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Robert E.

McKenzie
Arnstein & Lehr LLP
120 South Riverside Plaza, Ste. 1200
Chicago, Illinois 60606-3910
remckenzie@arnstein.com
(312) 876-6927

Bob McKenzie – IRS Offshore Account Investigations
Media Coverage Summary
December 2008 - August 2009

Media Coverage Index

• The Baltimore Sun – “Pay back taxes before IRS finds you,” August 23, 2009

• Dow Jones – “GETTING PERSONAL: Ripples widen in UBS case,” August 20, 2009

o This article was also included in The Wall Street Journal on August 20, 2009

• Forbes – “Switzerland Caves To IRS Demands,” August 19, 2009

• 580 CFRA News Talk Radio (Ottawa, Canada) – Business @ Night program, “UBS
agrees to name names,” August 19, 2009

• Dow Jones – “GETTING PERSONAL: UBS Deal Leaves Time To Come Clean,” August
19, 2009

o This article was also included in The Wall Street Journal on August 19, 2009

• MarketWatch – “There's no time like the present: UBS customer or not, time's ripe for
reporting your offshore account,” August 19, 2009

o This article was also included in FoxBusiness.com on August 19, 2009

• Associated Press – “Not so secret: UBS to divulge Swiss account names,” August 19,
2009

o This article was also included in Yahoo! News, Forbes.com, Miami Herald,
Huffington Post, Denver Post, Philadelphia Inquirer, Bismarck Tribune, Atlanta
Journal Constitution, Houston Chronicle, Fresno Bee, Contra Costa Times, The
Enterprise-Record, Centre Daily Times, Marin Independent-Journal, Danbury
News Times, Auburn Citizen, Southern Ledger, Belleville News Democrat,
iStockAnalyst, cbs4denver.com, Lebanon Daily News, KPLC-TV.com, Gaea
Times, WBAY.com, KVIA.com, WAVE.com, KRDO.com, WKBT.com,
NBC2News.com, and CBS4.com (Miami) on August 19, 2009

o This article was also included in Winston-Salem Journal, Maryville Daily Times,
Tulsa World, Mid Columbia Tri City Herald, Canton Repository, South Coast
Today, WOI-TV.com and KESQ.com on August 20, 2009
• Dow Jones – “GETTING PERSONAL: The Fear Factor For Swiss Account Advisers,”
August 18, 2009

o This article was also included in The Wall Street Journal on August 18, 2009

• Gannett News Service – “Some foreign banks drop U.S. clients,” July 21, 2009

• USA Today – “Some foreign banks drop U.S. clients,” July 14, 2009

o This article was also included in iStockAnalyst and ABCNews.com on July 14,
2009

• Business Report (South Africa) – “US tax evaders hold breath as court decides fates,”
July 14, 2009

o This article was also included in The Star (South Africa) on July 14, 2009

• USA Today – “Judge grants delay in UBS tax case,” July 13, 2009

• Associated Press – “US, Swiss ask for delay in UBS secrecy case,” July 12, 2009

o This article was also included in Forbes, CNBC.com, Yahoo! News,
TheStreet.com, San Diego Union-Tribune, Houston Chronicle, Chicago Tribune,
San Francisco Examiner, ABCNews.com, Times-Union (NY), Bismarck Tribune,
CBSNews.com, The Times of Northwest Indiana, The Canadian Press,
MyFoxChicago.com, Deseret News (UT), Chico Enterprise-Record, One News
Now, Reno Gazette Journal, The State (SC), Fort Wayne Journal Gazette, The
Daily Press (VA), Kansas City Star, The Herald-Zeitung (TX), The Columbian
(WA), Fort Worth Star Telegram, cbs4denver.com, and WBT Radio (NC) on July
12, 2009

o This article was also included in the Boston Globe, InvestmentNews, BNET,
Business Week, The Star-Ledger (NJ), Economic Times, Las Vegas Sun,
Orlando Sentinel, Charleston Gazette, CharlotteObserver.com, The Columbian,
Taipei Times, 6abc.com, Worchester Telegram, Sky News Australia and St.
Louis Post-Dispatch on July 13, 2009

• USAToday.com – “U.S., Swiss ask for delay in UBS secrecy case,” July 12, 2009

• MarketWatch – “Offshore tax havens under fire,” July 11, 2009

o This article was also included in FoxBusiness.com on July 11, 2009

• Accounting Today – “IRS has deal for offshore evaders,” May 4, 2009

• WebCPA – “IRS has deal for offshore evaders,” April 28, 2009

• National Law Journal – “Lawyers help clients fess up on offshore taxes,” April 6, 2009

• Financial Advisor – “IRS Offers Reduced Penalties For Offshore Accounts,” April 2009

• USA Today – “IRS: Offshore account holders told fess up to lower penalties,” March 27,
2009
o This article was also included in ABCNews.com, American Chronicle,
iStockAnalyst, SmartPros and BusinessWeek.com on March 27, 2009

• Dow Jones – “IRS Offers Reduced Penalties For Offshore Accounts,” March 26, 2009

• Associated Press (Short Version) – “IRS increases pressure on Swiss bank clients,”
March 26, 2009

o This article was also included in San Jose Mercury News, Seattle Post
Intelligencer, Chicago Tribune, Los Angeles Times, MSN Money.com,
Examiner.com (Chicago, IL), Lebanon Daily News (Lebanon, PA), Town
Hall.com, York Daily Record (York, PA), Enterprise-Record (Chico, CA), San
Francisco Herald, Miamiherald.com, Baltimore Sun, KDBC-TV (El Paso, TX),
WGBA-TV (WI), KFSM-TV (Ft Smith-Fayetteville, AR), Fox4kc.com (Kansas City,
MO), Minneapolis Star Tribune, PhillyBurbs.com, KPTM-TV (NE), Sun-Sentinel
(Ft. Lauderdale, FL), Las Vegas Sun, WBT-Radio (NC), WCSH-TV (Portland,
Maine), Newsday.com, Allentown Morning Call (Allenton, PA), KRIS-TV (Corpus
Christi, TX), Kansas City Star, WXTV (MO), KVIA-TV (El Paso, TX), KOLD-TV
(AZ), The Wichita Eagle, Danbury News Times (Danbury, CT),
OneNewsNow.com, International Herald Tribune (Global Edition of NYT), KDRO-
TV (CO), WBHX-TV (LA), KTIV-TV (Sioux City, IA), Cbs4qc.com (IA – Quad
Cities), Philadelphia Inquirer, KXXV News Channel (TX), The Southern Ledger,
WAOW (Wausau, WI), WKBT-TV (WI/MN), WDAM-TV (Hattiesburg, MS), KPAX-
TV (Missoula, MT), KPVI-TV (ID), KTUU-TV (AK), KTVQ (MT), KTTC-TV (IA),
KWCH-TV (Wichita, KS), WRCB-TV (GA), Action 3 News (Omaha, NE), Fox 12
Boise, Fox 28 (IN), KFVS (Heartland News), KATC-TV (LA), KPLC-TV (Lake
Charles, LA), WQQW-TV (Eau Claire, WI), Montana’s News Station, WFLX-TV
(FL), WLNS-TV (MI), WAAY-TV (Huntsville, AL), WBAY-TV (WI), NTV (NE),
KCAU-TV (Sioux City, IA), KAIT (Jonesboro, AR), KTVZ (OR), KMPH-TV
(Fresno, CA), KESQ-TV (CA), KFDA-TV (Amarillo, TX), WWSB- TV (FL), WTVM
(Columbus, GA), KIVI-TV (Boise, ID), KTNV-TV (NV), WXOW-TV (La Crosse,
WI), WDBJ7-TV (VA), KTVN-TV (NV), WOI-TV (IA), KSBY-TV (CA), KLTV (FL),
KJCT (CO), WIS (SC) on March 26, 2009

• Associated Press (Long Version) – “IRS squeezes Swiss bank clients for evidence,”
March 26, 2009

o This article was also included in MSN Money, Forbes, USA Today,
BusinessWeek.com, RealClearPolitics, Seattle Post Intelligencer, Yahoo! News,
Chicago Tribune, San Francisco Chronicle, Chicago Sun-Times, Miami Herald,
Washington Times, istockAnalyst.com, The Boston Globe Online, San Diego
Tribune, The State (Columbia, SC), Contra Costa Times (Walnut Creek, CA),
MLive (MI), Charlotte Observer, The Herald (Rock Hill, SC), The Plain Dealer
(Cleveland, OH), Bradenton Herald (FL), The Daily Advance (NJ), News &
Observer (NC), Kansas.com, Modesto Bee (Modesto, CA), Columbus Ledger
(Columbus, GA), Houston Chronicle, The Baltimore Sun, San Luis Obispo (CA),
Centre Daily (PA), Victoria Advocate (TX), The Denver Post, Philadelphia
Inquirer, The News Tribune (WA), Sacramento Bee, Sun Herald (MS), Macon
Telegraph (GA), Anchorage Daily News, Newsday.com, Fort Worth Star
Telegram, The Wichita Eagle, Business News, Abc7news.com (San Francisco,
CA), The Post Standard Syracuse, RealClearPolitics.com, Mid Columbia Tri City
Herald (WA), OneNewsNow.com, Press of Atlantic City, Myrtle Beach Sun News,
Orlando Sentinel, CharlotteObserver.com, Belleville News Democrat (IL),
Columbus Ledger-Enquirer (GA), The Southern Ledger, Minneapolis Star
Tribune, Bismarck Tribune, Examiner.com, Phillyburbs.com, WBT-TV (SC),
Town Hall.com, TheNewsTribune.com, ABC30-TV (CA), PR-Inside.com,
Maximum Edge.com, KDRV-TV (OR), Greenville News (SC),
ConnectMidMichigan.com, ConnectMidAmarillo.com, News 10NBC (NY), WPDE
(SC), WSLS TV (VA), WTOP.com (Washington, D.C.), Connect Tri-States.com,
Asbury Park Press (NJ), UpperMichiganSource.com, ValleyCentral.com, WACH-
TV (SC), Toledo On The Move, UpNorthLive.com, The Press-Enterprise,
Maximum Edge.com, Las Vegas Sun on March 26, 2009; as well as The China
Post, Delaware News Journal, Cherry Hill Courier Post and Post-Bulletin (MN) on
March 27, 2009

• Swissinfo – “Panic sets in for UBS clients in America,” February 24, 2009

• Baz.Online – “Amerikanische UBS-Kunden zeigen sich scharenweise selbst an,”
February 23, 2009

• USA Today – “IRS unlocks UBS vault hiding Americans evading taxes,” February 20,
2009

ο This article was also included in The News Journal and AARP Bulletin Today on
February 20, 2009; KSDK (St. Louis) and Livingston Daily on February 21, 2009;
and The Herald Times Reporter (Wisconsin) on February 22, 2009

• AHN – “UBS American Depositors Rush To IRS Hoping For Leniency,” February 20,
2009

• Associated Press – “UBS deal shakes foundations of Swiss bank secrecy,” February 19,
2009

ο This article was also included in International Herald Tribune, Los Angeles
Times, MSNBC, Forbes, Yahoo Finance, USA Today, Chicago Tribune, Hartford
Courant, Houston Chronicle, Chicago Tribune BizWrap, Newsday, Baltimore
Sun, Taiwan News, Aurora Sentinel, Detroit Free Press, Chicago Sun-Times,
Newsday, WHO-TV (IA), WHNT (AL), ABC (NY), 7Online.com (NY), and PR-
Inside.com on February 19, 2009

• Wall Street Journal – “U.S. Demands UBS Name 52,000 Clients,” February 19, 2009

• Dow Jones – “US DOJ Sues UBS To Enforce Summons For Bk Acct Records,” February
19, 2009

• Wall Street Journal – “UBS Imminent US Tax Probe Deal Eyed; Up To CHF2B Hit Seen,”
January 19, 2009

o This article was also included in Dow Jones on January 19, 2009

• National Law Journal – “US, Liechtenstein to exchange data on tax evaders,” December
15, 2008

• Associated Press – “US, Liechtenstein to exchange data on tax evaders,” December 5,
2008
ο This article was also included in New York Times, Houston Chronicle,
International Herald Tribune, Baltimore Sun, Los Angeles Times, MSN Money,
Chicago Tribune, Washington Post, Anchorage Daily News, Indianapolis
Business Journal, San Jose Mercury News, Philadelphia Inquirer, Miami Herald,
Seattle Time, Orlando Sentinel, Conde Nast Portfolio, The Columbus Dispatch
(Georgia), NBC 10 News (New York), istockAnalyst.com, Durham Herald Sun
(North Carolina), The Times Union, Columbus Ledger-Enquirer, Fort Worth Star
Telegram, San Luis Obispo Tribune (California), The Olympian (Washington),
The News Tribune (Washington), Hilton Head Island Packet (South Carolina),
San Diego Union Tribune, Charlotte Observer, Sacramento Bee, Monterey
County Herald, Yahoo! News, The Daily Advance (North Carolina), Contra Costa
Times (California), Centre Daily Times (Pennsylvania), South Florida Sun
Sentinel, Daily Press (Virginia), MLive.com (Michigan), Newsday (New York),
Biloxi Sun Herald, Belleville News Democrat, phillyBurbs.com, KTAR (Arizona),
News & Observer (North Carolina), Minneapolis Star Tribune, eTaiwan News,
Marin Independent-Journal (California), OneNewsNow, Hartford Courant, The
Columbian, Washington Examiner, Bismarck Tribune, The Enquirer-Journal
(North Carolina), NJ.com (New Jersey), Seattle Post Intelligencer, KTLA.com,
KAAL TV (Minnesota), WTOP (Washington, D.C.), PR Inside.com, Salon.com
Pay back taxes before IRS finds you
By Eileen Ambrose
August 23, 2009

You don't have to own a Swiss bank account to evade taxes.

Maybe you purposely underreport your income to the IRS or have gone along for years without
filing a tax return. Or, you made a mistake significantly in your favor on the return and never fixed
it.

Whatever the case, it's not too late to make it right with the IRS. Uncle Sam prefers that you
voluntarily come forward and pay what's due rather than having to track you down or, in serious
cases, prosecute you. And while you're at it, you might need to make good on state taxes.
Fortunately for Marylanders in tax arrears, the state is launching an amnesty program next
month.

About 85 percent of taxpayers voluntarily pay their share of federal taxes each year, according to
the IRS. But an estimated $290 billion of taxes go uncollected annually. Some of that revenue is
likely in the Alps and might be collected soon. The U.S. struck an unprecedented agreement last
week with the super-secretive Swiss to turn over information on about 4,450 UBS accounts
suspected of being set up to dodge taxes here.

So how do you get square with taxes?

Basically, you have two options: the quiet way and the noisy way, says George Clarke, a
Washington lawyer whose practice focuses on defending clients on tax matters.

The quiet way is where you file back returns or amend returns and pay what you owe without
calling attention to yourself, he says.

The noisy way is to approach the IRS and make a voluntary disclosure, where you come clean,
pay taxes, interest and penalties and, in return, generally avoid prosecution. The key is to come
forward before the IRS has you in its sights.

"If you find us before we find you, typically you won't be prosecuted," says IRS spokesman Eric
Smith.

The best option for you will depend on what kind of hot water you're in.

Let's say you haven't reported income from an offshore account, activity that is now the target of
the IRS. In this situation, make the voluntary disclosure, experts advise. For six months - ending
Sept. 23 - the IRS is offering Americans hiding assets offshore to come clean and potentially
avoid prosecution and steep penalties.

