would not be reported to the IRS.
UBS, however, has argued that disclosing the client list would amount to a criminal violation of Swiss banking secrecy laws. The Swiss government has raised the possibility that it would seize client data to prevent any handover ordered by a U.S. court.
On Monday, the Swiss Federal Council's seven members returned early from a scheduled vacation for a special meeting to discuss the legal standoff.
Federal investigators have maintained pressure on UBS during the impasse by pursuing criminal cases against some of the estimated 250 U.S. clients whose account data the bank previously turned over based on specific evidence of tax evasion. So far, three of those clients have pleaded guilty to filing false tax returns.
The IRS in March launched a six-month program offering lower penalties to Americans who voluntarily disclose secret offshore assets and agree to pay back taxes. Participation generally means no criminal charges will be filed, and requires payment of back taxes and interest for at least six years, plus some penalties.
While the IRS hasn't disclosed the participation rate, the agency says there has been a dramatic rise in the number of taxpayers making voluntary disclosures this year. Most of the cases involve taxpayers with unreported income in offshore accounts, the IRS says.