The UBS Mess: Stewart Weighs In

James B. Stewart of the Wall Street Journal has no sympathy here for UBS, the Swiss Government trying to protect it, or super-wealthy American taxpayers who parked cash in secret UBS accounts in order to defraud the IRS. The particular tax program that got UBS into trouble was implemented while the bank was purportedly cooperating with the IRS. Stewart implies that UBS, in refusing to turn over more depositor names to the United States, is reneging on a prior agreement. That isn’t true. UBS agreed to turn over some names as part of its plea deal with the United States, but the parties agreed to disagree regarding more extensive disclosures. Stewart also exaggerates the U.S. banking system’s privacy protections. Federal grand juries have virtually unfettered power to subpoena U.S. bank accounts and, in many cases, can order the banks not to disclose the subpoena to the customer whose accounts are being examined. Still, it is hard to argue with Stewart’s basic point. The customers at issue were specifically targeted by the bank as part of a scheme to help Americans dodge U.S. tax payments. If a small African or Latin American country, rather than Switzerland, was aiding and abetting its bank’s refusal to cooperate with such an important American tax fraud investigation, it is difficult to believe that we would be witnessing this much U.S. hand-wringing.