How steep? The IRS offers an example: Say you deposited $1 million in a foreign account six
years ago and since then earned a total of $300,000 in unreported interest income. Voluntarily
fess up, and you would pay $386,000 plus interest. That's high, but if you keep quiet and the IRS
catches you, you could end up paying $2.3 million - or more.
Tax dodgers have gotten the message. The IRS said in one week alone in July it received 400
voluntary disclosures, compared with 88 for all of last year.

Chicago lawyer Robert McKenzie says so far this year, more than 50 people have sought
his assistance with disclosures about foreign accounts, up from a half-dozen last year.
"The handwriting is on the wall that the IRS is coming, and people with accounts [in]
Thailand to Israel have come to me," says McKenzie, a tax partner at Arnstein & Lehr.

Voluntary disclosure isn't just for foreign accounts. Some tax evaders choose to make voluntary
disclosure just to get assurances from the IRS that the matter is resolved, lawyers say.

For most, though, quietly making good on taxes is the way to go. If you failed to file a return as
required - some low-income households don't have to - you can submit tax returns for the years
you missed. Tax experts suggest you mail in each return separately to avoid attracting too much
attention from the IRS.

(If your spouse doesn't file tax returns, or you suspect he or she is fudging numbers, submit
returns under "married filing separately" status to avoid being held liable for your spouse's
actions, says Steve Albert, a tax partner at Glass Jacobson in Owings Mills.)

You also can amend returns to correct mistakes by filing a Form 1040X. You'll need to explain
why you are correcting the return.

If you're catching up with filing, you will have to pay back taxes, interest and penalties,
McKenzie says. When amending returns, you'll owe back taxes and interest, but maybe not
a penalty, he says.

Can't pay all at once? The IRS offers payment plans and, under limited situations, might even
accept less than owed.

Of course, getting right with the IRS could mean you will have to do the same with the state.

In Maryland, the timing couldn't be better.

Starting next month, the state is launching an amnesty program for those who haven't paid their
taxes on returns due last year or earlier. Pay up, and civil penalties plus half of any unpaid
interest will be waived. You won't be criminally prosecuted, either, unless you're already under
investigation.

If you can't afford to pay immediately, the state will offer a payment plan. You will have to pay 10
percent of what you owe upfront and pay the rest by the end of next year.

Amnesty applications are available online at marylandtaxes.com or by calling 410-260-7951. Your
application must be postmarked by Oct. 30, the date the program ends.

Sure, coming clean might be costly, but it has benefits.

"People worry about [unpaid taxes] or their spouses worry about it, and it goes on for years," says
Albert. "If they file, they have peace of mind."
GETTING PERSONAL: Ripples Widen In UBS Tax Case
August 20, 2009
By Arden Dale

A web of details on undeclared accounts at banks stretching far beyond UBS AG (UBS) has
emerged as U.S. account holders scared by the case come forward to the Internal Revenue
Service.

The banks are far flung, located in spots that range from the cantons of Switzerland to some
Asian countries.

So far, the IRS has not said directly if it's investigating accounts at any bank besides UBS.
Nonetheless, no one with an undeclared account appears to be safe these days.

On Thursday, the Department of Justice announced the indictment of Hansruedi Schumacher,
who worked as a Swiss banking executive at Neue Zuercher Bank, a Swiss private bank in
Zurich. Schumacher allegedly helped wealthy Americans conceal assets and income in
Switzerland from U.S. authorities.

The indictment, said IRS Commissioner Doug Shulman, is "another step in our ongoing effort to
pursue hidden offshore assets - no matter where they are located."

Indeed, the IRS said a day before in outlining its UBS deal that the Swiss government has agreed
to review and process requests for account holders at other banks "to the extent that such a
request is based on a pattern of facts and circumstances equivalent to those of the UBS case."

Tax authorities in the U.S. are gathering stories about undeclared accounts at many banks under
an IRS program that shelters some tax evaders from the harshest penalties in return for turning
themselves in.

Scott D. Michel, an attorney at Caplin & Drysdale in Washington, D.C., says his firm is handling
disclosures "not just from account holders at UBS or other major Swiss banks, but from a number
of well-known, and lesser known, private banks and kantonal banks."

The Caribbean islands and Asia are other sites for such accounts, he adds.

The IRS is "well aware of the many banks other than UBS that held accounts for U.S. taxpayers,"
says Bryan Skarlatos, a partner at New York law firm Kostelanetz & Fink.

Robert E. McKenzie, a partner in the Chicago law firm of Arnstein & Lehr LLP and the
author of several books on the IRS and the U.S. Tax Court, says he has helped clients
report accounts at several smaller banks in the German, French and Italian cantons of
Switzerland.

By now, the IRS is likely to have a "pretty thorough list of Swiss banks with American
depositors," as a result of all the voluntary disclosures, adds McKenzie.
McKenzie says that Credit Suisse recently told some of his U.S. clients to close Swiss
accounts within the next several weeks.

Credit Suisse spokesman David Walker said the bank "strongly believes we have the right
compliance standards in place and adhere to all applicable laws." He declined to comment on
whether the bank had sent letters instructing accounts to be closed.

IRS Commissioner Doug Shulman declined to say Wednesday if the agency is investigating other
banks. However, he acknowledged that the agency is getting many leads from voluntary
disclosures. The UBS deal should send a message that it will pursue tax evaders with foreign
accounts at other banks, he added.

In the UBS deal, the IRS will submit a treaty request to the Swiss government describing the UBS
accounts for which it is requesting information. The Swiss government will then direct UBS to
start turning over information on thousands of accounts to the IRS.
Switzerland Caves To IRS Demands
With UBS names going to the IRS, expect authorities to go for more Swiss banks
and maybe even lawyers
August 19, 2009
Parmy Olson

LONDON -- To assist the U.S. government Switzerland has lifted its veil of secrecy and has
agreed to give 4,450 banking client names to the Internal Revenue Service. The international
crackdown on tax evasion has been gaining ever more momentum as governments, smarting
from the economic crisis, seek to claw back as much revenue as they can. As a result, Swiss
banking is crumbling and Switzerland's reputation for financial discretion is suffering as well.

The agreement between Switzerland and the United States announced on Wednesday could set
a precedent for American authorities to go after more names, from more Swiss banks. Until now,
Switzerland has, like other tax haven countries, only shared banking records with foreign law
enforcement agencies if they're investigating an action that would be considered criminal under
Swiss law. Switzerland hasn't changed any of its laws but has changed its interpretation of
existing laws that cover "tax fraud and the like." We won't know how far reaching this precedent
will be for another 90 days because Swiss and U.S. authorities are keeping them secret because
the IRS is hoping that U.S. depositors in tax haven nations will come clean on their own.

In its essence, Wednesday's deal came from a diplomatic dance that saw Switzerland agree to
reinterpret what it classed as tax evasion. It allows UBS to give up account information requested
by the IRS, to the Swiss Financial Tax Administration to then release to the IRS, without breaking
Swiss law.

The tailor-made agreement is based on terms of a double-taxation agreement that has existed
between the United States and Switzerland since 1996, but which on its own has done little to
help the IRS identify tax evaders. Now clauses in the new agreement could allow the IRS go
against other Swiss banks if they can assemble similar sorts of information for request to the
Swiss government. "There are further avenues for the DOJ and IRS to pursue," said Richard
Murphy of the British tax consultancy Tax Research.

Both Switzerland's and UBS' reputation for banking secrecy has already been permanently
scarred. (See "UBS: The Good Days Are Gone.") But confirmation that the IRS will get names
from UBS will compel a flood of more wealthy individuals who have Swiss bank accounts to come
forward to meet the voluntary disclosure deadline set by the IRS of Sept 23, a date agency
announced on Wednesday. Those who fess up after that deadline will face harsher penalties.

Many offshore banking clients (not just those who bank with UBS) have till now been in
wait-and-see mode for the outcome of the UBS case. Robert McKenzie, a partner at law
firm Arnstein & Lehr and former officer with the IRS Collection Division, is currently
advising approximately 50 such clients on the IRS disclosure issue--some are not clients
of UBS but of other offshore banks, and are concerned about the impact of the Swiss
bank's case.

Yet around 15 of them have wanted to wait for Wednesday's final announcement.
Unbelievably, there was hope that UBS might actually win its case against the IRS.
McKenzie says a recurring comment among lawyer circles is that a surprising number of
clients have been procrastinating on disclosure.

Waiting seems to be a mistake, since UBS will only notify 500 clients within the next 90 days that
their account details will be given to the IRS--most UBS clients will still be in the dark on
Wednesday about whether they are one of the 4,450.

"What happens if the IRS serves Credit Suisse next," said McKenzie, "and tells it to give
us the clients that meet this criteria meet with Swiss government, and you're past the Sept
23 deadline?" Cue harsher penalties. UBS account holders will be allowed to appeal the
decision to disclose their names in court but three sources consulted by Forbes, including one at
UBS, suggested that most of these appeals would almost certainly be unsuccessful.

Swiss banking clients may think that the best thing to do is consult their tax adviser, but
here's where things could also get complicated. "Every time I bring a person into the IRS
for voluntary disclosure--let's take a client with a Cayman Islands account--I have to give
them the name of the tax adviser, or the people who advised those clients," said
McKenzie.

With more advisers coming forward for voluntary disclosure ahead of the Sept. 23
deadline, the IRS has a growing database of advisers from whom it can request names of
all U.S. clients they have assisted on setting up offshore banking accounts or trusts.
McKenzie says appeals against such requests will fail--his own attempts to prevent the
IRS from disclosing the names of tax clients advised by former accounting firm Arthur
Anderson failed in September 2003.

The DOJ's recent statement on California resident John McCarthy, the fourth U.S. citizen to turn
himself into the DOJ as a client with a secret bank account with UBS, also raises questions about
people who have advised clients with such accounts. The DOJ's statement on McCarthy says
that UBS "worked closely with his Swiss lawyer to keep McCarthy’s funds from leaving
Switzerland and helped McCarthy move additional monies out of the United States undetected by
the federal government." Assuming that Swiss lawyers who help Americans evade tax services
are committing wire offenses, are they subject to extradition proceedings or even arrest if they
travel to the United States?

"If the U.S. decides to go down that route and make Swiss individuals criminally liable for what
they're doing that's going to have a radical impact on practice inside Switzerland itself," said
Murphy. There are currently 929 lawyers listed as financial intermediaries in Switzerland,
according to the Swiss Financial Action Task Force.
GETTING PERSONAL: UBS Deal Leaves Time To Come Clean
August 19, 2009
By Arden Dale

A landmark deal in the UBS AG (UBS) case will offer up thousands of Swiss account holders to
the Internal Revenue Service. But it also gives them some quarter right now.

One of the most salient details of a settlement outlined Wednesday by the IRS is that the 4,450 or
so people it will expose in coming months can confess even after they know for sure they are in
the sights of tax authorities.

That, in turn, will help some of them stay out of jail or escape other criminal penalties. The
deadline to step forward in the IRS voluntary disclosure program to get special penalty limits is
Sept. 23.

IRS Commissioner Doug Shulman said in announcing details of the deal that the agency will get
information on 4,450 accounts that held as much as $18 billion at one time.

It wants to send a message that there "is still time - although the clock is ticking - to come in and
get right with the government," Shulman said.

Divulging the contents of the UBS deal after weeks of speculation about it, Shulman painted the
picture in broad strokes. The settlement, he said, will give the IRS an unprecedented amount of
information on tax evaders. Further, it shows the agency is determined to work with governments
around the globe to catch offenders.

"Wealthy Americans who have hidden their money offshore will find themselves in a jam," he
said.

UBS issued a statement outlining details of the settlement, but declined to comment further.

Letters will soon start going out to the account holders in batches, with the first group expected to
number around 500. The recipients, and anyone else who thinks a letter may be in the mail, can
still seek leniency through the IRS voluntary disclosure program.

That is great news for his clients, says George Clarke, a member of the white collar and internal
investigations and tax practice at law firm Miller & Chevalier. Until now, an overriding concern for
many of them had been that the Swiss government would "turn the names over tomorrow," and
block anyone on the list from making a voluntary disclosure, he says.

Indeed, people should move as quickly as possible to contact the IRS, according to Robert
E. McKenzie, a partner in the Chicago law firm Arnstein & Lehr LLP and the author of
several books on the IRS and the U.S. Tax Court.

Though they can also go to Switzerland to contest their case, taking that route is "the
devil's game," says McKenzie.
"You could possibly win in Swiss court and the IRS doesn't get my name; but if you lose,
you could go to prison," says McKenzie. "That's a terrible bet; like the Clint Eastwood line
about 'Do you feel lucky?'"

Scott D. Michel, an attorney at Caplin & Drysdale in Washington, D.C., says that people are, "in a
word, playing Russian roulette if they don't" come forward.

Notification letters will be sent by the bank, and let people know that their information is going to
be provided to the IRS. It will be months, however, before the agency sees most of the accounts,
according to IRS officials on the call when Shulman gave details of the settlement.

A wrinkle is that many letters will go out after the Sept. 23 deadline for the voluntary disclosure
penalty deal, so bank customers who don't get a letter by that date shouldn't assume they are in
the clear. In fact, the agency expects to get a "significant portion of the account information and
names after the Sept. 23 cut-off," Shulman said.

The bottom line: Any bank customer with unreported offshore income or accounts should come
forward now, or face stiffer civil penalties and possible criminal prosecution later.

That's because, Shulman said, "once the Swiss government sends us the name, all bets are off."
There's no time like the present
UBS customer or not, time's ripe for reporting your offshore account
Aug 19, 2009, 4:59 p.m. EST
By Andrea Coombes, MarketWatch

It's likely no one except Swiss banking giant UBS AG yet knows the names that will be on the list
of some 4,450 U.S. taxpayers with offshore accounts -- a list due to be sent to the Internal
Revenue Service in coming months under a new agreement between the bank and the U.S.
government.

But once the IRS gets its hands on those names, those taxpayers likely will no longer qualify for
the relatively friendly terms of a temporary reduced-penalty program, offered now to those who
step up voluntarily to report their hidden offshore accounts, tax experts said.

Under the landmark IRS agreement announced Wednesday, UBS will send letters to 4,450
customers, notifying them of the plan to divulge their names. Those people then can
contest their name's release to an agency in the Swiss government, according to Robert
McKenzie, a partner in the Chicago-based law firm Arnstein & Lehr.

"If you're successful in that, the IRS will never get your name. But it's a huge, huge
gamble," he said. Meanwhile, the names of those who don't exercise their right to contest
the process then go to the IRS, McKenzie said.

So, what's the message for U.S.-based UBS customers?

Report your offshore account, and "waste no time" doing so, said Bill Smith, director of CBIZ
MHM's national tax office. And do it before UBS turns over the list to the IRS, he said. Once the
IRS initiates an investigation, the taxpayer is no longer eligible for the reduced-penalty program.

What if the IRS has your name but hasn't yet started an investigation? The tax agency has
offered only a definite "maybe" as to whether those taxpayers can qualify for the reduced-penalty
program, Smith said.

Meanwhile, anyone with an unreported offshore account should consider coming forward, Smith
said. "It's a very high-risk game now," Smith said. "The IRS is very serious about pursuing
offshore tax cheats."

See related story on IRS agreement with UBS.

Stiff penalties back in effect soon

As part of its ongoing effort to clamp down on unreported money stashed overseas, the IRS in
March announced a temporary easing of the steep fines and potential criminal fraud charges
related to offshore accounts. That program, which still entails relatively steep fines, ends Sept.
23.
Under the temporary rules, taxpayers who come forward face a 20% penalty on their foreign-
account assets -- in some cases the penalty drops to 5% -- applied solely for the year with the
highest account value.

