UBS must release data on 4,500 suspected tax cheats
Updated 8/20/2009 4:59 PM
By Kevin McCoy, USA TODAY For generations of investors, the promise of Swiss bank secrecy represented virtually a "sacred institution" able to withstand all would-be challengers, including Hitler's military might, says William Sharp, a tax attorney whose Tampa law firm represents dozens of Swiss banking clients. But the covenant became less than absolute on Wednesday, when Swiss banking giant UBS (UBS) reached an agreement with the U.S. Justice Department and the IRS that will disclose account data for roughly 4,450 wealthy American clients suspected of tax evasion — and ultimately lead to the release of thousands more names.
Read the documents:
IRS PRESS RELEASE: Text of today's press release US-SWISS AGREEMENT: Detailed diplomatic document (pdf) SETTLEMENT WITH UBS: Read the details (pdf) FUTURE STEPS: US and Swiss declarations (pdf)
"From an American tax perspective, the days of traditional Swiss banking secrecy are clearly over when it comes to accounts involving allegations of improper behavior," Sharp said in a phone interview from Zurich. "We're already seeing a rippling effect to other Swiss banks, and maybe even some non-Swiss banks."
The settlement of the closely watched tax battle requires Swiss authorities to "review and process" requests for account information at other Swiss financial institutions in cases with a similar "pattern of facts and circumstances" involving clients suspected of hiding income or assets offshore.
That provision sets the stage for authorities in the U.S. and other nations to seek account information from Credit Suisse and other Swiss banks, said Martin Press, a tax attorney whose Fort Lauderdale firm represents numerous Swiss banking clients.
IRS Commissioner Douglas Shulman said the unprecedented deal provides for disclosure of UBS accounts that at one point held an estimated $18 billion in assets. He declined to say how much the IRS expects to recover in back taxes, interest and penalties once the data are turned over.
"I believe this agreement gives us what we wanted — access to information about those UBS account holders most likely to have been involved in offshore tax evasion," said Shulman during a telephone news conference with reporters.
Saying the agreement helps resolve one of the bank's "most pressing issues," UBS Chairman Kaspar Villiger said the banking giant "welcomes the fact that the information-exchange objectives of the settlement can be achieved in a lawful manner under the existing treaty framework between Switzerland and the United States."
UBS shares closed at $15.44 on the New York Stock Exchange after Wednesday's announcement, a drop of 46 cents or nearly 2.9%.
Under the agreement, the IRS will submit a treaty request to the Swiss government describing the specific types of accounts for which the tax agency seeks ownership and financial information. IRS officials said the holdings in question included regular bank accounts, custodial accounts and nominee accounts suspected of being "sham trusts."
After receiving the U.S. treaty request, the Swiss Federal Tax Administration will seek the financial data from UBS, the Alpine nation's largest bank, and notify American owners that their account information may be disclosed to the IRS.
UBS is required to turn over data for the first 500 requested accounts within 60 days. The Swiss tax agency must get the remaining data on a continuing basis within nine months.
Swiss tax officials will submit the accounts to an expedited review, including expected legal challenges raised by the American account holders, before giving the data to U.S. authorities.
The agreement calls for a special task force of the Swiss tax agency to render its first 500 rulings within 90 days of receiving the U.S. treaty request. All other rulings must be concluded just under one year from the date of the initial U.S. application.
Tipping off Justice
American account holders who challenge the handover face the possibility of being tripped up by a federal law that requires them to notify the Justice Department of their appeal, said Bryan Skarlatos, a tax attorney at Kostelanetz & Fink, a New York City law firm that represents UBS clients.
An estimated 52,000 UBS accounts have some link to U.S. customers. But Shulman said some of those owners had previously disclosed their holdings to the IRS and had paid taxes over the years. He said the IRS all along wanted the 4,450 accounts targeted by the agreement because they had the most potential evidence of tax evasion.
However, the agreement includes a three-month delay before the public release of the IRS criteria used to select the UBS accounts. Skarlatos said the provision seemed aimed at pressuring all of UBS' American customers to take advantage of an IRS voluntary disclosure program that provides lower penalties to those who come forward.
Applications for that program are being accepted until Sept. 23 — well before the selection criteria are disclosed — and Shulman said the IRS currently has no plans to extend the deadline.
