UBS AG says that on February 19 the U.S. Internal Revenue Service (IRS), as was expected, took civil action in the U.S. District Court for the Southern District of Florida seeking judicial enforcement of a civil "John Doe" summons that was served upon UBS in July 2008.
According to the U.S. government, the lawsuit asks the court to order the international bank to disclose to the Internal Revenue Service (IRS) the identities of the bank's U.S. customers with secret Swiss accounts. Up to 52,000 U.S. customers with close to $15 billion in assets hid their UBS accounts from the government in violation of the tax laws, according to the Department of Justice.
UBS, which has 8,182 wealth-management advisors in the United States, believes it has substantial defenses to the enforcement of the John Doe summons and intends to vigorously contest the enforcement of the summons in the civil proceeding, as is permitted under the terms of the Deferred Prosecution Agreement entered into on 18 February, the company says.
The IRS's John Doe summons seeks information regarding a substantial number of undisclosed accounts maintained by U.S. persons at UBS in Switzerland, whose information is protected from disclosure by Swiss financial privacy laws, UBS says.
The government alleges that of these 52,000 secret accounts, about 20,000 contained securities and about 32,000 contained cash. According to a UBS document filed with the lawsuit, as of the mid-2000s, those secret accounts held about $14.8 billion in assets. Court documents allege that U.S. citizens failed to report and pay U.S. income taxes on income earned in those secret accounts.
According to the lawsuit, Swiss-based bankers actively marketed UBS's services to wealthy U.S. customers within the United States. UBS documents filed with the lawsuit show that UBS bankers came to the United States to meet with U.S. clients nearly 4,000 times per year, in violation of U.S. law. The government also claims UBS trained its bankers to avoid detection by U.S. authorities. Court documents further assert that many U.S. contacts occurred through UBS-sponsored sporting and cultural events, designed to appeal to extremely wealthy Americans.
"At a time when millions of Americans are losing their jobs, their homes and their health care, it is appalling that more than 50,000 of the wealthiest among us have actively sought to evade their civic and legal duty to pay taxes," said John A. DiCicco, Acting Assistant Attorney General for the Justice Department's Tax Division. "It is time for those who are trying to hide from the IRS to rethink their actions. The Department of Justice is committed to do all that it can to aid the IRS in locating those who would seek to hide behind secret accounts and in holding them accountable under the federal tax laws."
"We are committed to moving forward with the summons enforcement process. This action sends a strong signal to taxpayers hiding their money offshore. The IRS will be aggressive in pursuing people who shirk their obligations under the tax law. These people owe it to their fellow citizens to pay their fair share of taxes," says IRS Commissioner Doug Shulman.
"As Commissioner, I am committed to bringing to bear the full arsenal of IRS resources to pursue egregious offshore tax abuse. International tax issues are a top priority, and we will continue to aggressively pursue people hiding assets offshore," Shulman explains. "For people who are hiding money offshore, this serves as a wake-up call that they need to get right with their government. Taxpayers should talk to a tax professional and come forward under our voluntary disclosure process. Having the IRS find you could mean a much heavier price than coming forward on your own."
For the complete summons, go to: