The U.S. government and UBS AG asked a federal judge on Sunday to delay the start of a closely-watched trial, as they seek to resolve their dispute over U.S. demands for the identities of thousands of wealthy Americans suspected of using the Swiss bank to dodge taxes.

The request, in a joint court filing, came as the clock ticked down to the trial set for 9 a.m. EDT 1300 GMT) Monday in Miami, where U.S. authorities had been expected to move forcefully to pry the lid off Switzerland's much-vaunted tradition of bank secrecy.

In their filing, the U.S. Justice Department and UBS asked that the trial be postponed until August 3, giving the Swiss and U.S. governments time to continue their discussions seeking a resolution of this matter.

The Justice Department declined further comment, but UBS and the Swiss government have been signaling for weeks that they were open to an out-of-court settlement of the case.

The case has been widely seen as perhaps the biggest challenge yet to Switzerland's bank secrecy.

There was no immediate response from U.S. District Judge Alan Gold, who is presiding over the case and was to have begun hearing arguments Monday about why he should force UBS to disclose information on up to 52,000 wealthy U.S. clients suspected of tax evasion.

But UBS said the motion for a delay would be formally submitted for the court's approval Monday morning.

In a court order last week, Gold asked the Justice Department to spell out how far it was willing to go to learn the identity of Americans with secret accounts at UBS, the world's biggest wealth manager by assets.

He asked specifically about receivership and/or seizure of UBS' assets within the United States to enforce the demand that account data be turned over to U.S. tax authorities.


Such remedies might be requested of the court, Gold said, if UBS failed to comply, or was prevented from complying by the Swiss government. He gave the U.S. Justice Department until noon EDT on Sunday to respond.

Switzerland has vowed to prevent UBS from handing over client information to U.S. authorities, in an attempt to defend bank secrecy, and says the tax case targeting its biggest bank is souring diplomatic ties.

In a separate court filing on Sunday, the Justice Department said it was still prepared to step up its legal fight against UBS. But apart from unspecified monetary sanctions it stopped short of saying what penalties it might seek to impose.

UBS knew that its U.S. customers were using the bank -- with its tacit, if not explicit assistance -- to avoid paying their U.S. income taxes, the department said.

The U.S. government has a compelling national interest to obtain the client data it has demanded, it added, saying UBS was guilty of egregious conduct and a bank that systematically broke U.S. law on U.S. soil.

Michael Weinstein, a former trial attorney with the Justice Department in Washington D.C., said Sunday's request for a delay in the case pointed toward likely progress in talks aimed at settling the tax dispute.

I am of the philosophy that the U.S. won't take the nuclear option to seize the assets of UBS in the U.S., Weinstein said, citing risks to the economy and also the fact that they may be able to get the names by other, less confrontational means.

The U.S. government was criticized in 2002 over the collapse of accounting firm Arthur Andersen with the loss of thousands of jobs.

Andersen failed to reach a settlement with the Justice Department over its auditing of Enron and surrendered its audit license after being found guilty on a single criminal charge. The U.S. Supreme Court eventually overturned the verdict but Andersen never recovered.

The UBS case, which comes during a global fight against tax cheats supported by the U.S. administration, has damaged the UBS brand and could result in an expensive settlement for the bank. Swiss media have said UBS may have to pay anywhere from $2.76 billion to $4.6 billion.

U.S. prosecutors estimated last year that UBS was holding about $20 billion in assets for American clients in accounts hidden from U.S. tax authorities. The so-called undeclared business accounts were estimated to produce about $200 million in annual revenues for the bank.

The bank is due to report earnings on August 4.

Swiss newspaper Sonntag reported that the U.S. request for names from UBS was likely to be scaled back considerably as part of any settlement. It said the names of thousands of people suspected of using the bank for tax fraud could still be revealed, however.

(Reporting by Tom Brown; Additional reporting by Kim Dixon in Washington and Katie Reid in Switzerland; Editing by Tim Dobbyn and Diane Craft)