UBS May Testify Against Clients Over US Tax Evasion Case

Osmond Plummer Geneva 1 February 2010

UBS May Testify Against Clients Over US Tax Evasion Case

Swiss media reports that a secret agreement has been reached between UBS and the US authorities under which the firm will testify against its US clients if they plead not guilty to tax evasion.

The bank delivered the details of around 250 clients in February last year as part of a settlement of a criminal case and promised to provide information on some 4,450 further clients in a separate, civil case – actions recently ruled illegal by the Federal Tribunal. The promise is allegedly contained in a letter known as Annex E to the deferred prosecution agreement of 18 February and was understood to have been signed by UBS on 16 February.

A UBS spokesman was unable to comment on the contents of the Annex E which was filed separately under seal.

In reality, the only situation in which UBS would be required to testify is one in which the client is to plead not guilty.

Of the seven individuals so far charged with tax evasion, six are co-operating with the authorities and the seventh has yet to plead. The US Department of Justice will encourage co-operation with lighter penalties than would be obtained if the case was challenged by the defendant. If UBS has agreed to provide testimony, that will surely strengthen the hands of the IRS. The implications of the recent rulings from the Swiss courts that state that the data provided to date should not have been sent remain to be seen.

Milan Patel, a Swiss based US tax lawyer, said the actual number of accounts that should be declared may not be as many as has been reported due to a number of legal niceties. He also suggested that any involvement of UBS in US proceedings will be limited to their “validating documents so that they can be admitted as evidence according to the US legal procedures” rather than the bank testifying in open court.

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