U.S., UBS seek court delay; may settle tax fight

By Tom Brown

MIAMI (Reuters) - The U.S. government and UBS AG asked a federal judge on Sunday to delay the start of a closely-watched trial, as they seek to resolve their dispute over U.S. demands for the identities of thousands of wealthy Americans suspected of using the Swiss bank to dodge taxes.

The request, in a joint court filing, came as the clock ticked down to the trial set for 9 a.m. EDT 1300 GMT) Monday in Miami, where U.S. authorities had been expected to move forcefully to pry the lid off Switzerland's much-vaunted tradition of bank secrecy.

In their filing, the U.S. Justice Department and UBS asked that the trial be postponed until August 3, giving the Swiss and U.S. governments time "to continue their discussions seeking a resolution of this matter."

The Justice Department declined further comment, but UBS and the Swiss government have been signaling for weeks that they were open to an out-of-court settlement of the case.

The case has been widely seen as perhaps the biggest challenge yet to Switzerland's bank secrecy.

There was no immediate response from U.S. District Judge Alan Gold, who is presiding over the case and was to have begun hearing arguments Monday about why he should force UBS to disclose information on up to 52,000 wealthy U.S. clients suspected of tax evasion.

But UBS said the motion for a delay would be formally submitted for the court's approval Monday morning.

In a court order last week, Gold asked the Justice Department to spell out how far it was willing to go to learn the identity of Americans with secret accounts at UBS, the world's biggest wealth manager by assets.

He asked specifically about "receivership and/or seizure of UBS' assets within the United States" to enforce the demand that account data be turned over to U.S. tax authorities.

"COMPELLING NATIONAL INTEREST"

Such remedies might be requested of the court, Gold said, if UBS failed to comply, or was prevented from complying by the Swiss government. He gave the U.S. Justice Department until noon EDT on Sunday to respond.

Switzerland has vowed to prevent UBS from handing over client information to U.S. authorities, in an attempt to defend bank secrecy, and says the tax case targeting its biggest bank is souring diplomatic ties.

In a separate court filing on Sunday, the Justice Department said it was still prepared to step up its legal fight against UBS. But apart from unspecified "monetary sanctions" it stopped short of saying what penalties it might seek to impose.

"UBS knew that its U.S. customers were using the bank -- with its tacit, if not explicit assistance -- to avoid paying their U.S. income taxes," the department said.

The U.S. government has a "compelling national interest" to obtain the client data it has demanded, it added, saying UBS was guilty of egregious conduct and "a bank that systematically broke U.S. law on U.S. soil."