The Obama administration is not interested in escalating a dispute with Switzerland over bank secrecy laws, Switzerland's top justice official said on Monday after meeting with her U.S. counterparts.

The United States is not intent on having an escalation but they are willing to work for a resolution, Widmer-Schlumpf said Margolis told her.

Although she met with Holder, he could not discuss the UBS case because he represented UBS before joining the Obama administration and recused himself from the U.S. investigation into charges UBS helped U.S. customers avoid tax laws.

UBS, the world's largest banker to the rich, agreed last month to pay a $780 million fine and disclose the identity of about 300 of its U.S. clients to avert criminal charges that Swiss regulators said would have put the bank's existence at risk.

But a day after the agreement, U.S. tax authorities said they were still pursuing a civil lawsuit against UBS, seeking to access the data of another 52,000 Americans they say are hiding about $14.8 billion in assets in Swiss bank accounts.

The suit threatens to undermine the vaunted secrecy of Swiss banks. Eugen Haltiner, who heads Swiss regulator FINMA, has equated the dispute between Berne and Washington to an economic war, fueled by the spiraling financial crisis.

The dispute will likely deepen if the U.S. Congress passes legislation to crack down on tax avoidance schemes estimated to deprive the U.S. government of more than $100 billion a year.

A bill to be offered in the Senate on Monday will target offshore tax havens used by rich Americans in Switzerland, the Cayman Islands and other nations, senior Senate aides said.

The legislation proposed by Senator Carl Levin expands on a bill he co-sponsored last year with then-Senator Barack Obama and comes two days before a senior UBS executive, Mark Branson, is due to testify before a Senate hearing about the U.S. investigation.

Offshore tax haven and tax shelter abuses are undermining the integrity of our tax system, said Levin, of Michigan, in a statement. We cannot tolerate $100 billion in offshore tax abuses burning a hole through our budget each year.

We can fight back against secrecy jurisdictions and shut down offshore tax abuses if we have the political will.

After an EU summit in Brussels on Monday, French President Nicolas Sarkozy suggested that Switzerland should be put on an international blacklist of tax havens when leaders from the Group of 20 meet in London next month.

Widmer-Schlumpf said the U.S. officials did not reiterate the French suggestion, which she called unjustified.

Despite the dispute, the U.S. Justice Department said Holder thanked Widmer-Schlumpf for Switzerland's offer for help with closing the Guantanamo Bay prison for terrorism suspects, including possibly accepting detainees held at the facility.

They also discussed cooperation on fighting organized crime, terrorism and terrorist financing, U.S. and Swiss officials said.

(Reporting by Corbett B. Daly, Randall Mikkelsen and Kevin Drawbaugh; editing by Anthony Boadle)

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