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U.S. sues UBS over identities of 52,000 American clients

The U.S. sued UBS AG today in an effort to get the Swiss bank to turn over the names of as many as 52,000 wealthy Americans who allegedly tried to evade taxes.

The United States sued UBS AG today in an effort to get the Swiss bank to turn over the names of as many as 52,000 wealthy Americans who allegedly tried to evade taxes on $14.8 billion in secret accounts, the Department of Justice said.
Zurich-based UBS failed to comply with a summons from the Internal Revenue Service last July to produce records related to the American accounts, the Justice Department said in a petition to the Miami federal court.
The number of American accounts cited today is far higher than the 19,000 American citizens charged by the IRS in an earlier civil suit with secreting money in UBS accounts.
Today’s complaint asks the court to order the bank to disclose the account holders’ identities.
“These people owe it to their fellow citizens to pay their fair share of taxes,” IRS Commissioner Doug Shulman said in a statement. “Taxpayers should talk to a tax professional and come forward under our voluntary-disclosure process.”
Of the 52,000 secret accounts, about 20,000 contained securities and roughly 32,000 held cash, according to a Justice Department statement.
The government’s figures suggest that the average American’s account in the Swiss bank held $285,000.
Today’s suit comes a day after a $780 million settlement by UBS of a U.S. criminal investigation. Under that agreement, the company agreed to turn over the names of about 250 account holders today.
The Swiss government told the IRS last month that it would require the bank to turn over only 12 accounts, according to a declaration filed with the court today by Deputy IRS Commissioner Barry Shott.
The Swiss government won’t provide those records to the IRS until after the account holders have been given the opportunity to file lawsuits in a Swiss court to try to stop the record release, he said.
“The Swiss government has not provided any records sought under the treaty request, and it is not clear when, if ever, it will,” Mr. Shott said.
A Swiss embassy spokeswoman declined comment while calling attention to a Swiss government statement earlier today. The statement said: “Banking secrecy remains intact. It serves to protect privacy. However, it does not protect tax fraudsters.”
UBS, the largest bank in Switzerland, said today that it intends “to vigorously contest” court enforcement of the so-called IRS “John Doe” summons.
“Information is protected from disclosure by Swiss financial-privacy laws,” the statement said.
UBS cited U.S. and Swiss law, as well as “principles of international comity” that it said require American courts to consider foreign laws.
A spokeswoman for the Swiss embassy in Washington did not immediately respond to a request for comment.
The suit alleged Swiss-based UBS bankers came to America to meet with clients about 4,000 times a year, in violation of U.S. law. The bank trained its bankers to avoid detection by U.S. authorities as they met with clients at UBS-sponsored sporting and cultural events.
The U.S. business generated between $120 million and $200 million in annual profits for UBS, the suit contended.
UBS’s defiance today departed from the more conciliatory tone it struck yesterday in commenting on the settlement of the criminal probe.
“UBS sincerely regrets the compliance failures in its U.S. cross-border business,” UBS Chairman Peter Kurer said yesterday. “Client confidentiality, to which UBS remains committed, was never designed to protect fraudulent acts or the identity of those clients.”
A Senate investigative panel headed by Michigan Democrat Carl Levin is due to hold a hearing next Tuesday on the UBS matter.
Asked why the number of alleged American account holders had increased from 19,000 to 52,000, Justice spokesman Charles Miller said, “It’s what we believe is there.” He declined to identify the basis for the U.S. estimate.