That compares to a potential 50% penalty under the regular rules, a penalty that can be levied on
account assets for every year the taxpayer failed to disclose the account. In the past, that penalty
alone could deplete account assets in a couple of years, not counting back taxes and other fines.
It's unclear right now whether the IRS will consider extending the temporary-amnesty deadline.

That means now's the best time for Americans with unreported UBS offshore accounts to come
forward, tax experts said. Otherwise, you face the risk of being one of the people named to the
IRS after the Sept. 23 deadline has passed.

U.S. law requires taxpayers to report all financial accounts in a foreign country if the total value of
the accounts exceeds $10,000 at any time during the calendar year. The U.S. loses an estimated
$100 billion in tax revenue every year because of money stashed offshore, according to Sen. Carl
Levin, D-Mich., who with other lawmakers introduced the Stop Tax Haven Abuse Act in March.

Not just UBS customers

Meanwhile, anyone who has an unreported offshore account might consider that fast-
approaching Sept. 23 deadline. The IRS and Switzerland essentially agreed to a new
interpretation of what constitutes a tax evader under Swiss law, McKenzie said.

"There's a new standard for disclosure," he said. "The IRS may then go to all other major
Swiss banks and seek the names in a similar manner ... It could be months in the process
but it could come out," McKenzie said.

Even people with offshore accounts in other locales should consider coming forward,
McKenzie said, because people's anonymity may be breached other ways.

"People have come in already, disclosing many other banks. [The IRS is] gaining a lot of
information allowing them to pursue other people," he said. "The gamble is maybe your
name never gets disclosed and you never have to pay the taxes but how much would you
pay to sleep at night?"

Certainly, the IRS doesn't seem to have plans to ease off its focus on offshore accounts.

Speaking about the UBS agreement, IRS Commissioner Doug Shulman said in a statement
Wednesday: "This is no mere keyhole into the hidden world of bank secrecy. This agreement
represents a major step forward with the IRS's efforts to pierce the veil of bank secrecy and
combat offshore tax evasion," he said.

"It's an historic development in our international efforts, and it helps build a solid foundation for
addressing future offshore issues," Shulman said.

The IRS has not released figures on how many people have come forward since the voluntary
program was first offered in mid-March, but tax practitioners say they've seen a substantial rise in
taxpayers coming forward -- and they're not solely UBS customers.

The Swiss bank in February provided the names of about 250 clients and paid the U.S. $780
million in fines related to offshore tax havens. In that settlement, UBS did not deny helping
taxpayers hide accounts.
Deadline extended?

There's always a possibility that the Sept. 23 deadline will be extended, but tax experts disagree
on the likelihood of that. "I'd be surprised if there's going to be any extension," Smith said.

Still, Anthony Sabino, professor of law and business at St. John's University in New York, said the
IRS may extend the deadline so that "anybody in the shadows" can work out whether they want
to voluntarily disclose information about their accounts.

As for the release of all 52,000 UBS U.S.-based client names, Shulman had this to say: "This is a
number reported by UBS as all of their accounts with any U.S. connection. Many of these
accounts were held by U.S. people who had complied with the law and paid their taxes," he said
in the statement.

"We were never interested in pursuing 52,000 accounts and this was never an IRS number," he
said. "Remember, we filed this lawsuit when the Swiss government was taking the position that
we could not have access to any of these accounts. That posture changed in the past month and
we were able to gain access to the accounts we wanted.”
Not so secret: UBS to divulge Swiss account names
By Stephen Ohlemacher
August 19, 2009

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WASHINGTON (AP) -- The U.S. pulled back the veil on Switzerland's famed tradition of banking
secrecy Wednesday, winning an agreement for banking giant UBS AG to disclose the names of
4,450 American clients suspected of hiding assets in Swiss accounts.

The news is expected to prod thousands more UBS clients in America to voluntarily disclose their
financial details to the Internal Revenue Service, lest they be pursued later.

The accounts held $18 billion at one time, though many have since been closed, said IRS
Commissioner Doug Shulman.

"This agreement sends an unmistakable message to people hiding income and assets offshore,"
Shulman said. "The IRS will vigorously pursue tax cheats around the world, no matter how
remote or secret the location."

The Swiss, known worldwide for keeping bank accounts secret, said UBS had no real choice in
turning over the names.

Justice Minister Eveline Widmer-Schlumpf told a news conference in Bern that the deal lifts the
threat of criminal prosecution against UBS, which not only would have endangered the bank's
existence but would have dealt a severe blow to the Alpine nation's economy.

"There was no alternative to this solution," she said.

The agreement is part of the Obama administration's stepped-up efforts to go after wealthy tax
dodgers hiding assets in offshore accounts, an initiative that promises to yield many more
prosecutions, Shulman said.

UBS has an estimated 52,000 accounts held by U.S. customers. The IRS chief said the 4,450
accounts being identified were the ones most suspected of containing undeclared assets. Many
of the rest are held by people who have complied with the law and paid their taxes, Shulman said.

Tax experts said the agreement should terrify Americans who had been able to hide assets in
offshore accounts for generations with little fear of being caught.

"This is critically important because the Swiss caved," said Tom Cardamone, managing director
of Global Financial Integrity, a Washington-based group that advocates tougher policies against
international money laundering. "They agreed to give up names, so in that context, this is a real
body blow to Swiss banking secrecy."

UBS shares closed 0.9 percent lower at 16.74 Swiss francs ($15.74) on the Zurich exchange.

Earlier this year, UBS admitted assisting U.S. citizens in evading taxes as part of a deferred
prosecution agreement with the Justice Department. UBS agreed to disclose the names of about
250 American clients and pay a $780 million penalty. The IRS subsequently filed its case seeking
the names of additional U.S. taxpayers believed to be hiding assets.

The two sides told a federal judge last week they had reached a tentative agreement, but the
details were not released until Wednesday.

The agreement includes several measures favorable to the Swiss - and giving the clients a
chance to get right with the IRS.

Instead of releasing the names directly to U.S. authorities, UBS will turn them over to the Swiss
Federal Tax Administration. Account holders will then be able to appeal their release to the IRS
before Switzerland's Federal Administrative Court.

However, U.S. authorities will be notified of the appeals, giving them access to information about
account holders. It is expected to take several months for the first names reach the IRS, and
court proceedings could prolong the process.

Tax advisers at several U.S. firms said they are seeing many more customers with undeclared
assets seeking information about their legal options.

The IRS long has had a policy that certain tax evaders who come forward before they are
contacted by the agency usually can avoid jail time as long as they agree to pay back taxes,
interest and hefty penalties.

In March, the IRS began a six-month amnesty program that sweetened the offer with reduced
penalties for people with undeclared assets. Shulman said the response has been
unprecedented, though he declined to say how many people have applied.

"What this does is creates an overwhelming incentive for virtually everyone of those account
holders to come forward," said Peter Zeidenberg, a litigation partner at the law firm DLA Piper in
Washington. "If there had been a steady stream, there is now going to be an absolute flood."

Shulman said the Swiss government has assured U.S. authorities that the release of the names
conforms with both Swiss banking laws and the tax treaty signed by both countries. Shulman said
the IRS reserves the right to resume its legal fight if any of the names are withheld.

"This issue is not going away," he said.

The Swiss Bankers Association issued a statement in support of the agreement, saying, "UBS
can now continue with its consolidation process in an atmosphere free of this legal uncertainty."

UBS Chairman Kaspar Villiger said, "I am confident that the agreement will allow the bank to
continue moving forward to rebuild its reputation through solid performance and client service."

The case - and other U.S. efforts to go after international tax dodgers - already has a lot of
wealthy Americans with offshore accounts nervously running to their tax advisers - and the IRS.
It is not illegal for Americans to have overseas accounts, but they must pay U.S. taxes on the
money. Also, there are special reporting requirements for accounts of more than $10,000.

Robert McKenzie, a Chicago-based lawyer who represents dozens of American clients of
Swiss banks, said some will still try to avoid the taxman.

"Some will say 'Let's wait and see if I get a letter,'" said McKenzie. However, he said,
waiting too long "is really playing a game with the devil."

Sen. Carl Levin, D-Mich., sounded less impressed than the IRS by the agreement.

"The UBS settlement is at most a modest advance in the effort to end bank secrecy abuses," said
Levin, who has investigated tax havens as chairman of the Senate's Permanent Subcommittee
on Investigations. "It will take a long time before we know whether this settlement will produce
meaningful gains."

Shulman said UBS customers are free to take advantage of the disclosure program as long as
they come forward before the amnesty program expires Sept. 23 - and before the IRS receives
their name from UBS.

"The letter they receive from the bank will not disqualify them from coming forward to the IRS
under our voluntary disclosure program," Shulman said. "But once the Swiss government sends
us the name, all bets are off."

Associated Press writers Devlin Barrett in Washington and Frank Jordans in Geneva contributed
to this report.
GETTING PERSONAL: The Fear Factor For Swiss Account Advisers
August 18, 2009
By Arden Dale

Advisers who helped clients hide money in Swiss bank accounts have reason to be nervous as
more and more people confess to the IRS - and reveal who their accomplices were.

Details of a settlement between U.S. authorities and Swiss bank UBS AG (UBS) are expected as
soon as Wednesday, with thousands of account holders' names expected to be handed over.

So far, bankers who steered clients to the wrong side of the law have figured in the handful of
cases where account holders pleaded guilty to wrongdoing. The Internal Revenue Service's
criminal investigations unit isn't stopping with bankers, though; it wants to know about any adviser
who had a hand in tax evasion.

A new form the agency is using for those who make a clean breast of an account in exchange for
leniency asks about "all face to face meetings and communications regarding the accounts or
assets with independent advisors/investment managers not from the financial institution(s) where
the funds are held."

Once a questionable adviser gets on its radar, the IRS is likely to squeeze for more information.

Indeed, all it would take "is one client coming in with a voluntary disclosure, and that
could lead to an IRS summons demanding names of an adviser's other clients," says
Robert E. McKenzie, a partner in the Chicago law firm of Arnstein & Lehr LLP and the
author of several books on the IRS and the U.S. Tax Court, who serves on the IRS
Advisory Council.

The IRS "is doing reconnaissance," says George Clarke, a member in the white collar and
internal investigations and tax practice at law firm Miller & Chevalier. It is trying "to build a
picture," and when it discovers a bad actor, it will pounce.

The Department of Justice, adds Clarke, goes after these people "very, very aggressively."

IRS spokesman Frank Keith said in a recent email that taxpayers turning themselves in, and
other third parties, are providing the agency with "new useful" information. That includes details of
how undisclosed offshore accounts came to be set up "and the identities of those who assisted in
these efforts to circumvent U.S. tax laws."

While tax attorneys are quick to claim that bad advice isn't coming from major law firms, a niche
known as "asset protection" has raised some eyebrows. Asset protection specialists advise, in
part, on how to secure money in offshore accounts. Many are completely above board, but
there are "certainly a minority who are less than meticulous," says McKenzie.

Kenneth Rubinstein, a senior partner at law firm Rubinstein & Rubinstein in New York and an
asset protection specialist, says he doesn't believe U.S. tax attorneys or asset protection
attorneys advised clients not to disclose foreign accounts. Attorneys, he adds, know better and
wouldn't place their licenses in jeopardy.

But, many "non-attorney tax/asset protection 'advisers or consultants'" did offer bad advice, he
says. The market is full of unlicensed practitioners, he adds, who "either do not know/understand
the tax code or chose to ignore it out of expediency or dishonesty."

For McKenzie, this is patently true. Some of his clients were told by advisers not to
disclose Swiss accounts, Specific advice included instructing not to file a Report of
Foreign Bank and Financial Accounts (FBAR), an IRS form that must be filed each year for
account or accounts over $10,000.

There are legitimate reasons for choosing an offshore account. A doctor afraid that a malpractice
suit could wipe out life savings, for example, could keep part of his estate offshore to secure it
from creditors.

But, says McKenzie: "You must make sure you comply meticulously with all the reporting
requirements."

UBS didn't immediately comment.
Some foreign banks drop U.S. clients
July 21, 2009
By Kevin McCoy

The closely watched Justice Department court fight to get the names of 52,000 suspected
American tax evaders from Swiss banking giant UBS has prompted some other foreign banks to
drop U.S. clients they once welcomed, tax experts said Monday.

Eager to avoid a similar struggle with federal prosecutors, banks including Credit Suisse and
HSBC in recent weeks have notified American clients they must close their offshore accounts or
transfer them to the institutions' U.S.-based operations, where tax reporting requirements are far
stricter.

"Overall, the international banking community, and particularly the offshore banking community,
has been very friendly to American account holders," said William Sharp, a tax law specialist at
the Sharp Kemm law firm in Tampa. "That changed in the past couple of months as a result of the
UBS case."

U.S. District Judge Alan Gold in Miami on Monday granted an adjournment until Aug. 3 to enable
federal prosecutors and attorneys for UBS and the Swiss government to continue negotiations
toward a potential settlement. The Justice Department on Sunday said any deal must include
data "on a significant number of individuals with UBS accounts."

The owner of an HSBC account in Jersey, one of the English Channel islands, recently
received a 45-day notice to close the account, said Robert McKenzie, a tax law specialist at
Arnstein & Lehr in Chicago. A client with an offshore Credit Suisse account got a similar
notice, he said.

Credit Suisse said, "We strongly believe that we adhere to the highest compliance standards,
applicable laws, regulations and policies."

HSBC stressed it doesn't comment on specific client matters, and said the bank "abides by the
letter and spirit of the law in every country in which it operates."

Other Swiss banks initially welcomed clients who shifted assets from UBS as the legal fight
began last year. The eager greeting turned to reluctance as the trial date loomed, said Charles
Rettig, a tax expert at Hochman Salkin Rettig Toscher & Perez in Beverly Hills.

Some foreign banks elsewhere now avoid offshore business with Americans because they know
the Justice Department plans "to extend this effort to other jurisdictions beyond Switzerland," said
Martin Press, a tax expert at Gunster Yoakley Valdes-Fauli & Stewart in Fort Lauderdale.
Some foreign banks drop U.S. clients
They want to avoid tax woes plaguing UBS
July 14, 2009; Pg. 5A
By Kevin McCoy

The closely watched Justice Department court fight to get the names of 52,000 suspected
American tax evaders from Swiss banking giant UBS has prompted some other foreign banks to
drop U.S. clients they once welcomed, tax experts said Monday.

Eager to avoid a similar struggle with federal prosecutors, banks including Credit Suisse and
HSBC in recent weeks have notified American clients they must close their offshore accounts or
transfer them to the institutions' U.S.-based operations, where tax reporting requirements are far
stricter.

"Overall, the international banking community, and particularly the offshore banking community,
has been very friendly to American account holders," said William Sharp, a tax law specialist at
the Sharp Kemm law firm in Tampa. "That changed in the past couple of months as a result of the
UBS case."

U.S. District Judge Alan Gold in Miami on Monday granted an adjournment until Aug. 3 to enable
federal prosecutors and attorneys for UBS and the Swiss government to continue negotiations
toward a potential settlement. The Justice Department on Sunday said any deal must include
data "on a significant number of individuals with UBS accounts."

The owner of an HSBC account in Jersey, one of the English Channel islands, recently
received a 45-day notice to close the account, said Robert McKenzie, a tax law specialist at
Arnstein & Lehr in Chicago. A client with an offshore Credit Suisse account got a similar
notice, he said.

