Swiss vow to block bank handing over data to USA...

[joeblow]

Swiss vow to block bank handing over data to USA...

http://www.ft.com/cms/s/0/93572724-6bbf ... abdc0.html

By Haig Simonian in Zurich

Published: July 8 2009 14:37 | Last updated: July 8 2009 18:38

The Swiss government on Wednesday waded into the legal battle between UBS and the US authorities by saying it would forbid the bank from handing over confidential client information, if a crucial court case next week required it.

Bern warned it might go as far as confiscating the data, should a US court in Miami rule the bank was obliged to transfer the client names requested.

The move marks a major escalation in the war of words between Bern and Washington over US demands that UBS hand over names of up to 52,000 US taxpayers holding offshore accounts in Switzerland.

Although the Swiss government is not directly involved, Bern is represented as a "friend of the court". In a filing revealed Wednesday, the government warned it would issue a blocking order and, if necessary, confiscate all relevant material, to prevent UBS from complying, should the Miami court side with the US authorities.

"The enforcement of the summons would require UBS to violate Swiss law," it said.

UBS has argued such matters are best handled bilaterally between governments. The US has contended its action is valid, as UBS has admitted that Switzerland-based bankers broke US laws when visiting clients in America.

Last February, UBS agreed to pay $780m to settle a separate, but linked, criminal action by the US authorities. However, a civil case requiring the bank to reveal up to 52,000 client identities remained open, culminating in next week's hearings.

Legal experts said the conflict recalled a similar case in the 1980s, when the US sought information about Marc Rich, the controversial commodities dealer based in Switzerland. Both sides have used that precedent to justify their positions.

Swiss ministers have acknowledged UBS made mistakes in soliciting business from US clients and have recognised the bank will face heavy penalties. Observers expect an out-of-court settlement, involving heavy fines and possibly other sanctions. But while the bank has long appeared ready for a deal, the US has held out for names, raising pressure on UBS and turning the affair into a diplomatic issue.

Bern's position has been undermined by the fact that, in February, UBS was forced by the Swiss bank regulator to hand over 255 US client names most suspected of using sham companies to evade tax.