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Tuesday, July 1, 2008
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Federal Judge Approves IRS Summons for UBS Swiss Bank Account Records

WASHINGTON - A federal judge in Miami today issued an order authorizing the Internal Revenue Service (IRS) to request information from Zurich, Switzerland-based UBS AG about U.S. taxpayers who may be using Swiss bank accounts to evade federal income taxes. The Justice Department on Monday filed papers seeking the order.

The order, signed by U.S. District Court Judge Joan A. Lenard, authorizes the IRS to serve what is known as a "John Doe" summons on the bank. The IRS uses a John Doe summons to obtain information about possible tax fraud by people whose identities are unknown. The John Doe summons approved by the court today directs UBS to produce records identifying U.S. taxpayers with accounts at UBS in Switzerland who elected to have their accounts remain hidden from the IRS.

Based on a statement submitted to the court by former UBS banker Bradley Birkenfeld, UBS employees assisted wealthy U.S. clients in concealing their ownership of assets held offshore by creating sham entities and then filing IRS forms falsely claiming that the entities were the owners of the accounts. According to Birkenfeld’s court statement, UBS had approximately $20 billion of assets under management in "undeclared" accounts for U.S. taxpayers.

The law requires a United States taxpayer 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. A willful failure to report a foreign account can result in a penalty of up to 50 percent of the amount in the account at the time of the violation.