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March 8, 2010

Tax Data Theft Abroad Helps US Tax Evasion Effort

Tax data thefts at HSBC in Switzerland and other offshore banks are leading more whistleblowers to come forward to U.S. tax authorities, a top Department of Justice prosecutor said on March 5, 2010. The whistleblowers -- many former bank employees who worked in information technology -- could help the U.S. government look for the next bank after UBS AG that may be helping clients evade taxes and further deter wealthy individuals from stashing money offshore. "A lot of folks, and they seem to be IT (information technology) people, see what's happening" in Germany and France and are coming to the U.S. with information, Kevin Downing, a top DOJ lawyer said to a group of private and government lawyers at a conference in Washington. "It's a cottage industry right now," Downing said, declining to name specific banks that could be implicated.

UBS agreed last year to pay $780 million and hand over 4,450 client names to settle criminal and civil charges against the bank after it admitted it actively helped U.S. clients evade U.S. tax law. Germany has said it is prepared to pay for data offered by whistleblowers on clients of Swiss banks who may have been evading taxes, even if the information has been obtained illegally. Germany's move came after France, another key market for Swiss private banks, announced it had obtained sensitive data belonging to potential tax evaders, some of which belonged to the Swiss private banking operations of HSBC

Tax enforcement authorities around the world are coordinating activities on a greater basis than ever, lawyers said. "That data got into the hands of the IRS (Internal Revenue Service)," noted George Clarke, an attorney for wealthy clients at Miller Chevalier.

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