- The Washington Times - Tuesday, February 2, 2010

ZURICH | While the Swiss government struggles to salvage a settlement with the United States over data disclosure of UBS clients suspected of tax evasion, the banking community is grappling with news that an informant is seeking to sell to German authorities secret Swiss data on 1,500 German taxpayers allegedly evading taxes.

The offer reportedly is for the sum of 2.5 million euros ($3.48 million in U.S. dollars).

Germany is said to be at least considering the offer. But the Swiss authorities declare the offer to be “illegal” and suggest the perpetrators be prosecuted for stealing materials.

Swiss President Doris Leuthard maintained at the World Economic Forum in Davos, which ended over the weekend, that “it is rather insidious that a state operating under the rules of law make use of illegal data.”

“Our goal should be to obtain this data,” said German Chancellor Angela Merkel. “Every reasonable person knows that tax evasion needs to be uncovered.”

Germany has purchased such data before. That information was derived from a bank in Liechtenstein offered by a former bank employee in 2008 for 4.2 million euros.

“But we’re not Liechtenstein, and an important partner of Germany,” said a Zurich bank official. Yet, Germany is said to be among the biggest groups of tax evaders in Switzerland.

This newest brouhaha comes on the heels of a ruling by the Swiss Federal Administrative Court in Bern that avowed the U.S.-Swiss agreement made by the country’s Federal Council, or cabinet, was not entirely legal. Under Swiss law, tax evasion is a misdemeanor; and client confidentiality is assured.

The ruling has been appealed to the country’s highest court in Lausanne by FINMA, the Swiss Financial Market Supervisory Authority. The agency spokesman told The Washington Times that it is feared the banking community was becoming “dis-stabilized” and there has to be more legal clarification about what banks can or cannot do under the law.

Following the Swiss court’s ruling, the Swiss government said it would continue discussing the situation with the United States. UBS said in a statement that it “welcomes the fact that the Swiss Federal Council is pursuing a dialogue with the U.S. authorities.”

The Internal Revenue Service issued a brief statement last week indicating little room for compromise.

“The United States has an agreement with the Swiss government to produce information on U.S. account holders at UBS,” the IRS said. “We expect the Swiss government to continue to honor the terms of the agreement.”

In the end, the Swiss parliament may have to settle the U.S.-Swiss agreement by voting retroactively to approve the settlement made by the executive branch, which termed it an emergency measure to avoid a long and costly legal battle in the U.S.

Under terms of the settlement, Switzerland agreed to provide the U.S. Justice Department and the IRS the names and accounts of about 4,450 wealthy Americans, clients of UBS, suspected of tax evasion. The Swiss court’s ruling applied to only one client, identified as “A” under Swiss confidentiality rules, but it could effectively invalidate last year’s U.S.-Swiss agreement involving all 4,450 clients.

Under Swiss law, there must be deliberate fraud. So far, according to reports out of Bern, only a small fraction of the requested accounts have been delivered.

Also, the Swiss are waiting to see whether the wealthy Americans voluntarily surrender requested data to American authorities.

Swiss bankers are not conceding that bank secrecy is gone, only that it is challenged and is in a difficult position. But the question being asked is: When will the next challenge come?

Staff writer David M. Dickson contributed to this story from Washington. Helene Franchineau contributed from Paris.


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