Credit Suisse said, "We strongly believe that we adhere to the highest compliance standards,
applicable laws, regulations and policies."

HSBC stressed it doesn't comment on specific client matters, and said the bank "abides by the
letter and spirit of the law in every country in which it operates."

Other Swiss banks initially welcomed clients who shifted assets from UBS as the legal fight
began last year. The eager greeting turned to reluctance as the trial date loomed, said Charles
Rettig, a tax expert at Hochman Salkin Rettig Toscher & Perez in Beverly Hills.

Some foreign banks elsewhere now avoid offshore business with Americans because they know
the Justice Department plans "to extend this effort to other jurisdictions beyond Switzerland," said
Martin Press, a tax expert at Gunster Yoakley Valdes-Fauli & Stewart in Fort Lauderdale.
US tax evaders hold breath as court decides fates
July 14, 2009

A recent chapter in the battle between tax authorities and evaders is being played out in the US
courts. And more than 50 000 suspected US tax evaders wait in trepidation for the outcome of the
battle between the US government and Swiss bank UBS over revelation of their identities.

The parties to the court action are now attempting a settlement, but it is not at all clear that a
settlement will get the tax evaders off the hook.

The case was sparked by a whistleblower who previously worked for UBS. And further
information was possibly extracted from a US-based UBS employee who was detained by the US
authorities as a "material witness". Press reports say he has not been available for comment.

Earlier this year, the Swiss banking regulator forced UBS to reveal the names of 255 suspected
US tax evaders in contravention of Swiss banking secrecy laws.

According to AP yesterday, the UBS case has persuaded hundreds of US taxpayers with offshore
accounts to come clean with the Internal Revenue Service (IRS) under a "voluntary disclosure
programme" that allows most people to pay a fine and back taxes without facing criminal
prosecution.

"The IRS would like to continue the spectre of fear that this UBS case has created," Robert
McKenzie, a tax attorney with the Arnstein & Lehr firm, told AP. "This strategy is working.
The level of calls I'm receiving is picking up, not going down," he added.

The turn events have taken has turned out to be an ill wind for tax evaders and their advisers that
blows a lot of good to the lawyers.
Judge grants delay in UBS tax case
July 13, 2009
By Kevin McCoy

A federal judge in Miami agreed Monday to postpone an internationally watched trial in order to
give the Justice Department and Swiss banking giant UBS time to seek a settlement of
Washington's demands for the identities of 52,000 wealthy U.S. clients suspected of tax evasion.

U.S. District Judge Alan Gold granted the delay until Aug. 3 that both sides in the case requested
Sunday, on the eve of a key evidentiary hearing that had been scheduled for Monday. The
request marked the first time the parties had publicly acknowledged settlement talks in a case
that has strained U.S.-Swiss relations, cracked Switzerland's reputation for banking secrecy and
shaken the private banking industry.

Gold also scheduled a status conference via telephone for July 29.

UBS (UBS) called the court-approved delay "a positive development that the governments will
now engage in intensive discussions over the next two weeks and attempt to negotiate a
resolution."

The civil lawsuit hinges on the Internal Revenue Service pursuit of the identities of 52,000 wealthy
Americans the tax agency believes are dodging taxes through secret UBS accounts. The
accounts in question are believed to be part of what a Senate subcommittee last year estimated
was $100 billion in annual tax evasion by Americans using offshore accounts.

UBS says it can't supply the client data because such a handover would violate Swiss banking
secrecy laws. The Swiss government last week echoed that view, and said it would stop any
release of the information — by seizing it, if necessary.

The Justice Department said Sunday any agreement that emerges from the settlement talks
would have to include "information on a significant number of individuals with UBS accounts."

Federal prosecutors simultaneously increased pressure on UBS with a court filing that raised the
prospect of stiff financial penalties or other action if the bank continues to fight a summons
seeking the client data.

"If the court orders compliance with the summons, and if UBS defies that order, it is the intention
of the United States to ask the court to take appropriate steps to enforce its order and vindicate
its authority. This would include asking the court to hold UBS in contempt and to impose
monetary sanctions sufficient to bring UBS into compliance," said a legal memo filed by federal
prosecutors.

The memo warned that non-compliance could violate the $780 million February settlement in
which the Justice Department deferred prosecution of UBS for the bank's admission it secretly
helped U.S. clients set up offshore accounts that weren't disclosed to the IRS.
A violation could prompt prosecutors to seek a criminal indictment of UBS, hampering the
operations of Switzerland's largest bank.

However, the terms of the deferred prosecution agreement restrict Justice Department action
unless the bank fails "to comply with an enforcement order after all its appellate remedies have
been fully and finally exhausted," which could take years.

"It looks like the Swiss government and UBS blinked," said Robert McKenzie, a Chicago
tax lawyer with clients who held secret UBS accounts. "Now the question is will UBS agree
to release all of the names or just some of the names" of the account holders, as well as
"the identities of the account beneficiaries."
US, Swiss ask for delay in UBS secrecy case
By Curt Anderson
July 12, 2009

The U.S. and Swiss governments and banking giant UBS AG indicated Sunday they were
seeking a settlement and asked a federal judge to delay high-stakes hearings on the Internal
Revenue Service's effort to identify thousands of suspected American tax evaders.

The one-page motion, filed in Miami less than 24 hours before the hearings were to begin
Monday, said postponement is needed "to allow the two governments to continue their
discussions seeking a resolution of this matter."

Unless a deal is reached beforehand, the filing asks that the hearing be rescheduled for Aug. 3.

U.S. District Judge Alan S. Gold did not immediately rule on the request, but judges routinely
allow parties in civil cases extra time to settle out of court. Such a deal would likely include a large
penalty against UBS and possibly require the bank to reveal at least some names, tax experts
say.

The case seeking the identities of some 52,000 wealthy American clients suspected of hiding $15
billion at UBS has already sent shock waves through the international banking system.

Bankers fear a ruling against UBS would disrupt cross-border commerce, force people to
withdraw huge sums of money from financial entities with offshore offices and play havoc with
international tax treaties. Experts say some other foreign banks are asking American clients to
close out accounts for fear they may be targeted next.

"The precedent this case may set is of immediate relevance to all financial institutions with global
operations," the Institute of International Bankers and other financial organizations said in a
recent court filing.

The UBS case has persuaded hundreds of taxpayers with offshore accounts to come clean
with the IRS under a voluntary disclosure program. The program allows most people to
pay a fine and back taxes without facing criminal prosecution, said tax attorney Robert
McKenzie with the Arnstein & Lehr firm.

"The IRS would like to continue the specter of fear that this UBS case has created,"
McKenzie said. "This strategy is working. The level of calls I'm receiving is picking up, not
going down."

UBS, which previously admitted wrongdoing in a more limited U.S. tax case, is resisting turning
over the names that have been protected by centuries-old Swiss bank secrecy laws.

"Honoring the IRS summons would require UBS to violate Swiss criminal law, and we simply
cannot comply," said Oswald Gruebel, UBS chief executive officer, in a letter to bank offices
worldwide. "This matter should be resolved between governments according to established
frameworks."
The Swiss government escalated the dispute last week by threatening to block release of the
UBS account names if Gold rules for the IRS.

One of Europe's biggest banks, UBS has about 34,000 permanent and contract employees at
381 locations in the U.S., according to the company.

The IRS in February filed what are called a "John Doe summonses" seeking U.S. taxpayer
identities from UBS, shortly after the Zurich-based bank reached a deferred prosecution
agreement with the Justice Department over its tax evasion practices. UBS agreed then to
identify 300 people — some of whom are now facing criminal charges — and admitted it wrongly
used sham offshore entities, false paperwork and questionable client recruitment.

UBS also paid a $780 million penalty.

"Until its activities were discovered, UBS — on U.S. soil — regularly violated U.S. law, and
actively helped its customers violate U.S. law," said Justice Department tax attorney Stuart
Gibson, the lead U.S. lawyer on the case.

The 300 names were released under an exception to Swiss banking secrecy law when clients
deliberately defrauded tax authorities, as opposed to failing to declare all assets.

Abusive tax shelters and hidden offshore accounts cost the U.S. government an estimated $100
billion a year in lost tax revenue, according to Sen. Carl Levin, D-Mich., chairman of the Senate
Permanent Subcommittee on Investigations.

The Justice Department has brought several other UBS-related tax cases in South Florida,
including a November 2008 indictment charging former bank executive Raoul Weil with
conspiring to defraud the government. Weil, who ran UBS cross-border and private banking
operations, is a fugitive living in Switzerland, and his lawyer has insisted he is innocent.

In June 2008 former UBS banker Bradley Birkenfeld pleaded guilty to a similar charge — he
helped a California billionaire evade taxes — and has been cooperating extensively with federal
prosecutors and the IRS. He has not yet been sentenced.
U.S., Swiss ask for delay in UBS secrecy case
July 12, 2009
By Kevin McCoy

Justice Department prosecutors and UBS Sunday asked a federal judge to postpone an
internationally watched trial scheduled for Monday and give them more time to seek a settlement
of Washington demands that the Swiss banking giant turn over the names of 52,000 wealthy
American clients suspected of tax evasion.

Saying they want "to continue their discussions seeking a resolution of this matter," the joint
motion asked U.S. District Judge Alan Gold in Miami to reschedule the evidentiary hearing for
Aug. 3 if an agreement is not reached. The filing marked the first time the two sides publicly
acknowledged settlement negotiations.

There was no immediate ruling Sunday by Gold. Federal courts, however, typically grant
adjournments in civil cases to enable the involved parties to pursue settlement talks.

Both sides in the case and the Swiss government declined further comment. But a Justice
Department news release said both sides "have agreed that any alternative resolution reached
would necessarily include a provision requiring UBS to provide the Internal Revenue Service
information on a significant number of individuals with UBS accounts."

Federal prosecutors simultaneously increased pressure on UBS with a separate court filing that
raised the prospect of stiff financial penalties or other action against the bank if it continues to
fight a summons seeking the client data.

"If the Court orders compliance with the summons, and if UBS defies that order, it is the intention
of the United States to ask the Court to take appropriate steps to enforce its order and vindicate
its authority. This would include asking the Court to hold UBS in contempt and to impose
monetary sanctions sufficient to bring UBS into compliance," said a legal memo filed by federal
prosecutors.

The memo warned that non-compliance could violate the $780 million February settlement in
which the Justice Department deferred prosecution of UBS for the bank's admission it secretly
and systematically helped American clients set up offshore accounts that weren't disclosed to the
IRS.

A violation could prompt federal prosecutors to seek a criminal indictment of UBS —
Switzerland's largest bank and the world's largest private bank — a move that could severely
hamper its operations.

The Swiss government last week said it would block UBS from turning the client account data
over to U.S. authorities — even by seizing the information, if necessary. The Justice Department
memo said such a blocking order "could impact the deferred prosecution agreement entered into
by UBS with the support and assistance of the Swiss government."
However, the terms of the deferred prosecution agreement restrict Justice Department action
unless the bank failed "to comply with an enforcement order after all its appellate remedies have
been fully and finally exhausted," a process that could take years.

"It looks like the Swiss government and UBS blinked in response to the pressure," said
Robert McKenzie, a tax attorney at Arnstein & Lehr in Chicago representing clients who
held undeclared UBS accounts. "Now the question is will UBS agree to release all of the
names or just some of the names" of the account holders, as well as "the identities of the
account beneficiaries."

The international standoff has strained relations between the two nations, cracked Switzerland's
historic reputation for banking secrecy and shaken the private banking industry as it spotlighted
an estimated $100 billion in annual tax evasion by Americans using offshore accounts.

UBS has contended that complying would violate Swiss banking secrecy laws and expose the
bank to criminal prosecution by its homeland authorities.

"The IRS summons demands information on tens of thousands of account holders and puts UBS
in an untenable position, caught between the laws of two sovereign nations," CEO Oswald Grubel
wrote in a memo sent to the bank's executives Thursday. "Honoring the IRS summons would
require UBS to violate Swiss criminal law, and we simply cannot comply."
Offshore tax havens under fire
No matter results of UBS case, taxpayers should consider coming clean: experts
Jul 11, 2009, 10:48 a.m. EST
By Andrea Coombes, MarketWatch

SAN FRANCISCO (MarketWatch) -- A court hearing in Miami on Monday to determine if Swiss
banking giant UBS AG must turn over tens of thousands of client names to the IRS could provide
a major boost to the U.S. goal of recovering potentially billions of dollars in taxable assets
shielded by other countries' bank secrecy laws.

But for U.S. taxpayers with unreported offshore accounts -- whether they are UBS customers and
whether the judge decides the case in favor of the government -- the outlook for continuing to
hide that money is increasingly dim, some experts say.

The Justice Department is seeking the names of some 52,000 of UBS' U.S.-based clients after
the Swiss bank in February provided the names of about 250 clients and paid the U.S. $780
million in fines related to offshore tax havens. In that settlement, UBS did not deny helping
taxpayers hide accounts. See DOJ release on UBS settlement in February.

U.S. law requires taxpayers to report all financial accounts in a foreign country if the total value of
the accounts exceeds $10,000 at any time during the calendar year.

Though the U.S. and Switzerland earlier this year entered into an agreement to share some tax
information, the Swiss government on Wednesday said it would intervene to bar UBS from
handing over the data sought in this case. On Thursday UBS Chief Executive Oswald Gruebel
said in a memo that complying with U.S. demands would violate Swiss law. See story on UBS
calls on governments to settle tax dispute. See story on U.S. and Switzerland agree to share tax
information.

"This is a very important case for the [U.S.] government because you have many banks that are
formed in jurisdictions that exist essentially for the bank secrecy laws, not only Switzerland but
the Caymans and the Channel Islands," among others, said Bill Smith, director of CBIZ MHM's
national tax office. "If the court addresses the issue of the Swiss government saying the bank
can't comply, and the U.S. wins that battle, they have a pretty big weapon in their arsenal with
that victory. There are lots and lots of banks that they'd love to get this same information from."

It's unclear how long the hearing, set to start Monday in the U.S. District Court in Miami, will last,
and the judge won't necessarily issue a decision immediately. And it's highly likely an appeal will
be filed, tax experts said.

The U.S. loses an estimated $100 billion in tax revenue every year because of money stashed
offshore, according to Sen. Carl Levin, D-Mich., who with other lawmakers introduced the Stop
Tax Haven Abuse Act in March.

Decision time
For people who own offshore accounts, it's time to make a decision. If the U.S. gains access to
an account-holder's name, it limits that taxpayer's ability to take advantage of the IRS's current
amnesty program, which is generally not available to people about whom the tax agency learns
on its own.

To encourage people with offshore accounts to come forward voluntarily, the IRS in March
announced a temporary easing of the steep fines and potential criminal fraud charges related to
offshore accounts. That program, which still entails relatively steep fines, ends Sept. 23. See
story on IRS program.

Another consideration for account owners: With the increased attention being paid to offshore
accounts, the ability for owners to gain access to their money is not going to get any easier.

"No matter the results of pending litigation, taxpayers with unreported offshore accounts will still
face potential further criminal actions if they conduct financial transactions in order to further hide
the money or sneak it back into the U.S.," said Mark Matthews, a tax partner at Morgan Lewis
and former chief of the IRS Criminal Investigation Division.

"While many of my clients express the concern that they could lose up to half their money by
participating in the IRS voluntary disclosure program," Matthews said, others "viewed it as
actually gaining half the money in the sense that they could now freely spend it."

