MIAMI - Swiss bank UBS AG "systematically and deliberately" violated U.S. law by dispatching private bankers to recruit wealthy Americans interested in evading taxes and must be forced to reveal the identities of 52,000 of those clients, the Justice Department said in a court filing Tuesday.
The filing, which comes amid several published reports that the case may be near settlement, urges U.S. District Judge Alan S. Gold to hold UBS accountable for conducting years of illegal business on U.S. soil — business that earned the bank more than $100 million in fees but cost the U.S. hundreds of millions of dollars in unpaid taxes.
"It is time for UBS to face the consequences that it has brought upon itself," said Justice Department tax attorney Stuart Gibson in the 55-page filing. "The United States has proven its case for enforcement."
Gold has set a hearing on whether to enforce what are known as "John Doe summonses" used by the Internal Revenue Service to seek information about U.S. taxpayers. U.S. and Swiss newspapers have reported a settlement is likely before that hearing, but Justice Department spokesman Charles Miller declined comment.
UBS spokeswoman Karina Byrne said the bank is "open to an appropriate solution" short of going to court but said no settlement has been completed. In a statement, she repeated UBS's contention that disclosing the U.S. taxpayer names would violate Swiss law and that the dispute should be resolved by the two governments rather than the courts.
"UBS has sought to comply with the summons without violating Swiss law," Byrne said. "It has provided to the IRS as much information as it can from those records located in the U.S., where Swiss law does not apply."
The IRS summons seeks the identities of all U.S. taxpayers who had an "undeclared" account at UBS between 2002 and 2007. Many of these UBS clients have already voluntarily come forward to settle tax obligations with the IRS, Byrne said.
UBS previously reached a deferred prosecution agreement with the Justice Department in which it agreed to disclose the identities of up to 300 U.S. clients and pay $780 million to the U.S. government. In that deal, UBS admitted regularly violating U.S. law through its client recruitment methods, use of sham offshore entities and filing of false paperwork.
"In sum, UBS has admitted that its bankers committed very serious crimes on U.S. soil, in ways that subjected UBS to the full jurisdiction of the IRS and the courts of the United States," Gibson said in the U.S. filing.
One of those 300 UBS clients, accountant Steven Michael Rubinstein, pleaded guilty last week in Fort Lauderdale federal court to charges of filing a false tax return. He faces up to three years in prison.
Miami federal prosecutors also have obtained an indictment charging former UBS senior executive Raoul Weill with tax evasion conspiracy for his role in handling cross-border business and private banking. Weill remains in Switzerland and has been declared a fugitive from justice.
That indictment followed the July 2007 guilty plea by former UBS executive Bradley Birkenfeld to a similar charge of conspiracy to defraud the U.S. Birkenfeld has yet to be sentenced and has been cooperating extensively with federal investigators.