Late last night, Swiss banking giant UBS (NYSE: UBS) and the U.S. Department of Justice asked a federal judge to delay the trial on U.S. tax issues until August 3. The trial was set to start later today, and the delay sparked hopes for a possible settlement between the U.S. government and the bank.

The U.S. wants UBS to reveal the identities of 52,000 rich Americans suspected of using secret bank accounts as a tax dodge. Such a move would be a violation of Switzerland's bank secrecy laws, the Swiss government and UBS say. According to Reuters, the two sides are hoping to find a way to allow the U.S. government to receive client data without violating Swiss law.

Reportedly, Swiss bank UBS (NYSE: UBS) "systemically and deliberately" violated U.S. law by dispatching private bankers in America to recruit citizens interested in evading taxes.

UBS is now being forced by the Justice Department to reveal the identities of the 52,000 clients. This filing asks that the U.S. District Judge (Alan S. Gold) hold UBS accountable for conducting years of illegal business in the U.S. This business reportedly earned UBS more than $100 million in fees, while costing the U.S. "hundreds of millions" of dollars in unpaid taxes.

Continental Airlines (NYSE: CAL) is seeking immunity from antitrust laws to work more closely with United Airlines (NASDAQ: UAUA) and others on international routes. And, since airlines operate in a state of seemingly perpetual turmoil, what's the harm? According to the Justice Department: plenty.

The airline sought broad immunity as part of an effort to join Star Alliance, which includes US Airways, Lufthansa (OTC: DLAKY), and Air Canada -- along with United. Continental believes that it needs to join Star Alliance in order to remain competitive, especially with airlines that have this type of immunity already.

Since The Department of Justice appears ready to challenge a deal for Google (NASDAQ: GOOG) to sell search ads for rival Yahoo! (NASDAQ: YHOO), the two companies may quit while they are ahead. Or behind, depending on who is looking. Regulators are worried that the marriage would create a sort of monopoly on search ads because the two companies have about 85% of that market between them.

If the planned joint initiative fails, it hurts Yahoo! much more than Google. While the larger company would have made some money on sales commissions in the future, Yahoo! needs that revenue to help justify why it should remain independent. Google is also concerned that Justice might consider it a monopoly on its own since it holds a market share in search of about 65%. According to The Wall Street Journal, "By dropping out, Google would likely be seeking to avoid a legal battle that would spotlight its market power."

Observers believe that if Yahoo! cannot set up a Google deal, it is more likely to arrange a marriage with Microsoft's (NASDAQ: MSFT) internet unit or AOL so that it can gain more scale in the online ad market.

Yahoo! also has the very real option of going it alone. That would not be good for investors who put their money in at over $30 a share when Microsoft made a takeover bid, but it could be very good for shareholders who bought in around the current price of $13, making Yahoo!'s market cap only $18 billion. The company has valuable assets including Yahoo! Japan and China e-commerce company Alibaba. Yahoo! also has $3 billion in cash and will probably have an operating profit of well over $500 million this year. It is the largest internet display advertising firm in the U.S.

Yahoo! may simply be best off going its own way. It might surprise investors by doing fairly well.

Douglas A. McIntyre is an editor at 247wallst.com.

A Miami bankruptcy judge ruled that the U.S. Trustee Program, an arm of the Justice Department that oversees bankruptcy court related issues, cannot seek sanctions against Countrywide Financial in bankruptcy court. The U.S. Trustee had filed three lawsuits on behalf of debtors (WSJ subscription required) who had allegedly been "abused" by Countrywide during the bankruptcy process.

The judge, A. Jay Cristol, ruled that only federal prosecutors can bring such lawsuits, while still commending the agency for "noble intentions and efforts to protect the public from reprehensible conduct by an apparently overreaching mortgage lender."

The next step will hopefully be for federal prosecutors to take on the company. Countrywide, which is now owned by Bank of America (NYSE: BAC), is still facing a plethora of litigation from its former shareholders and customers. Given the continued meltdown in the mortgage industry since the deal closed, it seems likely that Bank of America overpaid badly for the lender. The millions that Bank of America will have to put up for legal expenses, settlements, and possible judgements also won't help, and that's to say nothing of the distraction it creates for the company's executives.

Google Inc. (NASDAQ: GOOG) and Yahoo! Inc. (NASDAQ: YHOO) agreed to delay their advertising sales partnership while the Justice Department reviews the deal. The news may look like a retreat by Google, but it undermines one of the key reasons Yahoo! gave for staying independent from Microsoft Corp. (NASDAQ: MSFT). Google was going to improve Yahoo!'s revenue.

