A federal judge decided Monday it will take months to determine if and when the Internal Revenue Service will learn the identities of 52,000 wealthy Americans who have secret accounts at Swiss bank UBS AG.
U.S. District Judge Alan S. Gold set a July 13 hearing on the IRS lawsuit, unless an agreement is reached first. UBS claims that turning over the account names would violate Swiss privacy law and jeopardize the bank’s license to stay in business.
“Such violations would expose these (UBS) employees to substantial prison terms, as well as fines, penalties and other sanctions,” the UBS lawyers said in a court filing last week. “There is simply no reason to have, nor equity in having, such an expedited process here.”
The IRS had sought an accelerated timetable, but Justice Department tax attorney Stuart Gibson and UBS lawyers told Gold at a brief telephone hearing Monday they had agreed on a lengthier process. Gold also set a series of deadlines for court filings.
“I would appreciate the continued efforts to discuss this matter, to narrow down what the legal issues are and the factual issues are,” Gold said.
The IRS last week asked Gold to enforce so-called “John Doe summonses” seeking information about the 52,000 accounts that hold an estimated $14.8 billion in assets. The lawsuit was accompanied by dozens of internal UBS e-mails, memos and other material that the IRS contends shows a systematic, long-term scheme by bank employees to help wealthy Americans evade U.S. income taxes.
The lawsuit followed by one day an agreement in which the Justice Department would defer criminal prosecution of UBS in exchange for the identities of up to 300 U.S. customers and payment by the bank of $780 million. That deal did not cover the much broader list of 52,000 names now sought by the IRS, but both sides knew the U.S. would ask for them.
UBS “knew this day was coming, and it knew this day would come sooner, rather than later,” Gibson said.
Another Miami federal judge in July 2008 approved the summonses seeking the account information, but UBS never complied. The new lawsuit asks Gold to enforce that earlier ruling.
Federal prosecutors in Miami previously charged a senior UBS executive, Raoul Weill, with conspiring to defraud the U.S. by helping American customers conceal some $20 billion from the IRS. Weill is a fugitive living in Switzerland, but his New York-based attorney has said he is innocent.
A former UBS banker, Bradley Birkenfeld, pleaded guilty last year in Fort Lauderdale to similar fraud conspiracy charges and has been cooperating extensively with U.S. investigators. Birkenfeld has not yet been sentenced.