However, Shulman said UBS clients could still apply for the program for a short period after being notified their accounts could be given to the IRS.
"Once the Swiss government sends us the name, all bets are off," he said, indicating that those UBS clients could face stiffer criminal penalties and possible criminal prosecution.
IRS officials said they initially expect to get information for more than 5,000 UBS accounts. According to the agreement, that number ultimately is expected to climb past 10,000 including accounts disclosed under the IRS voluntary disclosure program and from other sources and proceedings, such as a separate criminal case against UBS that was tentatively settled in February.
In the criminal case, UBS agreed to pay $780 million in a settlement that deferred federal prosecution of evidence that it repeatedly sent bankers on secret trips into the U.S. to help American clients hide assets and income offshore. There is no additional financial penalty in Wednesday's deal.
Federal prosecutors had charged that UBS bankers had posed as tourists, used encrypted laptops, numbered accounts and other counter-surveillance tactics as they traveled to and from the U.S. to advise clients about the overseas holdings. Thirty-two bankers traveled to the U.S. and met with clients roughly 3,800 times during 2004 alone, prosecutors alleged.
As part of the criminal settlement, UBS handed over financial data for about 250 American-owned accounts that bore specific evidence of tax evasion. Federal prosecutors have filed criminal cases involving owners of four of those accounts.
UBS also agreed in February to shut down its offshore banking activities for American clients. But, until the outlines of Wednesday's civil lawsuit settlement were reached last week, UBS had balked at turning over most of the data demanded by the IRS. The bank had argued that disclosure would be a criminal violation of Swiss banking secrecy laws.
The Swiss government had backed that contention and had even raised the prospect of seizing the account data to prevent any handover.
A win for the IRS – and for UBS
Wednesday's settlement outlined a phased procedure for final legal conclusion of the criminal case against UBS. It also included a mechanism for U.S. authorities to reopen legal negotiations on terms of the civil agreement if the account data expected by the IRS are not ultimately produced.
"The IRS can claim victory," said Press, the Fort Lauderdale tax attorney. "The settlement gives the U.S. what it wanted: an entry into bank secrecy and a manner to deal with the Swiss government directly, with a system to get similar information" from other Swiss banks.
UBS and Swiss officials can also claim victory, because the vast majority of Swiss bank accounts will remain secret, said James Nason, a spokesman for the Swiss Banking Association.
"For us, it was crucial that the agreement conforms to prevailing Swiss law, because international clients rely very much on the predictability and stability of the Swiss legal system," Nason said. "It was also important that the privacy of clients innocent of any wrongdoing should remain protected."
Banking secrecy has been a part of the Swiss banking industry since the 1930s, making it a financial haven for investors seeking confidentiality and protection of their assets.
But the UBS deal could force the industry to rewrite its business model, said Jonathan Lachowitz, a financial planner and owner of White Lighthouse Investment Management in Lausanne, Switzerland.
"As the veil of Swiss banking secrecy is being broken by foreign governments, many of whom have been losing out on significant tax revenues, Swiss bankers will have to learn to compete on quality, service and price; something they have not been accustomed to," said Lachowitz.
