Legal News

DOJ?s Suit Against UBS Playing Out at a Higher Level

By Ashby Jones

Switzerland’s reputation as a tax-haven might be on the wane. But it’s not going down without at least a little bit of a fight.

The president of Switzerland, Hans-Rudolf Merz, has asked Treasury secretary Tim Geithner to drop a lawsuit led by the Justice Department seeking to force UBS to turn over the names of some 52,000 wealthy Americans who had stashed their money with the bank. Click here for the story, from the NYT’s Lynnley Browning; here, here, here and here for earlier LB posts on the DOJ’s suit against UBS.

Under Swiss bank secrecy laws, disclosing clients' names is a criminal offense that can carry prison terms and large fines. UBS has argued that its employees could be prosecuted under Swiss law if they were forced to disclose client information.

But such arguments have yet to move DOJ officials. The Justice Department is unlikely to scale back or drop its case against UBS, a senior person briefed on the matter told the NYT. The agency "is not going to give in," this person said on Sunday.

Formal talks between Swiss and U.S. officials over a new treaty concerning Swiss banking are slated to start on Tuesday. Switzerland is proposing to negotiate a new tax treaty with the U.S. that would reduce the amount of secrecy afforded to wealthy investors trying to avoid paying taxes. Switzerland wants to keep the terms of any new treaty from applying to the 52,000 Americans.

The current treaty, signed in 1996, does not require Switzerland to disclose clients' names, and the United States is eager for a new treaty that does.

The acting consul general of Switzerland in New York told the NYT on Sunday that President Merz had asked Geithner for the names case against UBS to be withdrawn after a new agreement is signed.

Swiss officials have said in recent weeks that any new treaty might fall apart unless the legal case against UBS is dropped, because upset Swiss citizens could force a national referendum on the matter and reject it. The Swiss Parliament could also reject it, the official said.

Full post as published by Law Blog - WSJ.com on April 27, 2009 (boomark / email).