US lawsuit seeks to expose execs to jail terms, say lawyers
Bloomberg 23 February 2009
(ZURICH) US efforts to force UBS to disclose the names of 52,000 American customers would require the bank to violate Swiss sovereignty and criminal law, bank lawyers said.
A US lawsuit filed on Friday improperly seeks to enforce summonses from the Internal Revenue Service for the identities of account holders and would trample on Swiss sovereignty, according to a UBS filing on Friday in the federal court in Miami.
‘Swiss law strictly prohibits UBS and its employees from disclosing to the IRS the account information located in Switzerland that the IRS seeks,’ UBS lawyers wrote. ‘The IRS’s petition does not acknowledge these restrictions and instead simply ignores the existence of Swiss law and sovereignty.’
The filing is the bank’s first legal response to a lawsuit that would enhance tax collection by striking a blow at historic Swiss bank secrecy.
The US sued one day after Swizterland’s largest bank agreed to pay US$780 million and disclose the names of about 250 customers to defer prosecution on a charge that it conspired to help wealthy Americans evade US taxes over several years.
By trying to force disclosure, the IRS seeks to expose bank employees to ‘substantial prison terms, as well as fines, penalties and other sanctions’, the bank’s lawyers wrote.
The IRS also wants a judge to force UBS ‘to violate Swiss law in a manner that will expose it to penalties, civil liability and the possible revocation of its banking licence’.
UBS claimed the Justice Department is bypassing ‘carefully negotiated’ treaties that lay out procedures for the IRS to get information on tax fraud in Switzerland by US taxpayers. It said that UBS already has given information on 323 US account holders to the IRS since last July.
‘The IRS asks this court to rewrite the relevant treaties between two sovereign nations,’ according to the filing. ‘To the extent that the IRS is not satisfied with treaties that the US government has negotiated, that concern should be remedied through diplomacy, not an enforcement action.’
In a response, the Justice Department urged the judge not to delay the case. ‘Delay serves the cause of those US taxpayers who continue to hide behind the actions’ of UBS and ‘its spurious claims that it can do business within the United States with impunity, and still rely on Swiss bank secrecy law’, according to the Justice Department filing.
In its filing, UBS argued that it signed an agreement with the IRS in 2001 that allowed it to serve as a ‘Qualified Intermediary’ that would permit it to withhold the identities of US taxpayers from the federal tax collectors.
‘The IRS seeks to repudiate its own contract and demands the production of the very account information that the IRS agreed would remain confidential,’ wrote UBS lawyers from the law firm of Stearns Weaver Miller Weissler Alhadeff & Sitterson in Miami.
In avoiding prosecution, UBS admitted a series of lapses, including violations of the Qualified Intermediary agreement while pursuing a cross-border banking business to woo wealthy Americans, according to a statement of facts.
As many as 60 Swiss-based private bankers who were not licensed to operate in the US travelled to the United States with encrypted laptop computers to maintain client secrecy and got training on how to avoid detection by US authorities, according to the statement filed on Feb 18.
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Naming clients will break Swiss laws: UBS
US lawsuit seeks to expose execs to jail terms, say lawyers
Bloomberg
23 February 2009
(ZURICH) US efforts to force UBS to disclose the names of 52,000 American customers would require the bank to violate Swiss sovereignty and criminal law, bank lawyers said.
A US lawsuit filed on Friday improperly seeks to enforce summonses from the Internal Revenue Service for the identities of account holders and would trample on Swiss sovereignty, according to a UBS filing on Friday in the federal court in Miami.
‘Swiss law strictly prohibits UBS and its employees from disclosing to the IRS the account information located in Switzerland that the IRS seeks,’ UBS lawyers wrote. ‘The IRS’s petition does not acknowledge these restrictions and instead simply ignores the existence of Swiss law and sovereignty.’
The filing is the bank’s first legal response to a lawsuit that would enhance tax collection by striking a blow at historic Swiss bank secrecy.
The US sued one day after Swizterland’s largest bank agreed to pay US$780 million and disclose the names of about 250 customers to defer prosecution on a charge that it conspired to help wealthy Americans evade US taxes over several years.
By trying to force disclosure, the IRS seeks to expose bank employees to ‘substantial prison terms, as well as fines, penalties and other sanctions’, the bank’s lawyers wrote.
The IRS also wants a judge to force UBS ‘to violate Swiss law in a manner that will expose it to penalties, civil liability and the possible revocation of its banking licence’.
UBS claimed the Justice Department is bypassing ‘carefully negotiated’ treaties that lay out procedures for the IRS to get information on tax fraud in Switzerland by US taxpayers. It said that UBS already has given information on 323 US account holders to the IRS since last July.
‘The IRS asks this court to rewrite the relevant treaties between two sovereign nations,’ according to the filing. ‘To the extent that the IRS is not satisfied with treaties that the US government has negotiated, that concern should be remedied through diplomacy, not an enforcement action.’
In a response, the Justice Department urged the judge not to delay the case. ‘Delay serves the cause of those US taxpayers who continue to hide behind the actions’ of UBS and ‘its spurious claims that it can do business within the United States with impunity, and still rely on Swiss bank secrecy law’, according to the Justice Department filing.
In its filing, UBS argued that it signed an agreement with the IRS in 2001 that allowed it to serve as a ‘Qualified Intermediary’ that would permit it to withhold the identities of US taxpayers from the federal tax collectors.
‘The IRS seeks to repudiate its own contract and demands the production of the very account information that the IRS agreed would remain confidential,’ wrote UBS lawyers from the law firm of Stearns Weaver Miller Weissler Alhadeff & Sitterson in Miami.
In avoiding prosecution, UBS admitted a series of lapses, including violations of the Qualified Intermediary agreement while pursuing a cross-border banking business to woo wealthy Americans, according to a statement of facts.
As many as 60 Swiss-based private bankers who were not licensed to operate in the US travelled to the United States with encrypted laptop computers to maintain client secrecy and got training on how to avoid detection by US authorities, according to the statement filed on Feb 18.
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