Justice Department Demands UBS Release Names Of Customers Evading Taxes

(RTTNews) - The Justice Department called on Swiss bank UBS AG Tuesday to reveal the identities of 52,000 suspected U.S. customers that hid their UBS accounts from the government, violating tax laws by lying about income.

The move comes over four months after the government sued UBS, prompting the bank to pay out $780 million in penalties although it refused to name names.

However, the Obama administration insists that UBS reveal the names, filing papers in the U.S. District Court in Miami seeking the names as part of their lawsuit against UBS.

"UBS must disclose the identity of every U.S. taxpayer with an undisclosed UBS account so that every U.S. customer with an undisclosed account will get right with their government," according to the Justice Department's filing. "The United States has a strong national interest in making sure that all U.S. taxpayers comply with the tax laws, including disclosing their offshore accounts, and paying all the taxes they owe."

The lawsuit, filed on February 19, alleges that not only did UBS provide a tax haven, it actively sought out wealthy customers and specifically trained its bankers to avoid detection by U.S. authorities.

The Justice Department said the recruiting of wealthy clients occurred at sporting and cultural events "designed to appeal to extremely wealthy Americans."

"At a time when millions of Americans are losing their jobs, their homes and their health care, it is appalling that more than 50,000 of the wealthiest among us have actively sought to evade their civic and legal duty to pay taxes," said John A. DiCicco, Acting Assistant Attorney General for the Justice Department's Tax Division.

"The IRS will be aggressive in pursuing people who shirk their obligations under the tax law. These people owe it to their fellow citizens to pay their fair share of taxes," said IRS Commissioner Doug Shulman.

"Taxpayers should talk to a tax professional and come forward under our voluntary disclosure process," Shulman added. "Having the IRS find you could mean a much heavier price than coming forward on your own."

In February, UBS agreed to pay $780 million in fines to resolve the cross-border tax evasion case with the Justice Department and the Securities and Exchange Commission.

Over the past 10 years, UBS had been seeking clients in the United States and setting them up with accounts in Switzerland, allowing them to avoid paying U.S. taxes, according to investigators, while the bank earned as much as $140 million per year in interest.

As part of the settlement, UBS had agreed to provide an undisclosed number of names to the U.S. tax authorities.

Additionally, the Department of Justice agreed to defer any prosecution for at least 18 months or longer if the bank needs more time to expel its U.S. cross-border business.

Separately, the Swiss Federal Banking Commission concluded that UBS violated the requirements for proper business conduct, and it barred UBS from providing services to U.S. resident private clients out of non-SEC registered entities.

Further, the SFBC ordered UBS to enhance its control framework around its cross-border businesses and announced that the effectiveness of such a framework will be audited.

"It is apparent that as an organization we made mistakes and that our control systems were inadequate," said Marcel Rohner, Group CEO of UBS. "We will strengthen our compliance programs. UBS … is committed to fulfilling its obligations under the laws and regulations in every country in which it operates."

Over the summer, UBS AG's CFO Mark Branson announced that his company would cease to offer offshore banking services to U.S. clients through foreign banks.

"We have decided to exit entirely the business in question,'' Branson said in a hearing before lawmakers. ''UBS will no longer provide offshore banking or securities services to U.S. residents through our bank branches. Such services will only be provided to residents of this country through companies licensed in the United States.''

''UBS genuinely regrets any compliance failures that may have occurred,'' Branson added. ''We will take responsibility for them. We will not seek to minimize them. On behalf of UBS, I am apologizing, and committing to you that we will take the actions necessary to make sure this does not happen again.''

UBS is the world's largest wealth manager, earning almost $6.9 billion from managing wealth in 2007.

For comments and feedback: contact editorial@rttnews.com Copyright(c) 2009 RTTNews.com, Inc. All Rights Reserved

More News:   Market Updates | Stock Alerts | All Trading News | Stock Index