UPDATE:US Seeks UBS Info On Taxpayers With Hidden Swiss Accts
Monday June 30th, 2008 / 23h40
(updates with further comment from IRS commissioner) DOW JONES NEWSWIRES WASHINGTON (Dow Jones)- The Justice Department is seeking information from UBS AG (UBS) about U.S. taxpayers who may be using Swiss bank accounts to evade federal income taxes. Earlier this month, a former UBS banker pleaded guilty in a scheme related to helping U.S. clients evade taxes. He said the bank had about $20 billion of assets under management in "undeclared" accounts for U.S. taxpayers. Former UBS banker Bradley Birkenfeld pleaded guilty in a Florida court to conspiring to defraud the IRS by helping UBS clients avoid U.S. reporting requirements on income in Swiss bank accounts. He said UBS employees aided U.S. clients in concealing their ownership of assets held offshore by creating sham entities, then filing IRS forms falsely saying the entities owned the accounts. Birkenfeld faces as much as five years in prison and $250,000 in fines. Sentencing is scheduled for August. The Justice Department, in a release Monday, said it has asked a federal court in Miami to let the Internal Revenue Service serve a "John Doe" summons on the bank. Such summonses are used to obtain information about possible tax fraud by people whose identities are unknown. The summons would ask UBS to produce records identifying U.S. taxpayers with UBS accounts in Switzerland who chose to have their accounts remain hidden from the IRS. U.S. law requires taxpayers to report all financial accounts in a foreign country if the total value of the accounts exceeds $10,000. A failure to report a foreign account can result in a penalty of up to 50% of the amount in the account at the time of the violation. "Offshore accounts harbor billions of dollars, and people should take notice that the secrecy surrounding these deals is rapidly fading," said IRS Commissioner Doug Shulman in a news release. Shulman also said that depending on whether the Florida court approves the summons, the IRS may use similar tactics in cases beyond the one involving UBS. "We will be taking additional steps to ferret out offshore tax avoidance beyond today's announcement involving UBS. If service of the John Doe summons is approved, the IRS will pursue people and advisers identified through the summons process who use offshore bank and financial accounts to circumvent their tax responsibilities," Shulman said. Because ironclad secrecy laws are seen as the main advantage of Swiss banks over competitors in the U.K. and U.S., any hint that UBS may have to fork over information about clients is extremely unfavorable. UBS already is suffering from credit market write-downs and is expected to record a net loss - its fourth in as many quarters - of roughly 4 billion Swiss francs ($3.9 billion) in the second quarter. This would bring to nearly $43 billion the losses that UBS has suffered as a result of its exposure to the subprime market. UBS shares Monday were up 0.4% to $20.75 in after-hours trading. -By Kathy Shwiff, Dow Jones Newswires; 201-938-5975; Kathy.Shwiff@dowjones.com Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/al?rnd=3lGBWWahUFfXD%2FiXfjAf1g%3D%3D. You can use this link on the day this article is published and the following day.
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