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Rich People Sobbing In Fear As UBS Bars Swiss Bankers From Leaving The Country

The crackdown is leaving some stateside clients -- no doubt further panicked over not being able to see their private bankers in private -- alarmed, says another Journal story today:

Lawyers say they have been flooded by frantic calls from wealthy clients wondering whether to turn themselves in -- and, if so, how. "One woman was very scared. She was in tears," says Bryan Skarlatos, a lawyer at Kostelanetz & Fink in New York and chairman of the American Bar Association tax section's committee on civil and criminal tax penalties. On the ride back to New York from a tax conference in Galloway, N.J., last Friday, Mr. Skarlatos received four calls from worried clients. Some people have "many millions of dollars" stashed abroad, he says, and "are having a hard time deciding" what to do about the IRS program, which he describes as "the classic carrot-and-stick approach."

The "carrot" is a big break the IRS is offering on the usual penalties to Swiss bank account holders who volunteer to file amended returns and pay up within the next six months. The deal isn't an option for people under investigation for criminal tax evasion charges like Rubinstein, and presumably most of the other 300 names on the bank's most wanted list.

Some wealthy clients are fighting back, suing UBS for violating secrecy laws in Switzerland, where the bank is about as popular as AIG is here following a $60 billion national bailout.

In fact the probe owes a debt to another sold-out client, Orange County, Calif. billionaire Igor Olenicoff, the owner of the toothpaste-caked diamonds, who sued the bank for $500 million last year alleging a massive fraud and naming 28 UBS employees after pleading guilty to tax evasion. Shortly after Olenicoff filed suit, Birkenfeld pleaded guilty in the conspiracy and began cooperating in the investigation, which revealed that the bank had been conspiring with private bankers in Liechtenstein to move money around accounts in other countries less prone to cooperating with international regulatory authorities. But that game also appears to be ending, according to a report released yesterday by the Organization for Economic Cooperation Development on compliance with tax investigations: the last four countries "blacklisted" for their shoddy efforts to cooperate with financial investigations -- Costa Rica, Malaysia (Labuan), Philippines and Uruguay -- were moved to the "gray" list.