Legal News

In UBS Deal, Is the U.S. Hoping To Use Secrecy to Its Advantage?

By Ashby Jones

So, at long last, as we blogged earlier, we’ve got an end result in this UBS tax situation. The final piece of the settlement, put into effect last week, was announced earlier Wednesday. That component, reached between the U.S. and Switzerland, will allow the U.S. to get the names of 4,450 UBS account-holders. Click here for the WSJ story; here for the NYT story; here for the FT story; here for the agreement itself.

While some were saying the deal blew a hole in Swiss banking laws, Swiss justice minister and Law Blog all-name team member Eveline Widmer-Schlumpf said the agreement fully complies with Swiss law and doesn’t violate banking secrecy, which she emphasized isn’t meant to protect criminal behavior. “With this agreement, we have managed to avoid a conflict between the sovereignty of two states,” Widmer-Schlumpf said.

On the one hand, it appears the U.S. has given up a lot in the deal, gaining access to only a fraction of the 52,000 names it requested earlier this year. But the structure of the deal could allow the U.S. access to far more than the 4450 contained in the agreement. For starters, the names of the 4,450 haven’t been revealed, nor has the criteria the U.S. used in determining who might be on the list. Furthermore, the agreement says that notifications to the 4450 will be made on a rolling basis.

Taken collectively, these stipulations enable the government to use the element of uncertainty over those people who might be included in the 52,000 but not the 4,450. “There’s a huge fear factor here,” says Zuckerman Spaeder’s Evan Stewart. “It’s like the fear of being audited.”

And that fear alone might cause some people to come forward, as many have already done, according to this WSJ article from late last month.

One of our questions: Do account-holders have any recourse here? Uh, well, sort of, it seems. According to the Journal, account-holders can file lawsuits in Swiss courts seeking to block the handing over of their information to U.S. authorities. However, the settlement says that account holders who take Swiss court action have a legal obligation to notify the U.S. attorney general of their Swiss appeals. Not sure that’s a path many will be taking.

So who did all this lawyering?The government was led by Stuart Gibson, senior litigation counsel at the DOJ’s Tax Division. UBS was represented by John Savarese, Martin Arms and Ralph Levene at Wachtell Lipton; David Greenwald and Francis Barron at Cravath; and Eugene Stearns and others at Stearns Weaver Miller Weissler Alhadaff & Sitterson in Miami. The government of Switzerland was represented by Miami lawyer John Dotterrer and Stephan Becker of Pillsbury Winthrop.

Full post as published by Law Blog - WSJ.com on August 19, 2009 (boomark / email).