More people coming forward

The IRS has not released figures on how many people have come forward since the program
was first offered in mid-March, but tax practitioners say they've seen a rise in taxpayers coming
forward -- and they're not solely UBS customers.

Of the some 40 people he's represented in the IRS' disclosure process, "probably only
half" are UBS customers, said Robert McKenzie, a partner in the Chicago-based law firm
Arnstein & Lehr. "They're deciding to come in because of the publicity on this program
and also at some level [they're thinking], 'If UBS is first, will my bank be next?'"

But other taxpayers are biding their time, perhaps waiting to see the outcome of Monday's
hearing, tax practitioners said.

Meanwhile, "many attorneys are advising voluntary disclosure to head off possible criminal
enforcement activity by the IRS," said Mark Luscombe, a principal analyst with CCH Inc., a
Riverwoods, Ill., tax publisher and unit of Wolters Kluwer.

But even if the IRS loses this case, that doesn't mean taxpayers' names are safe, McKenzie
said, noting that there are myriad ways account information can be uncovered. For
instance, in one case involving a bank in Liechtenstein, he said, an employee stole
customer data and in return for cash rewards gave that data to German and U.S.
authorities.

McKenzie said he's currently involved in a case where a disgruntled employee copied a
statement from her boss's Swiss bank account -- an account with an amount "in the 10
figures," McKenzie said. Under the Internal Revenue Code's whistleblower law, someone
who brings information about tax evasion to the IRS may be entitled to 15% to 30% of
recovered funds.

In this case, McKenzie said, "this employee is not happy with her boss, and she is seeking
a way to become quite wealthy."
IRS has deal for offshore evaders
May 4, 2009
By Roger Russell

Washington, D.C.-As part of its plan to generate intelligence on accountants, bankers and
lawyers who help clients evade U.S. taxes by hiding money in offshore accounts, the Internal
Revenue Service will grant leniency to those who volunteer to pay taxes on overseas accounts in
exchange for information on who aided them in hiding the money abroad.

A new voluntary disclosure program, lasting six months, will guarantee a taxpayer will not
face criminal prosecution. However, the disclosure could come at a higher cost, explained
Robert McKenzie, tax partner at Chicago-based Arnstein & Lehr.

"The penalties they're proposing could be higher than before the program was
announced," he said. "Before the announcement, the taxpayer could face a penalty of up
to 50 percent per year of the amount in the foreign account for six years, which would
equal 300 percent. But the IRS could, and in many cases did, merely assess a $10,000
penalty for not filing FBAR, the foreign bank account report."

The requirement for filing Form TD F 90-22 (Report of Foreign Bank and Financial Accounts,
commonly known as an FBAR) is in the regulations under 31 U.S.C. Section 5314, which is a
provision of the Bank Secrecy Act. Generally, the civil penalty for willfully failing to file an FBAR
can be as high as the greater of $100,000 or 50 percent of the total balance of the foreign
account, as well as any criminal penalties that may apply.

"In the new announcement, the IRS lists exactly what you will face," said McKenzie. "If you
come in and voluntarily disclose that you did not report your foreign account, they will
give you a letter guaranteeing that you will not be prosecuted. The penalty is 20 percent of
the highest amount you had in the account over the last six years. On top of that, you have
to amend your income tax returns and report all income from the account for the past six
years, and pay tax and interest due on the income."

LOOKING FOR INFORMANTS

The IRS has added 28 questions to the voluntary disclosure form, which ask for details regarding
the individual's motivation for tax evasion. Of particular interest to tax advisors, the form asks for
the name and contact information of anyone who advised the individual to open an offshore
account.

"Even if the client gets no prosecution, that doesn't protect the person who advised him to
open the account," said McKenzie. "I anticipate the IRS will eventually go to these
advisors and demand the names of all their clients. Most of my clients involved in this did
not just choose to open a foreign account - someone in the U.S. advised them to do it."

The current offer is the result of the government's lawsuit against Swiss banking concern UBS,
according to Harold Pskowski, managing editor for international publications at tax researcher
BNA.
"It goes beyond UBS, but it's the UBS customers [who are] most likely to take advantage [of it],
because they're the ones most likely to be discovered," he explained.

In a pending case against UBS, the government had obtained the names of 250 account holders.
It says that there are 52,000 more Swiss accounts held by Americans. "We don't really know how
credible that is, but they had to pick a number," said Pskowski.

"There's been a lot of discussion as to whether it's worthwhile to take the IRS offer, because it's
not a great offer," he explained. "A taxpayer has to balance what will happen if he takes
advantage of the offer to what will happen if he gets caught. Clearly there's a risk of criminal
prosecution, but in most cases, it's not a great risk because the government doesn't have the
resources to prosecute 52,000 people - if, in fact, there are that many out there."

"The offer is particularly onerous in the flat 20 percent penalty on the highest value of the account
over a six-year period," he said. "If you were invested in equities and lost 50 percent of their
value, it could amount to a 40 percent penalty of what you now have. On top of that, you have to
pay tax and other penalties and interest, and once you settle with the IRS, you have to settle with
your state, so you could actually pay more than 50 percent of the value of the account."

"Six years is a relatively long time," Pskowski noted. "Some taxpayers in the past might have
settled and limited their taxes to a three-year period, though in theory the IRS can go back forever
- there is no statue of limitations. And now, if they discover you before you accept the settlement
offer, all bets are off. Having announced the new program, they're not going to give anyone a
better deal."

There are two other pressure points regarding offshore accounts, he observed.

"On a broader level, we're on the cusp of seeing major changes in bank secrecy laws and
exchange-of-information agreements. There's increased pressure on European countries to enter
these agreements, which is why it was a topic on the agenda for the G-20 [the Group of 20
finance ministers and central bank governors]," he said.

"In addition, the Stop Tax Haven Abuse Act has been re-introduced in both the House and the
Senate. Those bills do a number of things to strengthen the mechanisms of the IRS to get
information, and would blacklist a number of countries for being secrecy jurisdictions. Since
President Obama was one of the original co-sponsors, everyone assumes there will be
legislation," said Pskowski. "With parallel actions going on at the national and international level,
Switzerland may cave and open up its accounts. The IRS may get what it's looking for that way,
rather than through court actions."

Under the new guidelines, all voluntary disclosure requests will continue to be initially screened
by the IRS's Criminal Investigation unit to determine if the taxpayer is eligible to make a voluntary
disclosure. All requests containing offshore issues will be forwarded by Criminal Investigation to
the IRS's Philadelphia Offshore Identification Unit for civil processing.

RISK V. REWARD

One positive aspect of the new voluntary program is the certainty it creates, according to Bruce
Zagaris, a partner at Washington-based Berliner, Corcoran & Rowe LLP.

"Before, there were more questions about exactly what the penalties were and what was
required," he said. "It's useful that some of those uncertainties have been cleared up."
"But one of the difficulties is that when taxpayers do the calculations, they're going to realize that
the costs of participating in the program are very significant," he continued. "Many will say that as
much as they want to participate, they may not be able to afford it."

Another issue, noted Zagaris, is, "'If I don't participate, will they really catch me?' Until now the
IRS hasn't shown it has the resources to find people and prosecute them, but it is making
progress."

The action by the IRS to prosecute account holders and high-level officials at UBS, as well as
going after professionals outside of UBS that had a role in advising people, is one of the things to
consider, according to Zagaris.

McKenzie agreed. "If UBS actually turns over the names of the account holders, voluntary
disclosure won't protect you," he said. "Even though the penalties are high, it's still to
your advantage to come in to the voluntary disclosure program because the danger of not
telling the IRS and then being discovered is great. And if you don't come in within the next
six months, the penalties could be harshly enforced."

"The current voluntary program echoes a 2003 amnesty that was instituted on the heels of a
congressional offshore banking investigation," noted Selva Ozelli, an international tax attorney
and CPA. "While only 1,000 taxpayers participated in the 2003 amnesty, this new program is
likely to attract increased participation by taxpayers, their lawyers and accountants."
Lawyers help clients fess up on offshore taxes
New IRS settlement program offers lower one-time payment.
April 6, 2009
By Sheri Qualters

Tax attorneys are helping clients fess up to years of unpaid taxes on offshore account income
through a new Internal Revenue Service settlement program offering a lower one-time payment
for violators.

The IRS detailed the six-month program in March 23 internal memos, so attorneys are scrambling
to help clients come clean and avoid steep penalties and potential criminal prosecution.

Taxpayers with offshore accounts totaling at least $10,000 traditionally have faced civil penalties
of up to 50% of the account value or $100,000, whichever is greater, for willfully failing to file and
report income from those accounts on a Report of Foreign Bank and Financial Accounts. In some
cases, criminal penalties could also apply.

Under the settlement program, which involves filing up to six years of amended returns, the
agency will cut the usual penalty to a one-time payment of 20% of the account value, or 5% for an
inherited account.

Lawyers say taxpayers are signing up for the program, and more are likely to follow in the face of
the IRS' declining tolerance for hiding offshore funds.

Attorneys say the U.S. Department of Justice's actions against Swiss bank UBS A.G. are a clear
sign of the government's intent to ferret out offshore accounts.

On Feb. 18, DOJ announced a deferred prosecution agreement with UBS that included $780
million in fines, penalties and restitution, plus a promise to turn over the identity and account
information for some U.S. customers of UBS' cross-border business. The agreement also settled
U.S. Securities and Exchange Commission charges. U.S. v. UBS A.G., No. 0:09-cr-60033 (S.D.
Fla.); SEC v. UBS A.G., No. 1:09-cv-00316 (D.D.C.) [NLJ, Feb. 20].

The next day, DOJ filed a lawsuit in the Southern District of Florida seeking a court order that will
force the company to turn over all the names of the bank's U.S. customers. The justice
department estimated that 52,000 U.S. customers could be using UBS accounts as tax shelters.
U.S. v. UBS A.G., No. 1:09-cv-20423.

In a statement about the Florida case, IRS Commissioner Doug Shulman said the lawsuit "sends
a strong signal to taxpayers hiding their money offshore.

"The IRS will be aggressive in pursuing people who shirk their obligations under the tax law,"
Shulman said. "For people who are hiding money offshore, this serves as a wake-up call that they
need to get right with their government."

Varnum, Riddering, Schmidt & Howlett of Grand Rapids, Mich., has been fielding a steady stream
of calls from clients since the IRS rolled out the formal settlement program, said Paul L.B.
McKenney, a federal tax law partner in the firm's Novi, Mich., office. Accountants and business
attorneys are also reaching out for help on behalf of clients, McKenney said.

In from the cold

"We've been telling them you have to come in from the cold," McKenney said. "My feeling is that
most of the legal-source income will come in."

Many clients have called since the IRS settlement program was issued, but some are wary
about the process or turned off by the penalty, said Robert McKenzie, a tax partner at
Chicago's Arnstein & Lehr.

"Some are willing to come in, but some are not impressed when I tell them the cost of
coming in under the program," McKenzie said.

Some clients want assurances that the IRS isn't trying to trap them, and others worry that
the process will reveal other unrelated tax-reporting issues, he said. McKenzie said
participants should disclose and correct all problems on their returns if they opt for the
settlement.

Philadelphia's Pepper Hamilton had already been advising numerous clients about their options
for reporting previously undeclared offshore income in response to recent shifts in the IRS'
approach to such issues, said tax practice group chairwoman Joan Arnold.

Many of the clients are legal U.S. residents who are also citizens of other countries, she said.
Before the formal settlement program, the clients were concerned about whether and when such
voluntary reporting could trigger a criminal investigation, Arnold said. "What's nice about the
voluntary program is you've got some certainty of how to do it," Arnold said.

But Pepper's clients will still need additional legal judgment on such details as what the IRS
considers a foreign bank account, Arnold said. "There's a real paucity of rules on what a bank
account is."
A Swiss Miss
April 2009
By Jeff Schlegel

The Internal Revenue Service is cracking down on tax cheats hiding money in foreign countries,
and financial advisors who have wealthy clients with cash stashed overseas better hope their
clients properly reported such funds.

After a former private banker with Swiss bank UBS pleaded guilty in June to helping a client hide
$200 million in an offshore account, he blew the whistle on the bank by claiming it holds billions of
dollars for U.S. customers in secret Swiss bank accounts. In turn, the U.S. government has sued
UBS in a Florida court to hand over names of 52,000 American depositors. The IRS is offering
amnesty to people suspected of hiding money in such accounts—fess up and pay back taxes, or
face penalties that could include up to five years in jail and fines of $100,000 or 50% of the
amount in the unreported foreign account, whichever is more.

Robert McKenzie, a partner in the white-collar criminal defense and tax practice at the Chicago-
based firm Arnstein & Lehr, says advisors who put client money in offshore accounts for
diversification or other legal reasons should put in writing that they properly advised clients of the
legal responsibilities for reporting that money. That entails filing a Foreign Bank and Financial
Account report for overseas accounts worth more than $10,000.

If the client willfully failed to report the income and the IRS nabs them, the advisor who didn’t put
his legally defensible advice in writing could get dragged into the case and potentially—
depending on the outcome of the case—stand accused of aiding and abetting tax fraud. The
penalties include jail time and heavy fines.

McKenzie says about 15 people have sought his advice in the UBS case, and some are laying
low because they don’t think the IRS can possibly catch all 52,000 suspected accounts. “In a
given year, the IRS usually prosecutes 2,500 for tax fraud of all types,” says McKenzie, whose
advice is to come clean. “How much is it worth to sleep at night?”

McKenzie says UBS is probably the tip of the iceberg in going after foreign accounts. Credit
Suisse and HSBC have been mentioned in the press as possible targets, and he says he’s
advised people who’ve made voluntary disclosures with banks other than the aforementioned
three.
IRS: Offshore account holders told fess up to lower penalties
March 27, 2009
By Kevin McCoy

Trying to lure wealthy Americans to disclose assets hidden offshore, the IRS on Thursday
announced a six-month program that offers lower penalties to those who come forward and pay
taxes due on the secret holdings.

The offer includes clients of UBS, the Swiss banking giant that last month gave federal
investigators the names of American owners for about 300 accounts in a continuing federal court
showdown.

Along with lower tax penalties, those who comply are expected to avoid criminal prosecution.

"This is a chance for people to come clean on their own," said IRS Commissioner Douglas
Shulman. "For taxpayers who continue to hide their heads in the sand, the situation will only
become more dire."

Under the plan, owners who disclose foreign accounts would pay:

•Back taxes and interest for a minimum of six years.

•A 25% delinquency penalty for each year in which tax returns weren't filed, or a 20% accuracy
penalty for years in which returns were filed but income from offshore accounts wasn't included.

•A penalty equal to 20% of the highest aggregate value at any point during the last six years for
all previously secret foreign accounts.

Until now, the IRS could impose penalties of at least 50% for all years in which an account wasn't
disclosed. In some cases, that could exceed the value of the offshore holdings.

The IRS said those already under criminal investigation for tax evasion are too late to qualify. But
the agency said UBS account holders not part of such a probe would be eligible.

Robert McKenzie, a lawyer for more than a dozen American clients with UBS accounts,
predicted the program would prompt more disclosures because it would enable evaders to
compute their liability "almost to the penny" — which wasn't possible before. The IRS said
the number of Americans who have disclosed foreign accounts has more than doubled
this federal fiscal year over 2007-08.

