March 5 (Bloomberg) -- An executive for UBS AG, Switzerland’s largest bank, said its country’s laws prevent it from turning over most of the 52,000 customer identities being sought by the U.S. in a lawsuit that seeks to crack down on tax evaders.

UBS agreed Feb. 19 to pay $780 million and disclose some client names to avoid prosecution for helping wealthy Americans avoid taxes. The bank has agreed to turn over about 300 names, said Senator Carl Levin, chairman of a Senate panel that held a hearing in Washington yesterday on offshore tax havens.

UBS executive Mark Branson said at the hearing that bank officials “believe that UBS has now complied with the summons to the fullest extent possible without subjecting its employees to criminal prosecution in Switzerland” under bank-secrecy laws. Branson is chief financial officer of global wealth management at UBS.

The U.S. lawsuit seeks to force UBS to provide the names of 52,000 current and former U.S. clients it believes evaded taxes. The Swiss government recognizes only tax fraud, not tax evasion, as a crime. UBS contends the dispute should be resolved through diplomacy and not the U.S. lawsuit in federal court in Miami.

Levin, a Michigan Democrat, said offshore tax abuses cost the U.S. $100 billion a year and that Switzerland bears much of the blame because of its support of bank secrecy.

“The rest of the world is getting fed up with offshore tax havens that turn a blind eye to tax evasion and allow their financial institutions, lawyers, accountants and others to profit from tax-dodging,” Levin said at the hearing held by the Senate’s Permanent Subcommittee on Investigations.

‘Make Money Off Our Loss’

“It is absurd that any country wants to make money off our loss of tax revenue,” the senator said.

Levin said UBS agreed to turn over the names of about 300 U.S. clients as a part of its so-called deferred prosecution agreement with the U.S. Justice Department. Separately, the Swiss government agreed to turn over the names of 12 U.S. customers under a U.S.-Swiss tax treaty.

“The Swiss hold out bank secrecy as a national value, in the same way Americans prize freedom and democracy,” Levin said. “The Swiss claim bank secrecy is essential to protecting individual privacy and is more important than any law in the United States requiring the payment of taxes.”

Treasury Secretary Timothy Geithner told the Senate Finance Committee yesterday that the government will mount an “ambitious” program to crack down on companies that use offshore locales to avoid paying taxes.

83 Companies

In 2007, 83 of the 100 largest publicly traded U.S. companies had units in low-tax or no-tax jurisdictions such as the Cayman Islands or the Isle of Man, according to a congressional report released in January. They included American International Group Inc., Citigroup Inc., Bank of America Corp. and Morgan Stanley, all of which were given taxpayer money through the $700 billion financial rescue.

British Prime Minister Gordon Brown, speaking to a joint session of Congress yesterday, urged world governments to “outlaw shadow banking systems and offshore tax havens.”

Internal Revenue Service Commissioner Doug Shulman testified at Levin’s hearing. “The U.S. is taking unprecedented measures and there is much more in the works,” Shulman said. “You can expect to see a multiyear effort to beef up our resources.”

Zurich-based UBS has said it will close its cross-border banking business and strengthen its internal controls. Since last summer, the bank has closed more than 14,000 accounts, Branson said.

46,000 Accounts

Under questioning by Levin, Branson said UBS has about 46,000 accounts held by U.S. taxpayers. Of those, Levin said, 30,000 were accounts held by Americans who live in the U.S. and 16,000 by U.S. taxpayers living outside the country.

“All securities accounts of both residents and non- residents will be closed,” Branson told the panel. He said the bank will not close cash accounts for non-U.S. residents. Branson said the value of those cash accounts is less than $1 billion.

Levin asked if UBS would disclose information on those accounts to the IRS. “We’ll make sure there are appropriate controls over those accounts,” Branson said.

“Controls so there is no tax evasion?” Levin asked.

“All appropriate controls,” Branson said.

Levin expressed frustration in questioning Branson.

“I don’t know why I can’t get direct answers here,” Levin said. “Your answers seem needlessly evasive.”

Former Swiss Finance Minister Kaspar Villiger, 68, yesterday was named board chairman of UBS, replacing Peter Kurer.

Last week, UBS appointed Oswald Gruebel, 65, as chief executive officer. Gruebel, who earlier this decade revived Credit Suisse Group AG, replaced Marcel Rohner, who headed the unit accused of helping Americans evade taxes before becoming CEO 18 months ago.

To contact the reporters on this story: David Voreacos in Washington at dvoreacos@bloomberg.net; Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net

Last Updated: March 4, 2009 22:28 EST