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Top Court Rejects Appeal on Foreign Bank Account Subpoena

June 25, 2012

U.S. High Court Rejects Appeal on Foreign Bank Account Subpoena

A UBS AG bank branch in Zurich. Photographer: Gianluca Colla/Bloomberg

The U.S. Supreme Court declined to step into a dispute about whether the government, in a tax- evasion probe, can make a former UBS AG (UBSN) client turn over records about Swiss bank accounts without violating his constitutional right against self-incrimination.

The justices rejected an appeal by a man, identified by the initials M.H., who was held in contempt of court for refusing to comply with a grand jury subpoena seeking records that foreign- account holders are required to keep under the federal Bank Secrecy Act.

Questions about when the Fifth Amendment’s protections against self-incrimination apply to demands for banking or tax records could affect the government’s attempt to crack down on the use of secret foreign accounts to hide money from U.S. tax liability.

M.H. was among about 250 taxpayers whose secret accounts were disclosed by UBS as part of a February 2009 agreement in which Switzerland’s largest bank agreed to pay $780 million to avoid U.S. prosecution on a charge that it helped Americans evade taxes. In 2010, UBS provided the U.S. with almost 4,500 additional names, M.H.’s appeal said.

M.H. “is a non-citizen permanent resident of the United States and the target of a grand jury investigation seeking to determine whether he used secret Swiss bank accounts to evade his federal income taxes,” the Justice Department said in a court brief.

Failing to Report

M.H. said the grand jury’s demand violated his Fifth Amendment rights because -- even leaving aside potential tax- evasion questions -- he could face felony charges for failing to report some accounts or to keep all records required by the bank secrecy law.

“If the act of producing documents is incriminating, it is no less incriminating because the records were required to be kept,” M.H.’s appeal argued. “Across the country, the government is using grand jury subpoenas to require individuals to either produce incriminating foreign bank records or admit to the felony of not maintaining the records.”

If account holders can be required to produce the records, M.H. argued, authorities shouldn’t be allowed to use incriminating information to prosecute them.

Because having foreign bank accounts isn’t illegal, it’s not self-incriminating to require people to keep account records and provide them to tax authorities, the Justice Department said in opposing M.H.’s appeal.

Voluntary Participation

“The Fifth Amendment privilege does not extend to records required to be kept as a result of an individual’s voluntary participation in a regulated activity,” the Justice Department brief said. “His decision to hold foreign bank accounts is voluntary and subject to regulatory requirements.”

The San Francisco-based 9th U.S. Circuit Court of Appeals had upheld the government’s right to demand the records.

The Justice Department said the high court should also reject the appeal because, in this case, M.H. has already turned over information sought in the subpoena to avoid jail for contempt of court. That makes the issue moot, at least unless prosecutors use the information to charge M.H. with a crime, the government said.

The case is M.H. v. U.S., 11-1026.

To contact the reporter on this story: Bob Drummond in Washington at

To contact the editor responsible for this story: Steven Komarow at

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