The announcement comes amid a U.S. legal battle to get owners' names for 52,000 UBS
accounts in which Americans held at least $14.8 billion. UBS, which admitted helping U.S. clients
evade taxes, maintains that turning over the information would violate Swiss banking secrecy
laws.
IRS Offers Reduced Penalties For Offshore Accounts
March 26, 2009
By Martin Vaughan

WASHINGTON (Dow Jones)--The IRS Thursday announced reduced penalties for wealthy
Americans who have hidden assets in offshore accounts and who voluntarily turn themselves in
to IRS agents.

Those account holders will owe taxes and interest on untaxed amounts going back six years, plus
penalties as outlined in new IRS guidance, IRS Commissioner Doug Shulman said in a call with
reporters.

"Those who truly come in voluntarily will pay back taxes, interest and a significant penalty, but
can avoid criminal prosecution," Shulman said.

However, those who don't come in of their own accord will face the full range of civil and criminal
penalties, Shulman said.

"For offshore account holders who continue to hide their head in the sand, the situation will only
become more dire," Shulman said.

The IRS has been ramping up pressure in recent months on those hiding assets to come clean,
including through a high-profile lawsuit against UBS AG (UBS), which led to the bank's shuttering
its Swiss wealth-management services for U.S. clients.

The IRS is still fighting UBS in a civil lawsuit to obtain the identities of the U.S. owners of 52,000
accounts.

IRS officials said that generally, individuals who aren't currently under criminal investigation and
who haven't been notified of a civil examination will qualify for reduced penalties. That is likely to
include thousands of UBS's U.S. clients who remain unknown to the IRS.

IRS officials said voluntary disclosures of offshore accounts since the Oct. 1 start of the fiscal
year are already double what they were for all of fiscal 2008.

New Framework

Under long-standing IRS guidelines, those who voluntarily turn themselves in won't face criminal
prosecution. But on Thursday, the IRS set penalties that will apply, in order to provide
predictability and entice more tax evaders to come in from the cold.

The new penalty framework applies to voluntary disclosure cases that are pending, and to
individuals who disclose within the next six months.

Those individuals will be assessed either a delinquency penalty for failure to pay in a timely
manner, up to 25% of the tax owed, or an accuracy penalty for understating taxes due, up to 20%
of the tax owed.
In addition, they will be charged a penalty of 20% of the aggregate amount in all foreign bank
accounts in the year with the highest account value.

That 20% penalty is in lieu of all other penalties. For instance, participants will be able to avoid a
penalty for failure to disclose the foreign bank account of up to 50% of the value of the account
each year the account wasn't disclosed.

To put that in perspective, an individual who held $200,000 in offshore accounts over the last four
years could face penalties of up to $400,000 for failure to disclose those accounts to the IRS.
Additional penalties could apply, including fraud penalties of 75% of the taxes due on the offshore
amounts.

Under the new penalty terms for voluntary disclosure, the same individual would owe $40,000,
plus at most a penalty of 25% of taxes owed for failure to pay in a timely manner.

"This adds a lot of certainty, because you know exactly going in what the penalties will
be," said Robert McKenzie, a partner at the law firm of Arnstein & Lehr in Chicago.

Avoiding Heavy Penalties

Especially significant is the opportunity to avoid the heavy penalty for failure to disclose, said
lawyers who represent wealthy taxpayers in disputes with the IRS.

"In the past, I've told clients, 'Be prepared to lose half the account.' That sets a lot of people back
on their heels," said Michael C. Durney, an attorney with his own tax-controversy practice. "The
fact that you can lose no more than 20% will be a significant enhancement in getting people to
come forward."

The new 20% penalty can be reduced to 5% if certain conditions are met, the IRS said. The 5%
penalty applies only if the taxpayer didn't open the account; if the taxpayer didn't make deposits
into or withdraw from the account during the period he or she controlled it; and if all U.S. taxes
have been paid on the principal in the account (which does not include earnings that have
accumulated while the funds have been held offshore).

While most won't qualify for the 5% rate, tax lawyers said it might benefit some who inherited
offshore accounts set up with money on which U.S. taxes had been fully paid.

The penalties for delinquency or accuracy will apply even if taxpayers had "reasonable cause" to
believe they were in compliance with the law, IRS officials said. That means lawyers won't be
able to negotiate those amounts downward by arguing that the account holder was acting on the
advise of financial advisers, or that the individual is old or infirm.
IRS increases pressure on Swiss bank clients
March 26, 2009
By Devlin Barrett

WASHINGTON (AP) — The IRS is increasing the pressure on Americans who kept secret Swiss
bank accounts, pushing the wealthy clientele to cough up any evidence against their advisers or
bankers.

Lawyers tell The Associated Press that the government's demands for information and evidence
have increased since the government sued UBS AG to try to get the names of tens of thousands
of U.S. citizens who may have dodged taxes through Swiss accounts.

Robert McKenzie, a Chicago-based lawyer who has more than a dozen clients seeking to
voluntarily disclose their account information to the government, says more recent clients who
have come forward are now being asked a slew of new detailed questions about how the
accounts were handled, and by whom.
IRS Squeezes Swiss Bank Clients for Evidence
March 26, 2009
By Devlin Barrett

WASHINGTON (AP) — The IRS is ratcheting up the pressure on Americans who kept secret
Swiss bank accounts, giving them six months to come clean and cough up any evidence against
their advisers or bankers.

Tax lawyers told The Associated Press Thursday that demands for information and evidence
have increased sharply since the government sued UBS AG to try to get the names of tens of
thousands of U.S. citizens who may have dodged taxes through Swiss accounts.

Putting the squeeze on rich Americans who hid their wealth, IRS Commissioner Douglas
Shulman on Thursday also laid out a six-month window for those with secret offshore accounts to
come clean under specific terms and penalties.

The Obama administration wants UBS to turn over information on as many as 52,000 U.S.
customers who concealed their accounts from the government in violation of tax laws. In
February, the bank agreed to pay $780 million and turn over the names of roughly 250 U.S.
clients, but the Justice Department sued to get the names of tens of thousands more.

Swiss authorities have vowed to fight to protect their tradition of bank secrecy.

Robert McKenzie, a Chicago-based lawyer who has more than a dozen Swiss bank clients
seeking to voluntarily disclose their account information to the government, said more recent
clients who have come forward are now being asked a slew of new detailed questions about how
the accounts were handled, and by whom.

"My view is the IRS is now looking to find those who promote these financial devices, and give
advice on these financial devices, and expand the investigation," said McKenzie.

McKenzie said that before the government struck a deferred prosecution deal with UBS last
month, the Internal Revenue Service had six fairly straightforward questions it asked of U.S.
taxpayers holding Swiss accounts who voluntarily came forward.

McKenzie said new clients coming forward are now confronting a list of nearly 30 detailed
questions, asking not just about financial documents, but any travel to conduct banking business,
documents and correspondence related to the accounts, and which bank employees helped them
manage the accounts.

McKenzie said some of the account-holders he has advised are still willing to "roll the dice" and
see if the IRS catches them, but he is advising them to come clean with Uncle Sam, because
others are.

"Each time somebody comes in, it leads to a greater possibility the next person will be discovered
because his neighbor disclosed," said McKenzie.
Those with such Swiss accounts include doctors, immigrants, and even a retired American bank
executive, McKenzie said.

Lawrence Horn, a New Jersey lawyer who also represents Swiss bank clients, agreed that the
demands for information have increased markedly as the government continues its legal fight
over Swiss bank secrecy.

"The procedure used to be, 'You show me a little, I'll show you a little,'" said Horn. "Now they
want information up front. They're asking specific questions about when an account was opened,
who helped you open it, and if a law firm was used to open it."

Shulman, the IRS commissioner, told reporters on a conference call Thursday that the agency
was offering a six-month window for offshore bank clients to come forward under terms he called
fair but firm.

Those who come forward on their own can expect to pay back taxes and interest for a six-year
period, as well as a penalty of 20 percent of the amount held in the accounts in whatever year
their balance was highest, Shulman said.

"This is a chance for people to come clean on their own," said Shulman. "For taxpayers who
continue to hide their heads in the sand, the situation will only become more dire."

The deal is only good for six months, Shulman warned, after which the IRS will re-evaluate the
terms. By law, the IRS can seek as much as 50 percent of the balances of some accounts used
to avoid paying taxes.
Panic sets in for UBS clients in America
February 24, 2009
By Karin Kamp

UBS customers in the United States are coming
forward to declare their secret bank accounts amid
fear of serious financial and legal repercussions.
Some US lawyers say calls to their offices have shot
up since the Swiss banking giant announced last
Wednesday that it would hand over confidential
details of some 250 clients the American tax
authorities suspect of tax evasion.

"People are looking for the ability to sleep at
night," Robert McKenzie, a Chicago attorney,
told swissinfo.

McKenzie is representing 14 clients with accounts at Swiss banks, such as UBS and Credit
Suisse, who are seeking tax settlements.

In the past few days McKenzie has received several calls from concerned account holders
wishing to disclose their Swiss bank accounts to the US tax authorities, in the hope of
leniency.

On Thursday, US authorities filed a civil lawsuit in Miami demanding that UBS identify roughly
52,000 Americans whom the Internal Revenue Service (IRS) suspects of secretly holding a total
of at least $14.8 billion (SFr17.2 billion) in cash and securities.

Even before the Department of Justice broadened its investigation last week, the IRS was
receiving a deluge of calls from taxpayers worried about undisclosed foreign accounts, according
to Dow Jones Newswires.

The IRS is encouraging US taxpayers with such accounts to come forward and "get right" with the
government.

Heavy price

"Taxpayers should talk to a tax professional and come forward under our voluntary disclosure
process. Having the IRS find you could mean a much heavier price than coming forward on your
own," IRS Commissioner Doug Shulman said in a statement last week.

That heavy price includes penalties as high as 50 per cent of the amount in the secret foreign
bank account, applicable to each year of non-disclosure on US federal tax statements.

"Timeliness is critical. Those who ignore this window of opportunity may well find themselves in
prison for tax evasion," Charles Rettig, a lawyer at Hochman, Salkin, Rettig, Toscher & Perez in
Beverly Hills, California, told swissinfo.
Rettig's firm represents more than 100 clients who have or are in the process of disclosing their
secret foreign account details to the IRS.

He added that it has taken considerably longer than anticipated for many of his clients to receive
the tax documents they requested from UBS.

Rettig said many have filed so-called FBARs (Report of Foreign Bank and Financial Account) with
the IRS, while waiting for the additional information from UBS.

Embarrassed and worried

McKenzie said his clients have had different reactions to last week's news depending on
their circumstances. "It's embarrassing for some and downright worrying for others," he
said of the wealthy and upper middle class clients he has retained.

One of his clients, a business owner, had a Chinese supplier issue invoices for double the
real amount, he said. The Chinese supplier took half of the amount, and deposited the rest
in the business owner's UBS bank account. McKenzie said it was a way of lowering the
company's profits in the US, and therefore taxes as well.

He added that many of his other clients had less sinister motives and had opened secret
bank accounts due to a "lack of faith in the US banking system".

"These people wanted to have their money in the stable Swiss banking system," he said.

"Compassion"

One such client, an 86-year-old man who had deposited a few hundred thousand dollars in
a secret UBS account the late 1970s, called McKenzie's office last week panicking about
his future.

"Does this mean I'm going to jail?" the man asked. McKenzie assured his client, whose
case is in "active negotiations", that he would be spared prison.

"The IRS is vicious but not at that level. Once you reach 80 there will be some
compassion."

Rettig, however, is not so sure. He says that taxpayers who believe the IRS will not find them or
that UBS – which said it would fight the case against them – may not turn over all the names
could be sorely mistaken.

"Some may have considerable time – while incarcerated – to think about their decision not to
come into compliance when they had sufficient warning and an opportunity to do so," he said.
Amerikanische UBS-Kunden zeigen sich scharenweise selbst an
February 23, 2009

Die UBS soll Daten von weiteren 52'000 amerikanischen Kunden offenlegen, die angeblich
Steuern hinterziehen. Nun versuchen viele Kontoinhaber, mit der Steuerbehörde einen Deal zu
schliessen: Sie hoffen auf Milde.

Heute stellt sich die UBS vor Gericht dem US-Justizministerium. Ein Richter in Miami muss
darüber befinden, wie gegen 52'000 US-Kunden vorgegangen werden soll, die bei der UBS nicht
deklarierte Konten unterhalten – im Wert von 14,8 Milliarden Dollar. Der Ausgang des
Gerichtstermins ist ungewiss: Die UBS möchte Zeit gewinnen, doch das Justizministerium wird
jeden Versuch der UBS verhindern, die Fälle zu verschleppen. Bereits letzte Woche war die UBS
im Steuerstreit unter massivem Druck der USA eingeknickt und hat den US-Ermittlern Daten von
bis zu 300 amerikanischen UBS-Kunden zugesichert.

«Das Rennen ist eröffnet»

Viele der Kunden, die nun ins Visier der Steuerfahnder geraten sind – und dem Schweizer
Steuergeheimnis wohl nicht mehr ganz trauen –, gehen in die Offensive: Sie melden der US-
Steuerbehörde ihre Konten. «Das Rennen ist eröffnet», sagt Anwalt Robert McKenzie gegenüber
der grössten US-Tageszeitung «USA Today». McKenzie vertritt 17 UBS-Kunden, die Steuern
hinterzogen haben und mit den Behörden einen Deal schliessen wollen, um nicht zu hart
angefasst zu werden. Darunter befinden sich unter anderem ein Geschäftsmann, der Steuern im
«siebenstelligen Bereich» hinterzog. Oder ein älterer Amerikaner, der bei der UBS in der Schweiz
ein Konto unterhielt, weil er dem US-Bankensystem nicht traute.

Dass sich diese Kontoinhaber jetzt melden, kommt für McKenzie nicht überraschend: «Die
Botschaft der Steuerbehörde ist klar: ‹Zeigen Sie sich selbst an, bevor wir es tun›.» Seine
Mandanten hätten einer Selbstanzeige zugestimmt, da ihnen harte Strafen drohten: Eine
Strafverfolgung sowie eine Geldstrafe, die für jedes Jahr Nicht-Versteuerung die Hälfte der
Summe auf dem Konto beträgt.

Wenigstens keine Haftstrafe

Bei einer Selbstanzeige dürfen die UBS-Kunden mit einem milderen Urteil rechnen: Sie müssen
die hinterzogenen Steuern zwar zurückzahlen und auch eine Busse zahlen. «Doch immerhin sind
sie nicht die glücklichen Gewinner einer Haftstrafe», sagt McKenzie. Die Steuerbehörde bestätigt
den Ansturm der UBS-Kunden: «Wir bekommen täglich Anrufe von Personen, die sich anzeigen
wollen», sagt ein Sprecher gegenüber «USA Today».
IRS unlocks UBS vault hiding Americans evading taxes
February 20, 2009
By Kevin McCoy

One is a U.S. business owner who hid a tax-evasion scheme "well into the seven figures."
Another is an elderly American who kept money in an offshore account over fear for the
security of the U.S. banking system.

And then there are the children of parents who survived the Holocaust and established a
foreign trust account on their behalf.

Their attorney says all had undeclared bank accounts at UBS, (UBS) the Swiss banking
giant sued Thursday by U.S. authorities in an escalated demand for the identities of
owners of approximately 52,000 such accounts in which Americans secretly held at least
$14.8 billion.

They're also among a recent rush of American UBS customers who contacted the IRS
about their accounts, hoping to gain leniency for their failure to pay years of federal taxes
on the secret holdings.

"The rush is on," says Robert McKenzie, a Chicago attorney who's representing the three
UBS account holders plus 14 others seeking similar tax settlements regarding accounts at
the Swiss bank.

