Swiss government backs away from deal with US

The Swiss government are backing away from an agreement with the US which required them to provide names of wealthy American clients of the Swiss bank UBS who were suspected of tax evasion.

The announcement threatens to open a new front in the investigation into UBS by the Justice Department.

The Swiss cabinet, known as the Swiss Federal Council, said in a statement that it would continue talks with the US on the matter. It said there was a risk that the US would resume civil proceedings filed against UBS in a Florida court last year. That case sought to force UBS to disclose the names of 52,000 wealthy American clients suspected of tax evasion through UBS's private bank.

That lawsuit was suspended in August when the Swiss government, acting on behalf of UBS during months of intense negotiations, promised to hand over 4450 UBS client names.

The Swiss cabinet said it might put the disclosure of the names up for approval before the Swiss Parliament - but only if it received detailed information from the Internal Revenue Service on how many UBS clients had come forward under a voluntary disclosure program which ended in November.

The program brought in 14,700 clients from many banks, including UBS. This could allow the Swiss to avoid having to identify people who had already come forward.

The Swiss cabinet said it was not contesting Switzerland's disclosure of 250 names to the Justice Department in February. That move was part of a deal that helped UBS avoid indictment and instead pay a $780 million fine and admit to criminal wrongdoing with its offshore private banking services sold to Americans.

The Swiss did not explain how the disclosure of the 250 names was not deemed to be a breach of Swiss privacy laws while disclosure of the 4,450 was.

Statement from UBS

In a statement, UBS said that it "welcomes the fact that the Swiss Federal Council is pursuing a dialogue with the US authorities."

"UBS's new management will fully support the search for a solution. As before, we will fulfill all our commitments under the agreement."

Peter J. Henning, a law professor at Wayne State University Law School in Detroit and a former Justice Department criminal fraud investigator, said to The New York Times that with the original August deal, "the Swiss tried to pull a fast one on their own country. They really haven't changed their underlying bank secrecy laws, and their courts, and now their government, are saying, ‘You can't just do that.' The Swiss government is in a really bad situation. They have to confront the issue of bank secrecy - what do they want, what are they willing to live with."

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