MIAMI (Reuters) –
Switzerland urged a U.S. court on Thursday to reject demands by U.S. tax authorities for information about U.S. clients of UBS AG, saying disclosure would violate its sovereignty and international law.

The Swiss government's petition came in a federal court filing in Miami, where the U.S. Internal Revenue Service is seeking to force UBS (UBSN.VX) (UBS.N) to reveal the identities of 52,000 Americans suspected of using accounts at the bank to hide about $14.8 billion of assets and evade U.S. taxes.

"Switzerland's laws prohibit the release of confidential information to foreign governments when the request has not been made through authorized intergovernmental channels," the government said in its filing.

"If the court were to order UBS to produce evidence from Switzerland, and backed that order with coercive powers, the court would be substituting its own authority for that of the competent Swiss authorities, and therefore would violate Swiss sovereignty and international law," it said.

Echoing a similar filing earlier in the day from UBS, it said Swiss government law also specifically prohibits release of the information demanded by the IRS.

UBS acknowledged in February that it helped U.S. clients conceal assets from their government. It agreed to pay a $780 million fine and has since identified about 320 of its American clients.

In its high-profile legal showdown with the Zurich bank, the IRS is employing a legal tool known as a John Doe summons, which allows it to investigate tax fraud by individuals whose identities are unknown because of bank secrecy.

"FISHING EXPEDITION"

"UBS does not dispute the legitimacy of the IRS's interest in tax enforcement," the bank said in its court filing. It said exchange of banking information should be handled through pre-existing legal treaties and not through the courts, however.

The bank said the summons, which it called unprecedented in its breadth, risked disrupting "the careful balance between the U.S. interest in receiving tax related information from Switzerland and the Swiss interest in preserving its long tradition of financial privacy."

In its separate filing, the Swiss government branded the summons an overly broad "fishing expedition" type request that was clearly inconsistent with existing treaties.

Federal District Court Judge Alan Gold in Miami will determine whether the summons should be enforced. The case could set an important legal precedent, since UBS is the first foreign bank to be served with a John Doe summons.

The IRS has pushed ahead with its demand for enforcement at a time when political leaders in the United States and elsewhere, and even Pope Benedict, have called for a crackdown on secretive tax havens and offshore financial centers.

Switzerland, which is trying to defend its jealousy guarded tradition of bank secrecy, asked the United States last weekend to drop the case against UBS in return for a new tax accord with Washington.

Negotiations on the new agreement began on Tuesday. But in its statement to the court, the Swiss government said it had already warned the U.S. State Department that the threatened enforcement of the summons against UBS could scuttle the negotiations.

"The court should refrain from issuing an order that would interfere with those negotiations and the more general intergovernmental relations between Switzerland and the United States," the Swiss government told the court.

(Additional reporting by Pascal Fletcher and Jim Loney; Editing by Bernard Orr)

WASHINGTON – Freddie Mac is paying out more than $700,000 to the family of David Kellermann, the mortgage finance company's former acting chief financial officer who died last week in an apparent suicide, the company disclosed Thursday.

The McLean, Va.-based company said in a Securities and Exchange Commission filing that Kellermann's survivors are due to receive $703,400 in retention and stock awards.

Freddie Mac was seized by the government last September. The company, which owns or guarantees about 13 million mortgages, lost more than $50 billion last year, and the Treasury Department has pumped in $45 billion to keep the company afloat.

Richard Syron, Freddie Mac's chief executive until he was ousted by the government last September, received compensation valued at $13.1 million last year, according to Associated Press calculations of data filed with regulators. However, the bulk of that package came in the form of stock awards valued at about $10 million when they were granted in March 2008, when the company's shares were trading around $20 per share.

Their value has dropped precipitously, closing at 79 cents per share on Thursday.

Syron received combined salary and bonus of $2.6 million last year, down from $4.65 million in 2007. Syron also received retirement benefits and other "perks" valued at more than $500,000, down from about $664,000 a year earlier.

The AP formula is designed to isolate the value the company's board placed on the executive's total compensation during the last fiscal year. It includes salary, bonus, performance-related bonuses, perks, above-market returns on deferred compensation and the estimated value of stock options and awards granted during the year.

The calculations don't include changes in the present value of pension benefits, and they sometimes differ from the totals companies list in the summary compensation table of proxy statements filed with the Securities and Exchange Commission. Those totals reflect the size of the accounting charge taken for the executive's compensation in the previous fiscal year.

The company's first government-appointed chief executive, David Moffett, received $338,000 in salary and perks for his work in the September-through-December period. He later left the company in March 2009, Freddie Mac said, but will return as a consultant in the wake of Kellermann's death.

DETROIT/WASHINGTON (Reuters) –
Chrysler LLC filed for bankruptcy on Thursday and announced an industry-changing deal with Fiat, after being pummeled by sliding auto sales and unable to reach agreement on restructuring its debt.

Despite weeks of intense negotiations, Chrysler failed to gain full support from its lenders to avoid the first-ever bankruptcy filing by a major U.S. automaker.