The IRS' message is clear: "You better come in now before your name comes out," said
McKenzie, who declined to identify his clients but agreed to discuss general outlines of
their cases.

The developments are part of a historic legal struggle that has cracked Switzerland's renowned
reputation for banking secrecy and cast a spotlight on what a 2008 Senate hearing identified as
$100 billion in annual tax evasion by American owners of foreign accounts.

U.S. authorities filed the civil lawsuit in Miami, one day after reaching a deferred-prosecution deal
in which UBS agreed to a $780 million settlement of criminal charges it helped American
customers evade federal taxes. The agreement required the bank to turn over identities of some
of those clients.

Thursday's civil lawsuit asked a federal court to enforce so-called John Doe summonses served
on UBS last year for the names of the undeclared account owners, along with details of their
holdings.

The court demand also cited roughly 52,000 suspect accounts, up from 19,000 federal authorities
alleged last year.
Federal authorities upped the legal ante after UBS' criminal case acknowledgement of a 2000-
2008 scheme in which its bankers used encrypted laptop computers and counter-surveillance
tactics during trips to the U.S. in which they helped American clients evade taxes.

Former executive aiding prosecutors

The investigation was keyed in part by Bradley Birkenfeld, a U.S. citizen who previously worked
in UBS' private banking division and pleaded guilty to conspiracy last year. Birkenfeld agreed to
give federal authorities inside details of the scheme in exchange for potential leniency.

Despite the criminal case settlement and the challenge of the latest civil lawsuit, UBS — with
Swiss government support — is using all legal means to avoid being forced into naming names.

The Associated Press reported that Swiss President Hans-Rudolf Merz declared his country's
banking secrecy "remains intact" in a statement hours before the federal lawsuit was filed.
Switzerland law permits release of information about bank account holders when deliberate fraud
is involved, but not when an owner has simply not declared all assets.

UBS said it "intends to vigorously contest the enforcement of the summons in the civil
proceeding," as specifically permitted under the criminal non-enforcement agreement.

In a declaration filed with Thursday's civil lawsuit, Barry Shott, an IRS deputy commissioner, said
UBS had decided to turn over records only for owners of an estimated 300 accounts that had
indications of "affirmative acts of fraud or deception."

As of Jan. 21, the bank had reached a final determination to disclose information for just 12 of
those accounts, Shott said in the filing. But that wouldn't happen, he said, until the owners have
an opportunity to litigate the issue in Switzerland's court system.

"In sum, the Swiss government has not provided any records sought … and it is not clear when, if
ever, it will," Shott concluded.

However, the Associated Press reported that Merz said Swiss authorities had given U.S.
counterparts files for as many as 300 UBS clients suspected of tax fraud. UBS spokesmen could
not immediately be reached Thursday to confirm such a handover.

Dialing the IRS

Despite a potentially protracted court struggle, some of UBS' secret American clients already are
contacting the IRS.

The federal tax agency doesn't disclose information about individual taxpayers. However,
spokesman Bruce Friedland said Thursday "the IRS has been receiving calls on a daily basis
from taxpayers and their representatives about the voluntary disclosure process. A majority of
these cases involve taxpayers with undisclosed foreign accounts."

McKenzie, a partner and tax specialist at the Chicago law firm of Arnstein & Lehr, said he
began negotiations with the IRS after telling his clients they could face harsh penalties if
they unsuccessfully gambled they'd never be identified as secret UBS account
beneficiaries.

Those penalties include criminal prosecution and a penalty as high as 50% of the amount
in a secret foreign account for each year it wasn't disclosed in federal tax returns.
By contacting the IRS, says McKenzie, they can potentially qualify for the agency's
voluntary disclosure process. That requires filing amended federal tax returns for the
previous six years, paying all the taxes and interest owed for those years, plus negotiated
penalties for the years of non-filing.

Though such settlements are still costly, at least clients won't be "the lucky winner of a
sentence in a U.S. prison," McKenzie says.

That could have been a real possibility for a U.S. business owner client he said instructed
a Chinese supplier to issue invoices "for double the price" of supplies. Half the money
went to the supplier, who charged a commission to deposit the rest of the money in a UBS
account the business owner secretly controlled.

"It was an income tax skim," said McKenzie, adding that the undeclared total involved "is
well into the seven figures. … It would be an amount you would not forget."

He declined to speculate on how much the businessman could end up paying, but said the
client "will not go to prison." Some of his other clients are "more sympathetic," McKenzie
said.

One is an 86-year-old man he says became fearful for the stability of the U.S. banking
system during the high interest rates of the late 1970s. The man placed a few hundred
thousand dollars in a never-declared UBS account, "figuring it would give him security —
if the U.S. collapsed he'd still have some money," the attorney said.

"I don't think the IRS is ever going to put an 86-year-old man in prison," said McKenzie,
who described the case as in active negotiations.

As for the children of the Holocaust survivors, they were required to pay back taxes. But
they avoided IRS penalties, McKenzie said, because they "were unaware they were
required to file" disclosures about a foreign account established by parents who live
outside the U.S.

Other American owners of UBS accounts might not be as fortunate, said Charles Rettig, a
Hochman, Salkin, Rettig, Toscher & Perez partner in Beverly Hills. His law firm represents more
than 100 clients who either have or are in the process of disclosing their holdings to the IRS,
Rettig said.

"Now is the time for all taxpayers, and those who ought to be taxpayers … to come forward in
order to hopefully preserve their future freedom," Rettig said. "Those who ignore this window of
opportunity may well find themselves in prison for tax evasion."

For any who might question advice like that offered by Rettig, John DiCicco, acting assistant
attorney general for the Justice Department's tax division, offered a warning Thursday.

"At a time when millions of Americans are losing their jobs, their homes and their health care, it is
appalling that more than 50,000 of the wealthiest among us have actively sought to evade their
civic and legal duty to pay taxes," DiCicco said. "It is time for those who are trying to hide from the
IRS to rethink their actions."
UBS American Depositors Rush To IRS Hoping For Leniency
February 20, 2009

Following an agreement by the largest Swiss bank UBS with the U.S. Department of Justice to
reveal the names of 52,000 American depositors who kept secret bank accounts in the Swiss
bank, some of the depositors are starting to make a beeline for the Internal Revenue Service to
seek leniency.

Robert McKenzie, a Chicago lawyer, represents three UBS depositors who are trying to
beat being publicly named by UBS. McKenzie has 14 other U.S. residents who has also
secured his legal service to seek tax settlement.

The three are an American businessman who had established a tax evasion scheme
involving seven figures, a senior citizen who feared the security of the U.S. banking
system, and children of Holocaust survivors whose parents opened the Swiss accounts
on their behalf. McKenzie declined to name his clients.

While UBS appears to be cooperating with the Justice Department, at the same time it is tapping
all legal means to evade naming depositors. The move has the support of Swiss President Hans-
Rudolf Merz who said in a statement just before the federal lawsuit was filed that Switzerland's
banking secrecy remains intact.

UBS has revealed to the U.S. government the identities of 300 American depositors, which is just
a fraction of the 52,000 U.S. residents with UBS accounts, including the 19,000 already under
investigation by the Justice Department.
UBS deal shakes foundations of Swiss bank secrecy
February 19, 2009
By ELIANE ENGELER

BERN, Switzerland (AP) — Switzerland on Thursday desperately sought to reassure its citizens
and international banking clients that it would safeguard a treasured tradition of confidential
accounts after taking the unprecedented step of revealing over 250 tax cheats to U.S. authorities.

"Banking secrecy, ladies and gentlemen, remains intact," President Hans-Rudolf Merz told
reporters.

His claim, however, failed to convince many critics of a deal struck between Swiss bank UBS AG
and the U.S. Department of Justice — which is investigating allegations the bank helped
thousands of wealthy American evade taxes.

And the U.S. stepped up its legal offensive only hours after the agreement, as federal authorities
filed another lawsuit in Miami, seeking identities of as many as 52,000 American customers of the
bank who hid their accounts in violation of U.S. tax laws.

Merz said Swiss authorities handed over the files on 250 to 300 American clients of UBS who are
suspected of committing tax fraud. The transfer took place in the middle of the night in the Swiss
capital Bern, just ahead of a U.S. deadline for Swiss cooperation, he said.

Experts said the decision to bypass the courts and give up customers before exhausting all legal
options seriously endangers a pillar of the banking industry that helped transform Switzerland into
one of the world's richest countries.

Rainer Schweizer, professor of public law at the University of St. Gallen, said the foundations of
Switzerland's legal system have now been shaken.

Undeclared money was no longer safe in Switzerland, said Susan Emmenegger, professor of
banking at the University of Bern.

Zurich lawyers immediately filed a suit against the head of Switzerland's financial services
authority FINMA, which authorized the transfer of files.

"This so-called agreement is a brutal demonstration for why banking secrecy should be
guaranteed in the Swiss constitution," said Hans Geiger, emeritus professor of banking at the
University of Zurich, one of many leading Swiss experts on the industry to voice his opposition
Thursday.

Switzerland's largest bank and U.S. officials have been negotiating intensely since allegations
surfaced last year that UBS helped wealthy Americans conceal up to $20 billion.
Merz, UBS and Switzerland's financial regulator all insisted that Thursday's handover was not a
retreat from the principle of banking secrecy because it concerns only a small number of files that
are linked to tax fraud — and not tax evasion.

Along with neutrality, banking secrecy is a pillar of Swiss national identity. Under a 75-year-old
law, banking secrecy can only be lifted when individuals are deemed to have deliberately
defrauded tax authorities as opposed to failing to declare all assets, a distinction only Switzerland
and other tax havens make.

Banking secrecy "serves to protect privacy," Merz said. "However, it does not protect tax
fraudsters."

Under Wednesday's deal, UBS also agreed to pay a $780 million fine and cooperate further with
U.S. authorities.

The Swiss Bankers Association said it regretted the settlement because it was agreed before a
legal process initiated last year between U.S. and Swiss authorities had been completed.

The decision to act quickly, rather than wait for Switzerland's often slow and costly legal system
to approve the transfer of the files, follows intense pressure from Washington.

After indicting a former UBS official in May, American prosecutors stepped up their probe of UBS
last November by indicting senior UBS banker Raoul Weil and warning that other top executives
could face similar charges. One name mentioned was Peter Kurer, the bank's former general
counsel and current chairman.

Congress is expected to discuss UBS in a hearing on tax havens Tuesday.

Merz said U.S. indictments of the bank's most senior staff, along with a wider investigation into its
business practices in the United States, would have threatened the Swiss economy as a whole
during a serious economic downturn.

The bank's bankruptcy would cost the Swiss economy up to $250 billion, Merz said.

UBS lost 19.7 billion Swiss francs last year, the biggest corporate loss in the nation's history, and
received nearly $60 billion in a state bailout in October.

Bob McKenzie, a partner at Chicago law firm Arnstein & Lehr and former U.S. tax official,
said Switzerland's second-biggest bank, Credit Suisse Group, also is a possible target of
American investigators.

But it was clear UBS was not in the clear yet, even if investors greeted the deal initially with
optimism, sending the bank's share price up by nearly 5 percent.

According to the U.S. government's lawsuit in Miami, UBS was being pressed to provide
information on accounts valued at about $14.8 billion in assets.

The company said it will fight in court to keep the names private, arguing bank secrecy laws
shield those customers.
___

Associated Press writers Balz Bruppacher in Bern and Frank Jordans in Geneva contributed to
this report.
U.S. Demands UBS Name 52,000 Clients
February 19, 2009
By Brent Kendall and Martin Vaughan

WASHINGTON -- The U.S. Department of Justice filed a lawsuit in Miami Thursday asking a
federal judge to force Swiss-banking giant UBS AG (UBS) to disclose to the Internal Revenue
Service the identities of the bank's U.S. customers with secret Swiss accounts.

The government alleges that as many as 52,000 U.S. customers hid their UBS accounts from the
IRS. Roughly 20,000 of those accounts contained securities, while another 32,000 contained
cash, prosecutors said.

The lawsuit comes a day after UBS reached a deal with federal authorities to avoid criminal
prosecution for helping wealthy Americans hide accounts and evade taxes.

As part of Wednesday's settlement, UBS agreed to pay $780 million in penalties and restitution
and promised to reveal the identities of roughly 250 U.S. customers.

That deal, however, didn't settle a separate civil lawsuit filed by U.S. tax authorities last year that
sought the names of thousands of U.S. customers whom the IRS believes used UBS accounts to
evade taxes.

Thursday's lawsuit asks a judge to enforce an IRS summons issued to UBS last July seeking the
identities of those customers.

"We are committed to moving forward with the summons enforcement process," IRS
Commissioner Doug Shulman said in a statement. "This action sends a strong signal to taxpayers
hiding their money offshore. The IRS will be aggressive in pursuing people who shirk their
obligations under the tax law."

UBS said in a statement Thursday that it plans to vigorously contest the summons in court.

The bank said it has several legal defenses against the IRS request for customer identities. UBS
said its objections to the summons are based both on U.S. law and Swiss financial privacy laws.
The IRS and Justice Department's allegations Thursday that as many as 52,000 U.S. customers
hid UBS accounts is well above the estimates that federal authorities offered just Wednesday in
court papers that announced the government settlement with UBS. In those documents,
prosecutors said UBS provided services to 20,000 U.S. clients.

A Justice Department spokesman had no comment Thursday on the discrepancy.

The government's estimate of 52,000 U.S. customers surprised tax practitioners. The figure is
well in excess of the UBS's own estimates. The company told a Senate subcommittee last year
that it believed Americans held as many as 19,000 undeclared accounts with the bank.

The IRS move to enforce its summons against UBS is calculated, in part, to spur U.S. holders of
secret Swiss accounts to voluntarily turn their information over to the IRS.
"Taxpayers should talk to a tax professional and come forward under our voluntary disclosure
process," Shulman said. "Having the IRS find you could mean a much heavier price than coming
forward on your own."

The IRS court action is already beginning to have an effect. "I've had two new clients hire
me just today to help them voluntarily disclose," said Robert McKenzie, a partner at the
law firm of Arnstein and Lehr. "Others are still thinking about it."

Account holders who voluntarily come forward avoid criminal prosecution, and are likely to have
IRS penalties reduced or waived, tax advisors say. Voluntary disclosures also help the IRS find
other tax evaders, because those who disclose are asked for information on the financial advisor
who directed them to the offshore account, and any others they know of who hold similar
accounts.

But the prospect of having to pay a penalty, and uncertainty about how much, has still made
some reluctant to give themselves up, tax lawyers said. The penalty for failing to disclose to the
IRS the existence of a foreign bank account is up to 50% of assets in the account, per year.
Additional penalties apply for failing to report to the IRS any taxable gains from the account.

Tax lawyers are divided over whether the IRS will succeed in its bid to force UBS to turn over the
identities of thousands of U.S. clients.

The account information that UBS turned over as part of its deferred prosecution agreement was
associated with cases in which the U.S. had names, account information, and evidence that the
clients lied to the IRS. Treaties between the U.S. and Switzerland already provide for the
exchange of information in such cases.

But the summons that IRS is suing to enforce would go beyond those treaties and require UBS to
act in direct contravention of Swiss privacy laws.

"The Swiss released what the Swiss were going to release," said George Clarke, an attorney with
the firm of Miller & Chevalier. "The big question of whether a U.S. court is going to compel a
foreign bank to violate another country's bank secrecy laws still remains."

