Swiss Bank settles U.S. tax charges, mounting U.S. pressure on Swiss bank secrecy.

• Author: Crook, John R.

In November 2008, a U.S. federal grand jury indicted a senior official of the Union Bank Suisse (UBS) on charges related to an alleged conspiracy to conceal thousands of U.S. taxpayers' accounts from the Internal Revenue Service. (1) In February 2009, UBS entered into a deferred prosecution agreement with the Department of Justice, agreeing to pay $780 million to settle Securities and Exchange Commission and Justice Department civil and criminal charges that it helped U.S. taxpayers to avoid taxes. $380 million reflected disgorgement of profits; the remainder reflected lost tax revenue to the United States attributable to the bank's actions. The settlement avoided possible criminal charges against the bank itself; such charges often are fatal to corporations. (2) The bank also is reportedly closing about 19,000 accounts held by U.S. account holders that prosecutors suspect have not been declared to the IRS. (3) Excerpts from the Justice Department announcement of the February settlement follow:

UBS AG, Switzerland's largest bank, has entered into a deferred prosecution agreement on charges of conspiring to defraud the United States by impeding the Internal Revenue Service (IRS), the Justice Department announced today. As part of the deferred prosecution agreement and in an unprecedented move, UBS, based on an order by the Swiss Financial Markets Supervisory Authority (FINMA), has agreed to immediately provide the United States government with the identities of, and account information for, certain United States customers of UBS's cross-border business. Under the deferred prosecution agreement, UBS has also agreed to expeditiously exit the business of providing banking services to United States clients with undeclared accounts. As part of the deferred prosecution agreement, UBS has further agreed to pay $780 million in fines, penalties, interest and restitution. Earlier today, the agreement was accepted in Ft. Lauderdale, Fla. by U.S. District Judge James I. Cohn. A criminal information was unsealed today that charges UBS with conspiring to defraud the United States by impeding the IRS. According to court documents, in 2000, after it purchased the brokerage firm Paine Webber, UBS voluntarily entered into an agreement with the IRS that required UBS to report to the IRS income and other identifying information for its United States clients who held United States securities in a UBS account. Court documents allege that the agreement also...