Monday, June 30, 2008
DOJ Moves Court For UBS Client List
According to court papers filed with the United States District Court for the Southern District of Florida in Miami by U.S. Attorney R. Alexander Acosta, the Department of Justice is asking the Court to allow the IRS to issue a summons to UBS AG demanding the names of wealthy U.S. clients who used the Swiss bank to keep 'undeclared accounts' in order to evade U.S. taxes. Background information on the whole saga of UBS, tax evasion, Bradley Birkenfeld and his toothpaste here and here.
(Update 1 - July 3 2008: Bloomberg report says the IRS has scheduled a July 8 conference call with six auditors - Ernst & Young LLP, PricewaterhouseCoopers LLP, KPMG LLP, Deloitte & Touche LLP, Grant Thornton LLP and BDO Seidman LLP - to help detect foreign banks whose U.S. customers may be evading taxes through secret accounts. A U.S. judge on July 1 granted the IRS power to issue a summons demanding that Zurich-based UBS reveal the names of U.S. customers who may have used secret accounts at the bank to avoid taxes.)
Prior to this, as noted in the links mentioned above, U.S. prosecutors were in talks with both UBS and the Swiss government to find a way out of conflicting laws in the two countries regarding the disclosure of names. Seems the DOJ got tired of waiting for the Swiss to come around and decided to take matters to court. John DiCicco, deputy assistant attorney-general for the Justice Department’s tax division, said in a statement that "We are working co-operatively with both the Swiss government and UBS to obtain this information. We are prepared to seek enforcement if that process is not successful."
As the Wall Street Journal notes in its update on the matter, this is actually a big gamble for Justice, because its quite possible that the Court may decide not to violate the precedent of not forcing Swiss banks to reveal the names of their clients.
The filing is the first against a non-U.S. bank by the Justice Department using what it calls a "John Doe summons," a maneuver typically used to investigate tax fraud by people whose identities are unknown. The move could spark a major legal battle because the Justice Department is essentially gambling that courts will bless the move when it's directed at a company with extensive U.S. operations but that isn't based in the U.S. It has used such tactics in the U.S. previously against international credit-card firms - Feds Press Swiss Bank To Name U.S. Clients, Evan Perez, Wall Street Journal, July 1 2008
On the other hand, if the Court does agree to allow the IRS to send a summons to UBS, that will really shake up the whole system of international banking, which is entirely based on the premise that accounts in foreign banks are safe from being disclosed (except for the tiny requirement of U.S. clients needing to file a W-9 disclosure if they hold U.S. assets in foreign banks). You can bet your boots that not only will UBS be hit by a ton of similar demands from other countries, but this will also trigger demands for disclosure of names from a lot of other banks across the world which offer tax havens to international clients.
(Update 1 - July 3 2008: Bloomberg report says the IRS has scheduled a July 8 conference call with six auditors - Ernst & Young LLP, PricewaterhouseCoopers LLP, KPMG LLP, Deloitte & Touche LLP, Grant Thornton LLP and BDO Seidman LLP - to help detect foreign banks whose U.S. customers may be evading taxes through secret accounts. A U.S. judge on July 1 granted the IRS power to issue a summons demanding that Zurich-based UBS reveal the names of U.S. customers who may have used secret accounts at the bank to avoid taxes.)
Prior to this, as noted in the links mentioned above, U.S. prosecutors were in talks with both UBS and the Swiss government to find a way out of conflicting laws in the two countries regarding the disclosure of names. Seems the DOJ got tired of waiting for the Swiss to come around and decided to take matters to court. John DiCicco, deputy assistant attorney-general for the Justice Department’s tax division, said in a statement that "We are working co-operatively with both the Swiss government and UBS to obtain this information. We are prepared to seek enforcement if that process is not successful."
As the Wall Street Journal notes in its update on the matter, this is actually a big gamble for Justice, because its quite possible that the Court may decide not to violate the precedent of not forcing Swiss banks to reveal the names of their clients.
The filing is the first against a non-U.S. bank by the Justice Department using what it calls a "John Doe summons," a maneuver typically used to investigate tax fraud by people whose identities are unknown. The move could spark a major legal battle because the Justice Department is essentially gambling that courts will bless the move when it's directed at a company with extensive U.S. operations but that isn't based in the U.S. It has used such tactics in the U.S. previously against international credit-card firms - Feds Press Swiss Bank To Name U.S. Clients, Evan Perez, Wall Street Journal, July 1 2008
On the other hand, if the Court does agree to allow the IRS to send a summons to UBS, that will really shake up the whole system of international banking, which is entirely based on the premise that accounts in foreign banks are safe from being disclosed (except for the tiny requirement of U.S. clients needing to file a W-9 disclosure if they hold U.S. assets in foreign banks). You can bet your boots that not only will UBS be hit by a ton of similar demands from other countries, but this will also trigger demands for disclosure of names from a lot of other banks across the world which offer tax havens to international clients.
Subscribe to Posts [Atom]
