Government Sues UBS for Client Names

When UBS struck a $780 million deal with U.S. prosecutors this week, it agreed to hand over the names of up to 300 wealthy Americans who may have cheated on their taxes by secretly stashing money in that country.

But the case is far from closed.

The arrangement included clients that Switzerland viewed as potential tax cheats, but didn't include disclosing the names of all U.S. account holders at UBS. So today the Justice Department filed a lawsuit seeking to force UBS to identify as many as 52,000 bank clients who may have concealed their Swiss accounts from the American government.

The number was significantly higher than the 19,000 Americans the Justice Department turned up in its criminal investigation. Those account holders may have secreted as much as $20 billion in assets and evaded some $300 million in U.S. taxes.

The litigation, filed in federal court in Miami, asks that the names be turned over to the Internal Revenue Service, which is conducting its own investigation.

The lawsuit reopened festering differences between the United States and Switzerland over whether evading taxes is a crime. In Switzerland, it is not. Only tax fraud -- filing false information rather than failing to declare all income and investments -- is a crime.

Both sides appeared to be digging in their heels, with the Justice Department first asking for the names of 20,000 possible bank clients then raising the number to 52,000.

"At a time when millions of American 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 civil and legal duty to pay taxes," said John DiCicco, acting assistant attorney general.

Switzerland's president Hans-Rudolf Merz, earlier today, said the country's bank secrecy "remains intact" and vowed to fight making other UBS client names public. Although numbered accounts allegedly don't exist, a Swiss law passed 75 years ago enshrined the idea that bank accounts are sacrosanct unless there is a deliberate legal violation.

A decade ago, the U.S. government moved to close foreign tax cheating in Switzerland by requiring the disclosure of identifying information on American bank clients. UBS got around that, federal investigators say, by allowing clients to either hide behind sham entities or holding only non-U.S. investments. In either case, no tax-related information was passed to American authorities.

While both sides are jockeying, action on the lawsuit isn't likely for at least three months. The question is, said George Clarke, a Washington, D.C. tax lawyer, "whether the court is going to order UBS to violate Swiss law."

by Elizabeth Olson