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Business Digest: Case on Swiss Bank Secrecy Delayed

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Tuesday, July 14, 2009

LEGAL

Judge Delays Case on Swiss Bank Secrecy

A federal judge agreed to delay a hearing in a U.S. government challenge to Swiss bank secrecy, giving the Justice Department and the Swiss government about three weeks to negotiate a settlement.

The United States had been scheduled to square off yesterday against Switzerland's largest bank over a U.S. demand that the bank, UBS, turn over information about thousands of Americans suspected of using secret Swiss accounts to evade taxes. The judge delayed the hearing until Aug. 3, as the parties requested.

The case pits the U.S. government's interest in stopping tax dodgers against Switzerland's tradition of bank secrecy, one of the engines of the Swiss economy.

Swiss officials had argued that the case could damage relations between the two countries. The Swiss government had also been using as a bargaining chip a pending treaty amendment that could grant the United States increased access to account information in future cases of alleged tax evasion. Whether the proposed treaty language would be of much practical use to the United States is a subject of debate.

The IRS has been trying to force UBS to disclose information about Americans believed to have held 52,000 undeclared accounts, including the identities of the account holders. The Swiss government has said it would block UBS from complying, even if it were ordered to do so by a U.S. court.

Meanwhile, UBS has been closing all Swiss-based accounts of American depositors, in some cases telling them they must travel to Switzerland if they want to collect their money. Those actions have already given clients and potential clients reason to question whether they can count on Swiss banks to discreetly hold their money over the long term.

-- David S. Hilzenrath

Stanford CFO Pleads Not Guilty, for Now

James M. Davis, accused of helping financier R. Allen Stanford swindle investors in a multibillion-dollar fraud, pleaded not guilty to criminal charges in a U.S. court and was released on bail.

Davis, 60, who was chief financial officer at Stanford Group, one of the companies implicated in the alleged plot, will change his plea to guilty at a hearing before U.S. District Judge David Hittner in Houston within the next two weeks, his lawyer said.

"We don't have an agreed sentence," David Finn, Davis's attorney, said after yesterday's arraignment. "It's going to be completely the judge's call."


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