Justice Agency Slams UBS's Defense in Tax Case
By BRENT KENDALL
WASHINGTON -- The Justice Department attacked legal arguments made by Swiss banking giant
UBS AG, which is trying to fend off the U.S. government's attempt to obtain the identities of tens of thousands of the bank's U.S. customers with secret Swiss accounts.
UBS reached a deal with federal authorities in February to avoid criminal prosecution for helping U.S. clients hide their accounts from the Internal Revenue Service. As part of that settlement, UBS agreed to pay $780 million in penalties and restitution and promised to disclose the identities of about 250 U.S. customers.
A day later, the Justice Department asked a federal judge in Miami to enforce an IRS summons seeking the identities of as many as 52,000 U.S. customers who allegedly hid their UBS accounts.
Government lawyers said in a court brief filed on Tuesday that UBS had a weak case for clinging to Swiss banking secrecy, because the bank knowingly and intentionally helped tens of thousands of wealthy Americans evade hundreds of millions of dollars in taxes.
"Any hardship that UBS might face from refusing to comply with a court order here is a hardship that it brought upon itself," the Justice Department said in a 55-page court filing. "It is time for UBS to face the rest of the consequences that it has brought upon itself."
UBS has said it can't provide information to U.S. tax collectors because the move would violate Swiss privacy laws that prohibit the disclosure to third parties information about Swiss bank accounts.
The bank also has argued that the high-stakes dispute should be resolved diplomatically between the Swiss and U.S. governments instead of in U.S. courts.
"Our position remains that the enforcement of the summons would require UBS to violate Swiss law and is inconsistent with treaty frameworks," UBS spokeswoman Karina Byrne said on Tuesday.
Ms. Byrne said the bank has sought to comply with the summons and has given the IRS "as much information as it can."
Some observers have suggested in recent days that UBS and the Justice Department might be nearing a settlement, but the government's strongly worded court filing on Tuesday gave no hint of that.
Ms. Byrne said reports of a possible settlement in the case "are speculative and possible settlement amounts that have recently been reported have no basis."
The Justice Department dismissed the bank's statement that it had made a good-faith effort to comply with the IRS summons. "The notion that UBS has always acted in 'good faith' to comply with U.S. law ... bears all the hallmarks of an 11th-hour confession, made in the hopes the sinner will be absolved from the full consequences of his wrongdoing," the department said.
A court hearing on the dispute is scheduled for July 13.