Bruce Zagaris, a partner at the law firm of Berliner, Corcoran & Rowe, said he is skeptical a U.S.
court will enforce the order. "The IRS, to some extent, is blowing hot air here," he said. "Financial
privacy is the cornerstone of the Swiss economy, it's a fundamental right. It is something that has
been with Switzerland for many, many decades."

But Arnstein & Lehr's McKenzie said it is to be expected that UBS would resist the IRS
investigation until ordered to comply by a court, to satisfy the Swiss authorities.

Importantly, he said, the U.S. included a clause in the settlement of the criminal case that
could unwind the settlement if UBS doesn't cooperate in the civil case.

"If a U.S. court orders them to turn over information, and they fail to do so, they could be
held in criminal contempt, which would be a violation of the plea agreement," McKenzie
said.
US DOJ Sues UBS To Enforce Summons For Bk Acct Records
February 19, 2009
By Brent Kendall and Martin Vaughan

WASHINGTON (Dow Jones)--The U.S. Department of Justice filed a lawsuit in Miami Thursday
asking a federal judge to force Swiss-banking giant UBS AG (UBS) to disclose to the Internal
Revenue Service the identities of the bank's U.S. customers with secret Swiss accounts.

The government alleges that as many as 52,000 U.S. customers hid their UBS accounts from the
IRS. Roughly 20,000 of those accounts contained securities, while another 32,000 contained
cash, prosecutors said.

The lawsuit comes a day after UBS reached a deal with federal authorities to avoid criminal
prosecution for helping wealthy Americans hide accounts and evade taxes.

As part of Wednesday's settlement, UBS agreed to pay $780 million in penalties and restitution
and promised to reveal the identities of roughly 250 U.S. customers.

That deal, however, didn't settle a separate civil lawsuit filed by U.S. tax authorities last year that
sought the names of thousands of U.S. customers whom the IRS believes used UBS accounts to
evade taxes.

Thursday's lawsuit asks a judge to enforce an IRS summons issued to UBS last July seeking the
identities of those customers.

"We are committed to moving forward with the summons enforcement process," IRS
Commissioner Doug Shulman said in a statement. "This action sends a strong signal to taxpayers
hiding their money offshore. The IRS will be aggressive in pursuing people who shirk their
obligations under the tax law."

UBS said in a statement Thursday that it plans to vigorously contest the summons in court.

The bank said it has several legal defenses against the IRS request for customer identities. UBS
said its objections to the summons are based both on U.S. law and Swiss financial privacy laws.
The IRS and Justice Department's allegations Thursday that as many as 52,000 U.S. customers
hid UBS accounts is well above the estimates that federal authorities offered just Wednesday in
court papers that announced the government settlement with UBS. In those documents,
prosecutors said UBS provided services to 20,000 U.S. clients.

A Justice Department spokesman had no comment Thursday on the discrepancy.

The government's estimate of 52,000 U.S. customers surprised tax practitioners. The figure is
well in excess of the UBS's own estimates. The company told a Senate subcommittee last year
that it believed Americans held as many as 19,000 undeclared accounts with the bank.

The IRS move to enforce its summons against UBS is calculated, in part, to spur U.S. holders of
secret Swiss accounts to voluntarily turn their information over to the IRS.
"Taxpayers should talk to a tax professional and come forward under our voluntary disclosure
process," Shulman said. "Having the IRS find you could mean a much heavier price than coming
forward on your own."

The IRS court action is already beginning to have an effect. "I've had two new clients hire
me just today to help them voluntarily disclose," said Robert McKenzie, a partner at the
law firm of Arnstein and Lehr. "Others are still thinking about it."

Account holders who voluntarily come forward avoid criminal prosecution, and are likely to have
IRS penalties reduced or waived, tax advisors say. Voluntary disclosures also help the IRS find
other tax evaders, because those who disclose are asked for information on the financial advisor
who directed them to the offshore account, and any others they know of who hold similar
accounts.

But the prospect of having to pay a penalty, and uncertainty about how much, has still made
some reluctant to give themselves up, tax lawyers said. The penalty for failing to disclose to the
IRS the existence of a foreign bank account is up to 50% of assets in the account, per year.
Additional penalties apply for failing to report to the IRS any taxable gains from the account.

Tax lawyers are divided over whether the IRS will succeed in its bid to force UBS to turn over the
identities of thousands of U.S. clients.

The account information that UBS turned over as part of its deferred prosecution agreement was
associated with cases in which the U.S. had names, account information, and evidence that the
clients lied to the IRS. Treaties between the U.S. and Switzerland already provide for the
exchange of information in such cases.

But the summons that IRS is suing to enforce would go beyond those treaties and require UBS to
act in direct contravention of Swiss privacy laws.

"The Swiss released what the Swiss were going to release," said George Clarke, an attorney with
the firm of Miller & Chevalier. "The big question of whether a U.S. court is going to compel a
foreign bank to violate another country's bank secrecy laws still remains."

Bruce Zagaris, a partner at the law firm of Berliner, Corcoran & Rowe, said he is skeptical a U.S.
court will enforce the order. "The IRS, to some extent, is blowing hot air here," he said. "Financial
privacy is the cornerstone of the Swiss economy, it's a fundamental right. It is something that has
been with Switzerland for many, many decades."

But Arnstein & Lehr's McKenzie said it is to be expected that UBS would resist the IRS
investigation until ordered to comply by a court, to satisfy the Swiss authorities.

Importantly, he said, the U.S. included a clause in the settlement of the criminal case that
could unwind the settlement if UBS doesn't cooperate in the civil case.

"If a U.S. court orders them to turn over information, and they fail to do so, they could be
held in criminal contempt, which would be a violation of the plea agreement," McKenzie
said.
UBS Imminent US Tax Probe Deal Eyed; Up To CHF2B Hit Seen
January 19, 2009
By Katharina Bart

ZURICH (Dow Jones)--UBS AG (UBS) is seen by analysts and experts as drawing close to
concluding the messy U.S. probe into allegations that the Swiss bank aided wealthy Americans to
avoid taxes, which is likely to result in a hefty settlement fine.

"My guess is ... that they will end up making a sizable settlement which will be put in the fourth
quarter results, which we already know will be heavily loss-making as a result of the deal to
offload assets," said London-based Nomura analyst Jon Peace.

Experts have long predicted that UBS and U.S. authorities would reach a settlement to end the
matter, which has become increasingly messy for the bank to manage.

UBS' top private banker, Raoul Weil, was forced to step aside to fight his U.S. federal grand jury
indictment over allegations of aiding tax evasion.

In a presentation made available on the UBS Web site Monday, the bank said settling with the
Department of Justice, or DoJ, is a priority for 2009, along with returning to profitability and
patching up its battered reputation. Press reports in recent days, since U.S. authorities turned up
the heat on UBS by declaring Weil a fugitive, are pegging an imminent deal between the two.

Still, recent developments in the case make it clear that U.S. authorities are in the driver's seat,
and analysts say they may be eager to set an example on tax cheats.

"The U.S. authorities have a lot of leverage because if charged under U.S. law, this would
have an impact on UBS' right to function in the U.S.," said Robert McKenzie, Chicago-
based partner with Arnstein & Lehr. McKenzie specializes in white-collar crime and
offshore tax matters.

UBS must find a way to navigate a potential settlement with the U.S. DoJ, and Internal Revenue
Service while not angering wealthy clients, who pay UBS high fees in return for having their
assets managed in Switzerland, which built its reputation on banking secrecy.

"The DoJ clearly wants a full view of what's going on at the private bank - a delicate matter when
part of the deal you do with your clients is to protect them. Ultimately, it's a balancing act," said
Alois Pirker, a senior consultant in Boston with Aite Group, which does market research and
advises financial services firms.

The tax evasion probe has mushroomed at a time when UBS is sorting through major mortgage-
related losses and can ill afford the barrage of negative publicity a major U.S. justice probe has
meant. Although UBS said the massive outflows of funds which marred third-quarter earnings
slowed after a Swiss government shore-up in October, analysts are edgy ahead of the fourth-
quarter reading Feb. 10.

"If they don't resolve it now, it's not a nice issue to have lingering around," Aite Group's Pirker
said.
UBS spokesman Serge Steiner echoed Kurer's comments in the presentation, saying UBS
continues to seek a solution to the matter, but didn't elaborate.

A swift resolution could allow UBS to bin the financial damage from settling - estimated by
analysts including Peter Thorne of independent brokerage Helvea at up to 2 billion Swiss francs
($1.85 billion) - in 2008, giving the bank a fairer shot of making a 2009 net profit.

Analysts widely expect a fourth-quarter loss from UBS after loss warnings from rivals Credit
Suisse Group (CS) and Deutsche Bank AG (DB). UBS will be hit by a loss on equity of roughly
CHF4 billion after transferring the first batch of its illiquid assets to a fund managed by
Switzerland's central bank late last year.

However, analysts are looking more into whether UBS has managed to stem the bleeding of
client money. Analysts at Dresdner Kleinwort said fourth-quarter earnings showed perceived
financial crisis "winners" such as JP Morgan & Chase Co. (JPM) and Bank of America Corp.
(BAC) saw inflows, while those similarly hobbled as UBS - Citigroup Inc. (C) and Merrill Lynch &
Co. (MER) - saw client money leave.

"Translating this pattern into Europe suggests that UBS might have had another quarter of
outflows across its asset and wealth management divisions," Dresdner's Stefan Stalmann said.
Offshore accounts causing angst
The IRS' stepped-up probe of Swiss UBS is keeping lawyers busy.
December 15, 2008
By Pamela A. MacLean

Wealthy Americans with secret offshore accounts, nervous about
stepped-up Internal Revenue Service investigations of Swiss bank
UBS A.G., have scurried to tax specialists for help to negotiate deals
that will keep them out of jail and lower the tax hit.

There are an estimated 20,000 clients of UBS suspected of conspiring
with the bank to hide as much as $20 billion in assets overseas to skirt
federal taxes, according to the November indictment of one UBS
executive. An estimated 300 of those may be trying to make deals with
the government — not as many as expected, given the consequences,
said Edward M. Robbins Jr., a tax specialist at Hochman, Salkin,
Rettig, Toscher & Perez in Beverly Hills, Calif.

The case numbers may be picking up as more wealthy professionals realize they may not be able
to hide, and those include lawyers, doctors and even accountants with money stashed overseas,
according to Robbins. "They realize their professional licenses are at stake," he said.

His firm has 30 cases and six more came in just last week, he said.

In the millions

Tax partner Robert McKenzie of Chicago's Arnstein & Lehr said he has had 15 inquiries just in
the past two months. The majority of people have assets overseas in the millions of dollars. In
one recent case, a client voluntarily disclosed to the Internal Revenue Service (IRS) between
$3.4 million and $4 million in unreported income, depending on how you value the euros, he said.

The significance of the IRS and Justice Department's crackdown is how it differs strategically
from prior high-profile tax shelter investigations, such as the KPMG tax fraud case in New York,
said Chris Steskal, a white-collar defense partner in the San Francisco office of Mountain View,
Calif.-based Fenwick & West who oversees its regulatory practice.

In the KPMG tax shelter case, the government did not go after individual taxpayers who benefited
from shelters, due in part to the complexity of the prosecutions and difficulty proving intent, he
said.

By contrast, the government is going after 20,000 of UBS' American clients as "co-conspirators"
who benefited from the secret accounts, according to the November indictment of UBS executive
Raoul Weil in U.S. v. Weil, No. 08-60322 (S.D. Fla.). The government is currently fighting to force
UBS to turn over the names on all the secret numbered accounts.

IRS officials in Washington said they would not answer questions, given the sensitivity of the
issue. But a prepared Dec. 8 statement by IRS Commissioner Douglas Shulman said,
"Undisclosed foreign bank accounts are, and will remain, a top priority for the IRS." Shulman
noted that, in 2008, the IRS initiated 49 investigations involving offshore issues and issued 55
indictments from information in offshore banking cases.

McKenzie said not everyone is enthusiastic about absolving their guilt when they hear how much
it will cost.

"When they hear they have to report their proper income and pay the taxes, some don't view it as
an attractive option to come clean," McKenzie said. The IRS can take half the money in the
account, plus interest and other penalties, he said.

The experience has been repeated across the country, driven by the revelations in a California
case last year that a Russian émigré and billionaire, Igor Olenicoff, evaded income taxes on
roughly $200 million squirreled away in Swiss and Liechtenstein bank accounts at UBS.

Olenicoff, represented by Robbins, agreed to tell the IRS the name of his banker and pleaded
guilty to filing a false 2002 tax return in exchange for no jail time. That led to the indictment of
more UBS bankers and disclosure that as many as 20,000 Americans may have used UBS to hid
assets overseas.

"The incredible danger to these taxpayers is that the IRS gets its hands on these [UBS] bank
statements; that is a prima facie case of tax evasion," Robbins said. His advice is simple. "If you
have more than a million dollars in a secret account, run, don't walk, to your lawyer and say,
quote, get me out of this mess, unquote," he said. "Don't go to your accountant because they
have no privilege."

McKenzie says the IRS is providing an option to individuals: Come in from the cold and admit
liability in exchange for avoiding prison, with a major caveat — it only works if the IRS doesn't
already have your name.
US, Liechtenstein to exchange data on tax evaders
December 5, 2008

VADUZ, Switzerland (AP) — Liechtenstein is to sign an agreement next week that allows U.S.
authorities to request information on Americans suspected of hiding money in the tiny principality,
officials said Friday.

The deal, ending Liechtenstein's traditional silence on tax evasion matters, will lay out the
conditions under which U.S. officials can ask the country to hand over bank account information
starting Jan. 1, 2010, said government spokesman Max Hohenberg.

Like its larger neighbor Switzerland, Liechtenstein distinguishes between tax fraud, which it
regards as a crime, and tax evasion, which is an administrative offense. Until now, neither country
has cooperated with other nations' investigations into tax evasion.

"We are very satisfied to have reached this agreement with the U.S. because it gives legal
certainty to our bank clients," Hohenberg said.

"It essentially protects the essence of banking secrecy. It's not a blanket, automatic sharing of
information."

A U.S. Treasury Department spokesman, Andrew de Souza, confirmed the agreement will be
signed in Liechtenstein's capital Vaduz on Monday, but declined to provide details ahead of the
date in line with policy.

Hohenberg told The Associated Press that in return for providing information in specific cases of
suspected tax evasion, Liechtenstein's banks will have a key agreement allowing them to provide
offshore banking services in the U.S. renewed by Washington.

Liechtenstein also hopes the deal will benefit some of its nonfinancial industries by changing the
way they are taxed in the United States, he said.

"We have established legal certainty, not only for bank clients in Liechtenstein but also in relation
to the whole intergovernmental relationship not only with this administration but also with the
administration that's about to come in," he added.

Liechtenstein's biggest bank, LGT Group, has come under pressure over the past year for
allegedly helping foreign citizens evade their tax obligations at home. The bank is owned by the
principality's ruling royal family.

Bob McKenzie, a former official with the U.S. Internal Revenue Service and now partner at
Chicago tax lawyers Arnstein & Lehr, said the U.S. agreement was a significant step for
Liechtenstein.

"It certainly doesn't open up this tax haven to rampant intrusion from tax authorities in the
United States, but I guess the prince is under a little bit of pressure."
"We have an incoming president who is going to be more aggressive," he said, referring to
President-elect Barack Obama's past efforts to introduce legislation through the Senate to
crack down on tax havens.

Far more Americans have money in Swiss bank accounts than in Liechtenstein, he added.