[ by Melanie Gretchen ]

Swiss banks saw another domino fall to the U.S. recently, as Bern continues to fend off any criminal prosecution over allegations that they helped Americans evade taxes.  Swiss banks have turned over the names of thousands of their employees, many of whom aren't suspected of helping Americans evade taxes.

Credit Suisse Group AG and the private-banking unit of HSBC Holdings PLC, among others, have been the center of the emerging controversy over employees' personal privacy.  Many of the employees whose names were surrendered were never told that their names were being turned over;  in other cases, they were told but not allowed to review the documents sent that contained their names.

[CI-Note: In light of the recent fall of the financial empires – Corzine, Madoff, and Peregrine, to name a few – we can't argue with that;  if an employee is suspected of assisting, he or she shouldn't be allowed to touch potentially incriminating documents.]

And the winner is... The U.S. has a precedent of success in its effort to stop allowing foreigners to use its bank-secrecy laws to evade taxes.  In 2009, UBS AG admitted wrongdoing in helping Americans hide from tax authorities and agreed to turn over the names of more than 4,500 U.S. account holders and pay a $780 million fine.  Since then, thousands of Americans, not all of whom had accounts with UBS, have voluntarily disclosed their accounts as part of two U.S. tax amnesties.

In addition, the Swiss government gave banks permission to send the U.S. Department of Justice whatever information it sought, provided they comply with Swiss law.  Credit Suisse and at least four smaller banks in the meantime have sent the U.S. documents going back a decade to show how they ran their U.S. businesses and which contain thousands of names.

Public Backlash. Nevertheless, the handover hasn't created any allies. Among the thousands of names are people who were copied on e-mails who didn't work with clients, banking officials admitted.  Douglas Hornung, a Geneva-based lawyer has been hired by some 50 former and current employees.  One client, an assistant working at Credit Suisse's "American Desk," argues in a civil complaint filed in Geneva that she risks being arrested or questioned if she went to the U.S.

"The Swiss should offer whatever help is required for the U.S. to track down tax dodgers, but they should make clear that they will only do so within the country's legal framework.  To hand over the names of employees, without seeking their consent beforehand, violates Swiss laws and ultimately weakens the Swiss government's negotiating power at the bargaining table." -- Martin Janssen, a professor of finance at Zurich University.

For further details, go to [WSJ, 8/21/12].