November 27, 2009

Blessing in Disguise for UBS

The recently concluded settlement between the IRS and UBS that capped the much publicized spat between the two sides over about 52,000 alleged tax dodgers holding UBS bank accounts has turned out to be a blessing in disguise of sorts for the bank.

When the IRS filed a lawsuit against the bank for disclosure of the 52,000 American depositors suspected of tax evasion and threatened to get the government to revoke UBS' banking license in the States, the bank had little choice but to comply in some way with demands. The pressure on the bank was especially acute due to the financial problems it was facing – it had lost a total of $28 billion over the last two years and was virtually crippled by its losses from investments in the US sub-prime mortgage sector.

Hence last week, the long-drawn dispute between the IRS and UBS bank of Switzerland came to a close, at least for now, when the bank agreed to release information on 4,450 of its clients who the IRS suspects are keeping their cash in their bank accounts with the purpose of evading taxes on them. On the face of it, this move by the bank is a blow to the much vaunted Swiss bank secrecy laws when the confidential details of thousands of its depositors are revealed to the IRS.

However, the decision to release these 4,450 depositors' details has given the bank a new lease of life. For one thing, the settlement states that in exchange for this information, the lawsuit against the bank is lifted and penalties cancelled. Then, immediately after news of the settlement broke, the Swiss government took advantage of the development and sold its equity in UBS and in the process made $1.1 billion, which worked out to a 32% net gain on investment. This is the first success story of a European government bailing out a major bank while making money in the process.

But the Swiss government's bailout of UBS did not start with this settlement with the IRS. It actually started much earlier, even before UBS asked for its government's help over its business losses. Last October, the Swiss government gave UBS $5.6 billion in the form of debt convertible into common stock. When the news of the settlement hit the market, it was greeted with great relief. As a result, investors regained their confidence in investing into UBS and thus bought its common stock. All in all, the bitter experience UBS has had to go through became a blessing in disguise to them.

Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for over a decade. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.

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