Contributing: Helena Bachmann in Geneva
SETTLEMENT AGREEMENT WHEREAS, The United States of America (the "United States"), the U.S. Internal Revenue Service ("IRS") and UBS AG ("UBS") (singularly a "Party" and collectively the "Parties") desire to resolve their dispute over the John Doe summons that was served upon UBS by the IRS on or about July 21, 2008 (the "UBS Summons") and that is the subject of the matter pending in the United States District Court for the Southern District of Florida, Miami Division, entitled United States of America v. UBS AG, Case No. 09-20423-CIV-GOLD/MCALILEY (the "Action"); the United States and the Swiss Confederation have entered into a separate agreement dated August 19, 2009, in which the United States and the Swiss Confederation have agreed on an information exchange mechanism that is intended to achieve the U.S. tax compliance goals of the UBS Summons while also respecting Swiss sovereignty (the "USSwitzerland Agreement"); and as contemplated in the US-Switzerland Agreement, the IRS will deliver to the Swiss Federal Tax Administration (the "SFTA") a request for administrative assistance, pursuant to Article 26 of the 1996 Convention Between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income (the "1996 Convention"), seeking information with regard to accounts of certain U.S. persons maintained at UBS in Switzerland (the "Treaty Request"). NOW, THEREFORE, the Parties have agreed to the settlement of the Action on the terms set forth below: 1. Immediately upon the execution of this Settlement Agreement, and in no event more than 5 business days after its execution, UBS and the United States will file a Stipulation of Dismissal, pursuant to Fed.R.Civ.P. 41(a)(1)(A)(ii), with the United States District Court for the Southern District of Florida. (A copy of the proposed joint stipulation dismissing the Action is attached hereto as Exhibit A.) The Parties understand that the dismissal of the Action pursuant to this paragraph 1 shall, in and of itself, have no effect on the UBS Summons or its enforceability. 2. In order to facilitate and support the information exchange mechanism being established under the US-Switzerland Agreement, UBS agrees that it shall produce, on a rolling basis, account information to the SFTA on the following schedule: (i) within 60 days after UBS receives notice from the SFTA that the Treaty Request has been received by the SFTA, UBS shall submit to the SFTA the first 500 cases described in paragraphs 2.A.b and 2.B.b of the Annex to the US-Switzerland Agreement; (ii) within 180 days after UBS receives notice from the SFTA that the Treaty Request has been received by the SFTA, UBS shall submit to the SFTA the remaining cases described in paragraphs 2.A.b and 2.B.b of the Annex to the USSwitzerland Agreement; and (iii) within 270 days after UBS receives notice from the SFTA 2 that the Treaty Request has been received by the SFTA, UBS shall submit to the SFTA all the remaining cases subject to the Treaty Request. As a result, UBS shall complete the production to the SFTA of all cases responsive to the Treaty Request no later than 270 days after UBS receives notice from the SFTA that the Treaty Request has been received by the SFTA. The account information referred to in this paragraph is the information that UBS is ordered to produce to the SFTA pursuant to the Treaty Request. Based on an analysis conducted by UBS, the Parties estimate that information concerning approximately 4,450 accounts shall be provided by UBS to the SFTA in response to the Treaty Request. 3. In order to further expedite the process, UBS agrees to send notices based on currently available contact information to U.S. persons whose accounts with UBS are subject to the Treaty Request informing such U.S. persons that they should promptly designate an agent in Switzerland for the receipt of communications concerning the Treaty Request with respect to their accounts as soon as such accounts are identified by UBS but, with respect to accounts described in paragraphs 2.A.b and 2.B.b of the Annex to the US-Switzerland Agreement, beginning immediately upon UBS receiving notice from the SFTA that the Treaty Request has been received by the SFTA and continuing on a rolling basis, UBS shall send notices to holders of 500 such accounts within 15 days of receiving notice from the SFTA; shall send notices to holders of 1,000 additional such accounts within 30 days of receiving notice from the SFTA; shall send notices to holders of 1,000 additional such accounts within 45 days of receiving notice from the SFTA; and shall complete notifying all such accounts identified at that time within 90 days of receiving notice from the SFTA. The Parties recognize that certain unavoidable system limitations and technical issues with respect to a de minimis number of accounts relating, for example, to the identification of addresses for old and/or closed accounts, may cause delays with respect to notification. The Parties agree that any delay in sending notices to a de minimis number of account holders requiring notification within the timeframes set forth in this paragraph 3 shall not be considered a violation of this paragraph 3. The Parties will consult regularly with respect to any such issues that arise. If such U.S. persons do not designate an agent in Switzerland, communications with respect to their accounts