UBS Trial to be Postponed

At the last minute, the large Union Bank of Switzerland (UBS) and the U.S. government are proposing to postpone a controversial trial. This delay comes at the request of American tax authorities who want to force the release of data on approximately 52,000 American clients of UBS.

The authorities want the data to expose tax evaders. The proceedings against UBS were to have started in a Miami courtroom on Monday, but Swiss legal authorities in Bern announced on Sunday that, in view of the settlement negotiations already underway, both sides had asked to postpone the beginning of the proceedings for 15 days. The Swiss authorities were reported to be especially pleased with the move. Details, such as how far along the conversations are on a settlement, were not announced.

Tensions did arise between UBS and the Swiss government regarding the course of action. The government had emphasized that the surrender of information will not be approved because of official Swiss banking secrecy. Since a compromise with American authorities had not been looming on the horizon earlier, the Swiss had been worried about a multi-billion dollar fine or even a possible UBS bankruptcy.

In Sunday’s edition of Switzerland’s “Neue Zürcher Zeitung (NZZ)” newspaper, it was reported that a harsh letter had been sent from the Swiss Finance Ministry to UBS. The letter, which was later reported to be a “conciliatory communication,” was a reaction to the offer made by Finance Minister Hans-Rudolf Merz that UBS could still settle the tax liabilities of U.S. clients who had hidden their assets with the assistance of the bank. Then, in this case, no tax information would have to be handed over. The NZZ said that UBS did not disavow the suggestion of a tax liability settlement, but UBS was worried that this would have caused all conversations in the United States to be torpedoed before the trial.

UBS turned over 250 client records to American authorities this past February. These records, as the Swiss see them, do not rise to the level of certain types of tax transgressions, which would exempt them from the protection of Swiss banking confidentiality. After this record transfer, the bank went ahead and paid 780 million dollars. UBS Group Chief Executive Officer Oswald Grüdel called this “one of the largest fines ever paid in a tax proceeding.” UBS losses in the financial crisis, up to this point, amount to about 30 billion Swiss franks (or almost 20 billion euros) and the bank's capital resources appear to be too limited for future payments.

For the Swiss government, this is a question of testing a constitutional approach to finding out who of the 52,000 American UBS clients had really committed tax evasion. On the other hand, the American tax authorities are demanding the immediate release of all information so that they can check for themselves. U.S. Department of Justice officials have long accused UBS of systematically violating laws and encouraging tax evasion by Americans. This is why every UBS account of American taxpayers will have to be made transparent.

One judge even raised the possibility of forcing American branch offices of UBS to close and seizing parts of the bank's business operations. UBS employs approximately 27,000 people in the United States, almost 1,000 more than it employs in Switzerland.