UBS TO LET FEDS KNOW A FEW NAMES OF OFFSHORE DEPOSITORS

NY Times - UBS, the largest bank in Switzerland, agreed to divulge the names of well-heeled Americans whom the authorities suspect of using offshore accounts at the bank to evade taxes. The bank admitted conspiring to defraud the Internal Revenue Service and agreed to pay $780 million to settle a sweeping federal investigation into its activities.

Federal prosecutors have been examining about 19,000 accounts at the bank, but UBS ultimately may disclose the identities of only a few hundred customers.

But to some, turning over any names at all heralds the end of the secret Swiss bank account, whose traditions date to the Middle Ages.

"The Swiss are saying that this is the end of Swiss banking as they knew it," said Jack Blum, an offshore tax specialist. "Nobody will trust the security of the Swiss bank account."

As part of the settlement, UBS agreed to cooperate with a broad summons issued by the Justice Department to turn over the names. Under the terms of a so-called deferred prosecution agreement, the bank and its executives could be indicted if UBS didn't identify the customers.

UBS has said it is closing the offshore accounts of its American clients. But under the deal with the United States authorities, the bank must provide periodic written evidence of that to prosecutors. UBS earned $200 million annually from the business.

Prosecutors suspect that from late 2002 to 2007, UBS helped American clients illegally hide $20 billion, letting them evade $300 million a year in taxes.

In a striking admission, UBS said that from 2000 through 2007, some of its private bankers and managers had "participated in a scheme to defraud the United States" and the I.R.S. by helping American clients set up and conceal offshore accounts. The scheme involved falsifying or not properly obtaining or filing certain tax forms required of both the bank and its clients.

UBS's offshore private banking business once employed some 60 private bankers in Lugano, Zurich and Geneva. Prosecutors claimed UBS referred clients to lawyers and accountants who set up secret offshore entities to conceal assets from the I.R.S.

UBS urged some American clients to destroy records and to stash watches, jewelry and artwork that they had bought with money hidden offshore in safe deposit boxes in Switzerland. The bank also encouraged them to use Swiss credit cards so the I.R.S. could not track purchases.

NY Times Update - A day after UBS agreed to pay $780 million and identify certain American clients to resolve claims that its offshore accounts were used to evade taxes, the Justice Department moved to force the bank to disclose the identities of 52,000 Americans - far more than were previously known to be bank clients.

In the criminal investigation that lead to the settlement, the Justice Department had been looking at some 19,000 wealthy Americans with a total of $20 billion in assets who may have evaded $300 million a year in federal taxes through UBS's undeclared offshore private banking services.

But the Internal Revenue Service has been conducting a parallel investigation, and on Thursday the Justice Department filed court papers asking a federal judge to require UBS to disclose to the I.R.S. the identities and records of 52,000 wealthy clients.

UBS said it would vigorously challenge the efforts.

As part of Wednesday's settlement, the Justice Department received the names and bank records of about 250 wealthy American clients of UBS, and, according to people briefed on the matter, was preparing to indict several for offshore tax evasion. The bank admitted to wrongdoing by unidentified senior bankers and executives and to a failure of internal controls.

The 250 clients include what one person briefed on the matter said were “boldfaced names” in New York, Los Angeles, Miami and other major cities, some who had made their fortunes and some who had inherited it. The indictments would come within several weeks, the people said.