The move was hailed by President Barack Obama as a critical step in saving 30,000 jobs at Chrysler, majority-owned by Cerberus Capital Group, and hundreds of thousands more jobs at affiliated suppliers and dealers.

At the same time, Chrysler entered an expected alliance with Fiat SpA, in which the Italian carmaker was given an initial stake of 20 percent.

The deal will allow Fiat to own up to 35 percent as it makes investments in U.S. operations and small-car technology for Chrysler. Over time, Fiat could eventually own 51 percent after Chrysler has repaid its loans to the U.S. Treasury.

Chrysler has struggled in recent years to compete, hurt by its near total reliance on the U.S. market, poor quality and a truck and SUV-dominated vehicle line-up with the lowest combined fuel economy of any major automaker.

Founded in 1925 by Walter P. Chrysler, three years later the company laid the cornerstone for the Chrysler Building, briefly the world's tallest building and still a landmark on the Manhattan skyline.

The Chapter 11 filing, in U.S. Bankruptcy Court in Manhattan, has implications for the entire industry -- including Chrysler's rivals and suppliers.

As part of the filing, the U.S. government will provide up to $3.5 billion in debtor-in-possession (DIP) financing and up to $4.5 billion in exit financing. Obama said he hopes the entire process will take only 30 to 60 days.

Some of Chrysler's 3,600 U.S. dealers are expected to close, and Chrysler Financial will stop providing loans for new cars and trucks. Instead, General Motors Corp's financing arm, GMAC, will provide loans to Chrysler dealers and customers.

The legal proceedings will be overseen by Judge Arthur Gonzalez, the same jurist who oversaw the Enron and WorldCom bankruptcies.

In addition to Fiat's ownership stake, U.S. officials expect Chrysler to be 55 percent owned by the United Auto Workers' healthcare trust fund while the U.S. and Canadian governments hold a combined stake of 10 percent.

Chrysler has three manufacturing plants in Canada and had to reach agreements with its unions there and the Canadian government under the restructuring. The automaker is not filing for bankruptcy in Canada, but the Canadian government, along with the province of Ontario, said they will provide $2.42 billion in financing to help the company restructure.

FIGHTING WORDS

The bankruptcy signals that Obama is prepared to play hardball with holdout lenders rather than knuckle under to their demands and will likely set the tone for similar discussions with bondholders of General Motors -- which is now on the clock to restructure its operations by the end of May.

While Obama voiced his support for Chrysler and the deal with Fiat, he was pointed in his criticism of the investors who did not agree to this deal.

"I don't stand with them. I stand with Chrysler's employees and their families and communities," the president said. "I don't stand with those who held out when everybody else is making sacrifices. That's why I'm supporting Chrysler's plans to use our bankruptcy laws to clear away its remaining obligations."

This is not the first major government action with Chrysler. In 1980, U.S. President Jimmy Carter signed a bill providing Chrysler with more than $1 billion in loan guarantees.

"Bankruptcy is what they have been headed for in the past several months," said Mirko Mikelic, portfolio manager at Fifth Third Bank. "The biggest concern now is that the different stakeholders will be able to make the tough decisions they need to make."

Chrysler Chief Executive Robert Nardelli will leave the automaker following the emergence from bankruptcy. The U.S. government will place six members on the new company's board and Fiat will appoint three.

Shares of Chrysler's U.S. rivals reacted positively to the news. GM shares ended 6.1 percent higher and Ford Motor Co ended up 9.7 percent, both on the New York Stock Exchange.

FIAT: A DONE DEAL

The bankruptcy filing did not stall the Fiat deal.

Chrysler has been seeking a rescue deal from the Italian automaker while also trying to finalize its debt agreement.

"It's a partnership that will give Chrysler a chance not only to survive, but to thrive in a global auto industry," Obama said. "Fiat has demonstrated that it can build the clean, fuel-efficient cars that are the future of the industry."

In court documents on Thursday, Chrysler detailed its lengthy search for a partner over the last year and a half, including talks with General Motors and Nissan. Those talks did not pan out and Chrysler eventually found its way to Fiat.

The government's debt-restructuring talks have been spearheaded by the Obama administration's autos task force and former investment banker Steve Rattner.

In a bid to win over three fund firms that had spurned an offer to accept $2 billion in cash in exchange for writing off all of Chrysler's $6.9 billion in secured debt, U.S. officials sweetened the terms by throwing in another $250 million, people familiar with those discussions said.

Chrysler's plight reflects a slump in demand facing a global industry whose $2.6 trillion annual revenue is equivalent to the GDP of France and which employs more than 9 million people.

(Reporting by Poornima Gupta and John Crawley, additional reporting by Kevin Krolicki, Soyoung Kim, David Bailey, Nick Carey, Jui Chakravorty, Jeff Mason and Giselda Vagnoni; writing by Jo Winterbottom and Patrick Fitzgibbons; Editing by Tim Dobbyn and Andre Grenon)