UBS tax deal uncertain ahead of U.S. court case

By Lisa Jucca

ZURICH (Reuters) - Swiss bank UBS braced on Friday for a high-stakes trial in the United States next week that could force it to reveal secret client data, as a last-minute deal remained elusive.

It was unclear whether wealth management giant UBS could reach a settlement to the damaging tax row before a court hearing starts in Miami on Monday, weighing on its shares.

"Finding a solution to the matter may take longer than just the next few days, although one can never rule out a last-minute deal," a source familiar with the matter told Reuters when asked about the chances of a deal this weekend.

Washington has asked UBS to disclose the identity of 52,000 American holders of Swiss accounts suspected of not paying taxes, something UBS Chief Executive Oswald Gruebel cannot comply with as it would be in breach of Swiss criminal law.

But a settlement would most likely have to include a partial disclosure of client data, possibly in an indirect way, and a non-punitive financial penalty, a second source said.

A deal could involve Switzerland agreeing to disclose some UBS client information, possibly by helping the IRS cross-check U.S. banks' data about transfers from Switzerland and UBS.

Switzerland has vowed to seize UBS data to stop the bank from handing it over to U.S. authorities, in an attempt to defend its crumbling bank secrecy. It said the tax case targeting its best-known bank is souring diplomatic ties and that hitting UBS hard could destabilize the global financial system.

UBS, which employs 27,000 people in the United States and manages more than $600 billion at its Wealth Management Americas division, is struggling to recover from the subprime crisis.