U.S. Sues UBS Over Secret Bank Accounts

Tax Fraud Ubs Feds Seek Identities Of 52000 U.S. Customers Who Hid Billions From IRS

by CBS News

Published: Thu, February 19, 2009 - 2:52 pm CST

Federal authorities have filed a lawsuit against Swiss-based bank UBS AG seeking the identities of tens of thousands of U.S. customers.

The suit filed in Miami Thursday seeks to force the firm to turn over information on as many as 52,000 U.S. customers who hid their accounts from the U.S. government in violation of tax laws.

"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, in a written statement. "It is time for those who are trying to hide from the IRS to rethink their actions."

The move comes a day after the Justice Department struck a deal with UBS to get access to some of its customers who used Swiss bank secrecy law to hide billions of dollars in assets.

According to the government's lawsuit, the accounts in question held about $14.8 billion in assets in the past decade.

As part of its deal with prosecutors Wednesday, the bank agreed to pay $780 million in fines and penalties.

"We accept full responsibility for these improper activities," Peter Kurer, chairman of Swiss-based UBS AG, said in a statement. He added that the bank was determined to abide by the terms of the deal with U.S. criminal and securities officials.

"Client confidentiality, to which UBS remains committed, was never designed to protect fraudulent acts or the identity of those clients, who, with the active assistance of bank personnel, misused the confidentiality protections," he said Wednesday.

According to U.S. officials, when an acquisition in 2000 of a U.S. company brought UBS a host of new, American clients, the bank set about to evade new reporting requirements for those clients. To do so, UBS executives helped U.S. taxpayers open new accounts in the names of sham entities.

Prosecutors contend that UBS executives used encrypted software and other counter-surveillance techniques to prevent anyone from detecting that they were actively marketing such Swiss bank secrecy - and tax evasion - to American taxpayers.

The clients, in turn, filed false tax returns that omitted the income they earned in their Swiss accounts, according to the court papers.

Federal officials said they had pulled aside a veil of secrecy that hid a corrupt international banking practice.

"This was not a mere compliance oversight, but rather a knowing crime motivated by greed and disrespect for the law," said Alexander Acosta, U.S. attorney for southern Florida.

Internal Revenue Service Commissioner Doug Shulman warned U.S. taxpayers hiding money overseas that it was time to come clean with Uncle Sam.

"People who have hidden unreported income offshore need to get right with their government. They should come forward and take advantage of our voluntary disclosure process," Shulman said.

Sen. Carl Levin, D-Mich., has estimated that abusive tax shelters and hidden offshore accounts cost the U.S. government nearly $100 billion a year in lost tax revenue.

Prosecutors are still hunting for UBS executive Raoul Weil, who was indicted in November 2008 on charges he conspired to defraud the government for overseeing the bank's cross-border business.

In June 2008 former UBS banker Bradley Birkenfeld pleaded guilty to a similar charge.

If UBS fails to turn over the clients' information, or stops cooperating with authorities, federal prosecutors could refile charges against the bank.

Under the deal, UBS also will completely stop engaging in the type of cross-border banking business that got them into trouble.

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