- The Washington Times - Saturday, August 1, 2009

MIAMI | Days before a high-stakes trial with implications for bankers worldwide, the U.S. and Swiss governments said Friday they reached a hard-fought settlement in the U.S. effort to get the names of thousands of wealthy Americans suspected of evading taxes by hiding billions of dollars with Swiss banking giant UBS AG.

Both governments and UBS said details would remain confidential until a written settlement was completed, likely within the next week. A trial scheduled to begin Monday was canceled by U.S. District Judge Alan S. Gold, who set an Aug. 7 conference call to go over a proposed final agreement.

“The parties have reached an agreement in principle on the major issues,” U.S. Justice Department tax attorney Stuart Gibson told Judge Gold in a telephone conference Friday. “There are some other issues that need to be resolved.”

Shares of UBS AG on Friday rose 95 cents, or 6.9 percent, to close at $14.74.

The breakthrough came minutes before Secretary of State Hillary Rodham Clinton and Switzerland’s foreign minister, Micheline Calmy-Rey, met in Washington to discuss the UBS case and related issues. The announcement of a deal was somewhat surprising, given that Mr. Gibson told Judge Gold on Wednesday the two sides were far apart.

“There’s been an agreement in principle,” Mrs. Clinton said. “Our governments have worked very hard on this to reach this point.”

Ms. Calmy-Rey said she was “very satisfied” with the agreement but did not elaborate. But Swiss Foreign Ministry spokesman Lars Knuchel said the settlement bodes well for U.S.-Swiss relations, which have been strained by the tax case.

“I think it is in the interests of both countries to find a solution, to find a settlement, and the simple fact that the two delegations and both governments have now in principal reached an agreement is a good example for the overall good relationship that these two countries share,” Mr. Knuchel said.

Originally the trial was to begin July 13, but Judge Gold agreed to give all sides time to reach a settlement first.

The case, in which the U.S. Internal Revenue Service is taking on centuries of Swiss banking secrecy tradition, involves some 52,000 U.S. taxpayers believed to be hiding about $15 billion in assets in UBS accounts. The IRS wants Judge Gold to order the Zurich bank to turn over those names so it can collect taxes on the funds - and so the Justice Department can prosecute them for tax evasion.

UBS and the Swiss government, however, insist they cannot reveal the names without violating laws in Switzerland. The Swiss have threatened to block disclosure even if Judge Gold were to order the identities released to U.S. authorities.

“If all 52,000 names are turned over, it might end Switzerland as we know it as an international banking center,” said Martin Press, a tax attorney with Gunster Yoakley & Stewart PA, based in West Palm Beach, Fla. “So this is very important to the Swiss.”

The Justice Department indicated that any deal would have to include disclosure of some taxpayer names and would likely include a large penalty against UBS, which has some 34,000 employees and contract workers in the United States.

Earlier this year, UBS admitted to assisting U.S. citizens in evading taxes as part of a deferred prosecution agreement with the Justice Department. UBS agreed to disclose the names of about 300 American clients and pay a $780 million penalty. The IRS subsequently filed its case seeking the 52,000 additional names.

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