IRS, Justice Target Undisclosed Assets In Swiss Accounts
Saturday, November 1, 2008
At the Beverly Hills office of criminal defense lawyer Edward M. Robbins Jr., anxious new clients are showing up with an unexpected problem.
The clients put money in Swiss bank accounts, where it was supposed to stay secret. But now those depositors fear the U.S. Internal Revenue Service and the Justice Department will gain access to their bank records, Robbins said.
"They're coming in from the cold. They're nervous," Robbins said.
And with good reason, the former federal prosecutor said. A lawyer who specializes in tax cases, Robbins thinks the government is gearing up to prosecute large numbers of Americans for failing to disclose foreign accounts on their tax returns and evading taxes on income generated by the accounts.
"If I were one of these guys with 10 to 50 million in my account, I'd be having an aneurysm," Robbins said. "It's an extremely dangerous situation for these guys."
The legendary secrecy of Swiss banks has come under fresh assault lately from U.S. and European authorities who say their citizens have used the privacy to hide assets and dodge taxes.
The U.S. effort to capture back taxes targets Americans who hold undeclared accounts at UBS, one of Switzerland's largest banks. The developments could put UBS in legal jeopardy and undo the reputation for confidentiality that has helped make a small nation in the Alps a magnet for international deposits.
UBS, which also has extensive operations in the United States, has been under investigation by the Justice Department and the Securities and Exchange Commission.
"UBS takes this matter very seriously and is working diligently with both Swiss and U.S. government authorities, consistent with Swiss law and the legal frameworks for intergovernmental cooperation and assistance," UBS spokesman Mark Arena said by e-mail.
Over the summer, the IRS won permission from a federal court to demand that UBS turn over the identities of an estimated 19,000 American clients who have failed to disclose their Swiss-based accounts on U.S. tax returns. It remains unclear what has or will come of that effort. Swiss law restricts the bank's ability to breach client confidentiality. Swiss law also gives clients the opportunity to oppose the release of their names through a judicial process that could slow any disclosures.
"All of these names have to be checked, and each case has to be looked at," Swiss embassy spokeswoman Emilija Georgieva said, declining to say whether the Swiss have turned over any identities to the U.S. government, yet.
Washington lawyer Martin Lobel, chairman of the Tax Analysts information service, said the Swiss government appears to be "using the legal process to delay until people forget about it," and he predicted that "nothing much is going to happen." Even if the IRS got the names of 19,000 UBS depositors, the agency couldn't handle the volume, Lobel said.