By Patrick Temple-West
WASHINGTON Aug 29 The U.S. Justice Department
said on Thursday it had signed an agreement with the Swiss
government to allow some Swiss banks to avoid or defer
prosecution stemming from a long-running probe of tax dodging by
Americans using Swiss bank accounts.
The settlement program will apply to about 100 second-tier
Swiss banks, provided they agree to disclose certain previous
hidden assets of U.S. customers. It will be open only to banks
not already under U.S. criminal investigation.
The deal is a step forward in a three-year U.S. effort to
pierce the shroud of Swiss bank secrecy, but some details of the
program raise questions about its potential for rooting out U.S.
tax evaders, tax lawyers and watchdog groups said on Thursday.
Under the program, eligible banks would pay penalties and
disclose account information about U.S. customers in order to
avoid prosecution, the department said in a statement.
"The program's requirement that Swiss banks provide detailed
account information will improve our ability to bring tax
dollars back to the U.S. Treasury from across the globe,"
Attorney General Eric Holder said in a statement.
Fourteen Swiss banks already under investigation by U.S.
prosecutors are excluded from the program, the Justice
Department said. The program is not available to individuals.
Some critics of the Justice Department's previous tax
crackdown efforts welcomed the settlement program.
"On the whole it's a pretty strong agreement," said Heather
Lowe, director of government affairs at anti-graft watchdog
Global Financial Integrity.
Still, the settlement program has "gaps," specifically
whether banks could settle without turning over U.S. client
names, Lowe said. "That is definitely one open question here."
Under the program's penalty provisions, a Swiss bank seeking
a nonprosecution agreement must agree to a penalty equal to 20
percent of the total dollar amount of all hidden U.S. customer
accounts held by the bank on Aug. 1, 2008.
That was roughly when the United States started cracking
down on tax avoidance by Americans with secret Swiss accounts.
The penalty amount increases to 30 percent and then to 50
percent, depending on how active a bank was in continuing to
open secret accounts for Americans after the crackdown began.
To determine whether or not to participate in the program,
Swiss banks will need to weigh the cost of potential penalties
versus the risk of a U.S. prosecution, tax lawyers said.
"It's a choice between two evils," said Walter Boss, a tax
lawyer with Poledna Boss Kurer AG in Zurich. If they don't
cooperate with the U.S., the U.S. might indict them."
The program also requires cooperating banks to tell
prosecutors about Americans' assets that left Switzerland and
were moved to other tax havens.
Though the Justice Department declined to identify the Swiss
banks it is investigating, a number are known to be facing U.S.
probes. These include Credit Suisse, Julius Baer
, the Swiss arm of Britain's HSBC, privately
held Pictet, and state-backed regional banks Zuercher
Kantonalbank and Basler Kantonalbank.
Several of these banks have said they are preparing
information on client withdrawals as demanded by U.S.
investigators, after the Swiss government said it would allow
them to circumvent secrecy and privacy laws to do so.
"The U.S.'s goal ultimately is to get untaxed money into the
tax system," said Jeffrey Neiman, a former federal prosecutor
involved in other Swiss bank investigations who is now in
private law practice in Fort Lauderdale, Florida.
"Whether or not this is going to be a big step is
still an open question."