October 22, 2010 / 5:08 PM / 9 years ago

U.S. seeks to dismiss UBS criminal tax evasion case

NEW YORK (Reuters) - The U.S. Department of Justice is seeking to dismiss a criminal prosecution against UBS AG that led to the Swiss bank paying a $780 million penalty and admitting it helped wealthy U.S. clients evade taxes.

In a filing on Friday in the U.S. district court in Fort Lauderdale, Florida, prosecutors said UBS has complied with an 18-month agreement to defer prosecution, after helping roughly 17,000 clients with $20 billion of assets hide their accounts from the Internal Revenue Service.

As part of the February 2009 settlement, Zurich-based UBS handed over names on more than 250 client accounts and ended its U.S. cross-border banking business.

It later revealed data on some 4,450 additional accounts and the government said UBS is continuing to cooperate.

“UBS AG has fully complied with all of its obligations,” senior litigation counsel Kevin Downing wrote in the filing. “The United States believes that dismissal is appropriate.”

The settlement is considered a landmark in cracking Switzerland’s famed bank secrecy. Dismissal of the case requires court approval.

UBS spokeswoman Karina Byrne declined to comment.

“The UBS prosecution was historic and unique, and is a high point in government tax enforcement,” said Peter Hardy, a partner at Post & Schell PC in Philadelphia and former prosecutor. “It has resulted in a systemic change in how Switzerland views foreigners holding assets in their banks.”

On Friday, Swiss financial market regulator FINMA told bankers and insurers in that country that they must understand non-Swiss rules and take steps to mitigate or eliminate risks stemming from cross-border activity.

Since the U.S. accord was announced, the federal government has prosecuted several individual former UBS clients. At least 10 have been sentenced to terms ranging from probation to one year in prison.

Meanwhile, about 15,000 Americans with offshore accounts reported them voluntarily to the IRS under a 2009 amnesty program.

“The question now is whether the government can capitalize on its gains, or be mired in the many cases on its plate” following the voluntary disclosures, Hardy said.

The case is U.S. vs UBS AG, U.S. District Court, Southern District of Florida, No. 09-60033.

Reporting by Jonathan Stempel in New York; additional reporting by Robin Bleeker in Geneva, Tom Brown in Miami and Helen Kearney in New York

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