U.S. and UBS reach breakthrough deal in tax dispute
MIAMI, July 31 (Reuters) – The United States and Swiss bank UBS AG have struck a deal to settle their dispute over tax evasion and bank secrecy, backing off from an escalating standoff that had threatened to damage ties between the two countries.
The announcement of an agreement in principle headed off a showdown over U.S. demands that Switzerland’s best-known bank reveal the names of thousands of wealthy Americans suspected of using UBS to evade taxes. The Swiss government had fiercely resisted what it portrayed as an assault on its sovereign bank secrecy laws.
A U.S. Justice Department attorney said a final settlement was expected within a week, raising hopes for an end to a dispute which was being closely watched by the world’s multibillion-dollar offshore banking industry.
“I’m reporting to the court that the parties have reached an agreement in principle on the major issues,” U.S. Justice Department attorney Stuart Gibson said in a conference call with Florida federal court Judge Alan Gold.
“There are some other issues that need to get resolved, and we expect to be able to resolve them during the coming week,” Gibson added.
He gave no details of the settlement, but told Gold a final signed accord should be ready in time for a pretrial status conference in the case that the judge set for Friday, Aug. 7.
WASHINGTON, BERNE WELCOME DEAL
News of the deal headed off a trial against UBS that had been scheduled to begin on Monday in Miami, Florida. Gold tentatively reset the trial date for Aug. 10, but it would be called off if a final agreement emerges.
Shares of UBS were up 86 cents, or 6.2 percent, at $14.65 in midday New York Stock Exchange trading on news that a deal was underway.
Before meeting in Washington on Friday, U.S. Secretary of State Hillary Clinton and her Swiss counterpart, Micheline Calmy-Rey, said they were pleased with the preliminary agreement.
Lars Knuchel, spokesman for the Swiss Foreign Ministry, said the settlement was a breakthrough in Swiss-American relations.
“The simple fact that two delegations from both governments have now in principle reached an agreement is a good example for the overall good relationship,” he told reporters after the meeting.
U.S. authorities have been trying to force UBS to disclose the identities of as many as 52,000 U.S. holders of secret Swiss accounts suspected of dodging taxes.
DIAMONDS IN TOOTHPASTE
The U.S. probe into UBS first grabbed the media spotlight in June 2008 when Bradley Birkenfeld, a former UBS banker, disclosed in a federal court in Fort Lauderdale, Florida, that he once smuggled a client’s diamonds into the United States in a toothpaste tube to avoid detection by U.S. authorities.
Five months later, Raoul Weil, then head of UBS AG’s wealth management business, was charged with conspiring to help thousands of Americans hide $20 billion in assets from U.S. tax authorities.
Weil, a Swiss citizen who has since left UBS but denies any criminal wrongdoing, is considered a fugitive from U.S. justice.
In February, UBS agreed to pay $780 million to settle criminal charges it was facing under a separate but related tax dispute. It agreed to hand over data related to around 250 U.S. clients who had secret Swiss accounts and promised to close its offshore business to U.S. clients.
The Swiss government stretched bank laws to the limit to pass on the data without a formal violation of the nation’s law, but tax lawyers said the case was a serious hit to traditional Swiss bank secrecy.
As part of any agreement to settle the tax dispute, Swiss media have reported that UBS was likely to a pay a multibillion-dollar fine. Putting the dispute behind it would be a huge relief for the bank, however, analysts say.
The settlement may not include all 52,000 UBS client names being handed to U.S. authorities but could involve a sizable transfer of client data by the Swiss bank, according to some Swiss officials.
The U.S. dust-up with the bank is part of a global effort to clamp down on tax evasion, and lawyers and tax experts have cautioned that the U.S. government may not stop at UBS but will continue to push other foreign banks to ensure their American clients pay the taxes they owe.
Lawyers also expect European nations to follow suit.
(Additional reporting by Jim Loney in Miami, Sue Pleming and Deborah Charles in Washington; Editing by Pascal Fletcher and Phil Berlowitz)