shall be sent to such persons' last known mailing address. UBS agrees that the notice will advise such U.S. persons that if they choose to appeal to the Swiss Federal Administrative Court any SFTA administrative decision authorizing the providing of account information to the IRS, they may have an obligation under 18 U.S.C. §3506 to serve the notice of any such appeal and/or other documents relating to the appeal on the Attorney General of the United States at the time such notice of appeal or other document is submitted. UBS agrees that the notice shall encourage such U.S. persons to consult with qualified counsel concerning any obligations they may have under 18 U.S.C. §3506 should they choose to appeal. UBS agrees that the notice shall encourage such U.S. persons to execute a written instruction directing that the relevant account information (i.e., account opening and closing documentation and account statements) in respect of any accounts they maintained with UBS in Switzerland be transmitted to the IRS; in accordance with all valid instructions received from such U.S. persons, UBS shall transmit, at the earliest opportunity and on a rolling basis, all such information to the IRS. Finally, UBS agrees that the notice provided by UBS shall encourage such U.S. persons to consult with a qualified U.S. tax advisor regarding their account with UBS and, if appropriate, to take advantage of the IRS's 3 Voluntary Disclosure Practice. (Such notice shall be substantially in the form attached hereto as Exhibit B.) 4. UBS agrees that, in connection with its ongoing exit from its U.S. cross-border business, UBS shall send a written communication to all exiting U.S. clients encouraging such clients to execute a written instruction directing that account information substantially similar to the account information ordered to be produced to the SFTA with respect to any accounts they maintained with UBS in Switzerland be transmitted to the IRS, and UBS shall continue to maintain instructions and proposed forms relating to such waivers on UBS's website. In accordance with all valid instructions received from exiting U.S. clients, UBS shall transmit, at the earliest opportunity and on a rolling basis, all such account information to the IRS. In addition, the IRS has stated, in the US-Switzerland Agreement, that it intends to ask UBS clients who wish to participate in the IRS's voluntary disclosure practice to submit written instructions to UBS directing that UBS provide relevant account information directly to the IRS. UBS commits to process such instructions promptly and, in accordance with all valid instructions received from such accountholders, UBS shall promptly transmit such account information to the IRS. 5. The Parties understand that the Swiss Federal Office of Justice (the "SFOJ"), which shall seek the assistance of the Swiss Financial Market Supervisory Authority (the "FINMA"), shall oversee UBS's compliance with its commitments under this Settlement Agreement, including but not limited to the commitments set forth in paragraphs 2 and 3 of this Settlement Agreement. 6. The IRS and UBS hereby agree to...
snip...(didn't want to take up to much space with all the RICH FOLKS THAT DON'T PAY THEIR TAXES)
FULL TEXT HERE ;
http://i.usatoday.net/money/_pdfs/us-ubs-bank-agreement.pdf
http://www.usatoday.com/money/perfi/taxes/2009-08-19-ubs-tax-irs_N.htm
another sob story from the rich. the ones that wanted America to fail, just so they could keep theirs $$$
John Fleming, GOP Congressman, Blasts Obama Over Buffett Rule: I Can't Afford A Tax Hike
First Posted: 9/19/11 05:35 PM ET Updated: 9/19/11 06:28 PM ET
Rep. John Fleming (R-La.) appeared on MSNBC Monday morning to express opposition to President Barack Obama's deficit reduction plan, which includes a proposal to raise taxes on the wealthy.
Fleming charged that the plan is a terrible idea which kills jobs provided by wealthy "job creators" who pay personal income taxes. When asked about his business ventures -- including his role in a number of Subway restaurants and UPS stores -- from which he earned $6.3 million last year, Fleming told MSNBC host Chris Jansing that his business expenses left him with little to tax "by the time I feed my family."
Fleming told Jansing that the $6.3 million is "before you pay 500 employees, you pay rent, you pay equipment and food."
"The actual net income of that was a mere fraction of that amount."
"By the time I feed my family, I have maybe $400,000 left over," Fleming said.
Jansing pointed out that to a person making $40,000 or $50,000 per year, making $400,000 annually is "not exactly a sympathetic position," but Fleming responded by calling his success a "virtue" and noting that "class warfare has never created a job."
"This is all about creating jobs," Fleming said. "This is not about attacking people who make certain incomes."
http://www.huffingtonpost.com/2011/09/19/john-fleming-obama-millionaires-tax-buffett-rule_n_970084.html
folks, this is just one city.
read carefully, think of jobs (or the lack of), and think of this greed, then think of the money they are screwing America out of, while the middle and lower income pay their fair share, these guys are laughing all the way to the bank.
wonder if any of these corporate folks cheated America $$$ ???
http://fuelfix.com/blog/2011/07/26/want-to-find-out-who-makes-the-most-find-out-here/
