UPDATE 6-U.S. trial delay seen bringing UBS tax deal nearer

Mon Jul 13, 2009 2:56pm EDT
 
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* UBS, U.S. govt get delay in key tax trial to Aug. 3

* Both say aim to reach settlement to end tax dispute

* Settlement seen involving transfer of UBS client data

* Shares rise 4.75 percent (Adds analyst comments)

By Lisa Jucca and Tom Brown

ZURICH/MIAMI, July 13 (Reuters) - A federal court judge in Miami approved a delay in a high-profile trial on Monday in which U.S. tax authorities hoped to force UBS AG (UBSN.VX) (UBS.N) to reveal the identities of thousands of Americans suspected of using the Swiss bank to evade taxes.

Both UBS and the U.S. Justice Department requested the postponement on Sunday as the parties said for the first time that they were engaged in talks for a possible out-of court settlement of the case centering on Switzerland's jealously guarded tradition of bank secrecy.

Presiding Judge Alan Gold of U.S. District Court for the Southern District of Florida agreed to the request to delay the trial's opening until Aug. 3 and said he would gladly give further extensions on request "to assist in accomplishing any goal of settlement."

Gold also set a telephone status conference for July 29, when he said he hoped the participants would be prepared to say whether the Aug. 3 trial would take place as scheduled.

"UBS welcomes Judge Gold's decision to approve a temporary stay of the litigation. It is a positive development that the governments will now engage in intensive discussions over the next two weeks and attempt to negotiate a resolution," the bank said in a statement.

The case, seen as key to the future of the global offshore banking industry, seeks to force UBS to reveal the identities of 52,000 rich Americans suspected of using secret bank accounts to dodge taxes. This would be in breach of Swiss bank secrecy laws.

A source familiar with the situation told Reuters the talks led by the U.S. and Swiss governments were aimed at finding a way to allow the transfer of bank client data without breaching Swiss law. The source did not rule out a payment from UBS.

"The likely scenario will be a compromise where there may be some limited information provided to the U.S. government, (but) it won't be what the U.S. government is looking for," said Keith Wirtz, president and chief investment officer of Cincinnati, Ohio-based Fifth Third Asset Management.

The Justice Department, which cautioned it remained ready to ratchet up its legal fight with UBS, said any settlement would include the bank providing data on a significant number of its U.S. clients.

A person familiar with the situation told Reuters last week that, to circumvent Swiss law, the Swiss government could agree to disclose UBS bank client data indirectly, possibly by helping the U.S. Internal Revenue Service cross-check U.S. banks' data about transfers from Switzerland and UBS.

Any settlement is likely to dent Swiss privacy laws, however. It could involve the transfer of some client data, but would help UBS move on from a damaging row that is hurting its brand and deflecting it from its aim to return to profit.  Continued...

 

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