The international clash between the mighty United States government and those quaint chocolate and cuckoo clock makers over in Switzerland was all set for today in a Miami federal court room.
But as often happens when lawyers are involved, the dramatic showdown over alleged tax evasion and banking secrecy was postponed at the last minute.
Federal judge Alan Gold (left) granted the postponement after a joint application by the two parties, the U.S. government and the Swiss banking giant, UBS, giving them until Aug. 3rd to negotiate an out-of-court settlement and save face in this confrontation where positions have hardened in recent days.
Confrontation Delayed
This delay, welcomed in Switzerland, allows the Obama administration to avoid a major diplomatic confrontation. Switzerland publicly announced last week that as a sovereign state it would obstruct U.S. demands to obtain the names of the U.S. holders of 52,000 UBS accounts.
The 1934 Swiss Bank Secrecy Law makes it a crime to give financial information about individuals unless ordered by a Swiss court. The U.S.-Swiss tax treaty also allows for providing information in individual cases, but the U.S. preferred a massive fishing expedition on the questionable assumption that every American with a UBS account was a tax evader.
UBS Guilty
Last February, the U.S. Dept. of Justice, representing the U.S. Internal Revenue Service, sued UBS demanding all of its American client names. This, after bank officials admitted that from 2001 to 2006, they had assisted some U.S. account holders to evade U.S. taxes.
To avoid prosecution, a day earlier, the IRS announced a settlement with UBS in which the bank agreed to pay $780 million in fines and give names and account information for a group of 250-300 clients the Swiss judged to have been involved in "tax fraud’ which is illegal in Switzerland. Tax evasion per se is not.
The Real Issue
While all this ruckus makes for great political and judicial theater, it has minor relevance to Switzerland's continued standing as the leading financial center in the offshore world.
From the earliest days of the Sovereign Society’s founding as an international membership organization over a decade ago, the we have benefitted from the advice of leading professionals in Swiss banking, investment, asset management and the law. Several of these professionals serve on our Council of Experts, and together with other Swiss business persons with whom we work, they form an invaluable and unique network.
Swiss bankers are a conservative lot, (UBS management excepted), and the current UBS banking scandal is an embarrassment not only to them, but to the people of Switzerland.
Support for Bank Secrecy
Another of our Swiss advisors, a leader in insurance and annuities, makes clear that the majority of Swiss do not condone UBS assisting in tax evasion, but in national opinion polls, the Swiss continue to strongly support their bank secrecy law.
One of our longest serving advisors in Zurich told me that while UBS had been stupid in allowing U.S. income tax evasion, the bank's subsequent dumping of its American clients had been "a high handed violation of trust" and a "crude attempt at their clients’ expense to get rid of a political hot potato."
He called this conduct, "very un-Swiss."
"What bothers me most," he said, "is the false impression that Swiss bankers are law breakers. The truth is that the vast majority of our banks offer honest and valuable advice. It pains me to see our national reputation harmed, especially by some banks dropping and refusing American clients."
He added: "I work with numerous smaller Swiss private banks that are more than willing to accommodate American clients."
UBS Go Home
If the IRS presses its case, the government could close down UBS operations in American where it has 27,000 employees and manages over $600 billion in assets. Shaky UBS already has written off $60 billion or more in subprime mortgages and other questionable investments, the largest loss of any European bank. Another of our Swiss contacts suggested that a simple solution would be for UBS to "close its doors in the U.S. and stay home in Switzerland."
Current UBS troubles are another confirmation of the advice the Sovereign Society and its editors have repeated since our founding -- "Don't bank with UBS or Credit Suisse" -- the two monster-size Swiss banks that cared more about expansion and profits than about clients.
Sovereign Society Advice
We recommended against UBS and Credit Suisse, preferring accounts with sound private Swiss banks that have not been "Americanized" -- that, unlike UBS, still honor the strict Swiss bank secrecy law that until now has protected financial privacy.
A decade ago we denounced a previous a UBS surrender to demands of the U.S. Federal Reserve System. Official U.S. acceptance of the 1998 merger of Swiss Bank Corp. and Union Bank of Switzerland creating UBS AG was not approved by the Federal Reserve until UBS agreed to provide U.S. regulators all information "necessary to determine and enforce compliance with [U.S.] federal law." As now. U.S. regulators then had threatened to shut down the bank's extensive U.S. operations.
Welfare State Tax Grab
Another of our Zurich advisors said the Swiss see the IRS-UBS lawsuit as a crude means for a major deficit welfare state, the U.S., to grab more tax dollars to finance its big spending. "They do this without concern for the laws of other countries and we are right to resent this insult to our national sovereignty."
Several of those with whom I spoke in Switzerland referred to the "new era" in international banking that is being forced on all tax haven countries by the G-20 countries and the OECD.
"In that new era, Switzerland, with $5 trillion under management, will continue to play a leading role as asset manager to the world. Centuries of experience have taught us how to weather crisis and this UBS mess is hardly another World War."
Foresight & Help for You
At the Sovereign Society fortunately we saw this coming. Over many months we have responded to scores of complaints from Americans affected by these outrageous Obama anti-offshore policies.
Our management meets regularly with Swiss and many other offshore bankers. We have in place agreements with reputable Swiss banks willing to accept new accounts from those who identify themselves as Sovereign Society members.
These arrangements are in full compliance with IRS and SEC rules and other U.S. laws. U.S. client must sign an IRS Form W-9 that allows an offshore bank to report required information to the IRS.
As it has been since our founding 11 years ago, our staff is available to assist in opening a Swiss or other offshore account.
Take advantage of these special Swiss banking arrangements and the advice of our Swiss advisors -- sign up here for Sovereign Society membership. Once you are a member, you can contact us for help via email at info@sovereignsociety.com
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