It looks like there is some chance the partnership will not happen at all. That would justify the fact that Yahoo!'s stock is down by more than half from its 52-week high. Yahoo! indicated that the wait might be short. "The companies have agreed to a brief delay in implementing this agreement to continue our ongoing discussions with the (U.S.) Department of Justice," Yahoo! said in a statement. "We have had discussions with regulators and look forward to responding to their questions about this agreement."

The trouble is that Justice can take its own time. It's under no pressure to give an answer in short order. The news also begs the question of whether the two companies will wait for antitrust reviews in the EU and Canada.

Each day that passes without Yahoo! having a sales relationship in place with Google is a day its earnings do not recover.

Douglas A. McIntyre is an editor at 247wallst.com.

MAJOR PAPERS:

• According to people familiar with the discussions, the Wall Street Journal reported that Microsoft Corporation (NASDAQ: MSFT) has held discussions with Time Warner Inc (NYSE: TWX) and News Corporation (NYSE: NWS), among others, about joining it in a deal that could lead to the breakup of Yahoo! Inc (NASDAQ: YHOO). Some of the sources said the preliminary talks are unlikely to result in a deal with Yahoo!
• Johnson & Johnson (NYSE: JNJ) is reportedly in exclusive talks to sell its wound-care business Ethicon to the private-equity arm of JP Morgan Chase & Co (NYSE: JPM), according to the Wall Street Journal. Terms of the potential deal were not disclosed.

OTHER PAPERS:

• Sources familiar with the inquiry said that the Justice Department has opened a formal antitrust investigation into a deal that would allow Google Inc (NASDAQ: GOOG) to provide some search advertising for Yahoo!. The Washington Post reported that investigators will demand documents from Google and Yahoo!, as well as other large companies in the media and Internet industries.

WEB SITES:

• Reuters reported that regulators in the European Union are looking at the long-term effects of BHP Billiton Limited's (NYSE: BHP) $170B bid for Rio Tinto Group (NYSE: RTP). Sources familiar with the EU questionnaire said regulators have asked competitors and customers about effects of the deal on their businesses through 2015.

MAJOR PAPERS:

• The Wall Street Journal reported that probes by the U.S. Justice Department and the Securities and Exchange Commission center on whether American International Group Inc (NYSE: AIG), as well as its financial products division, which has been the source of controversy and profits, intentionally inflated the value of contracts linked to subprime mortgages.
• According to a person familiar with the matter, the Financial Times reported that South Korea's LG Electronics may consider a bid for General Electric Company's (NYSE: GE) appliance business.

OTHER PAPERS:

• Exxon Mobil Corporation (NYSE: XOM) will sell the remaining gas stations it owns to gasoline distributors, according to the Associated Press. However, the distributors will continue to pay to use the Exxon and Mobil brand names.
• Xinhua reported that MetLife Inc (NYSE: MET) is seeking permission from Chinese regulators to combine its two ventures in China. The insurer said it believes the move will allow it to compete more effectively in the Chinese market.

The BBC reported on Saturday that demands are being made for careful government scrutiny of any potential alliances between Internet giants Yahoo Inc. (NASDAQ: YHOO) and Google Inc. (NASDAQ: GOOG).

According to the BBC report, a coalition of activist groups including the Black Leadership Forum, the League of Rural Voters, the National Black Chamber of Commerce, and the American Agriculture Movement, is concerned that allowing any kind of unregulated working relationship between Yahoo and Google could put Internet neutrality in serious jeopardy. Gary Flowers, representing the Black Leadership Forum, is quoted by BBC as stating, "We all suffer in such mega mergers." He further stated that the nature of such a partnership could "condense competition, increase prices and limit new business opportunity on the Internet."

The BBC indicates that the Justice Department is already in the process of reviewing joint operation trials that the two companies have engaged in. However, the department seems to be down playing the citizen coalition's demands, citing that the two companies have no working agreements to address. At a recently held Google shareholders meeting the matter was addressed by Chairman Eric Schmidt who stated, "If there were a deal [with Yahoo], we would anticipate structuring the deal to address the antitrust concerns that have been widely discussed."

I would tend to echo the valid concerns of Gary Flowers: too much control over Internet communications by any one particular entity or alliance would inevitably be bad for all of us. I think the matter needs to be taken to a broader base of examination than the justice department alone can provide.

In case you missed it, Congressmen Henry Waxman of California and Tom Davis of Virginia, the Democratic and Republican leaders on the House Oversight Committee, have sent a letter to the Justice Department asking them to investigate whether Roger Clemens "committed perjury and made knowingly false statements" when he told the committee that he had never used steroids or human growth hormone.

The letter also said that "We are not in a position to reach a definitive judgment as to whether Mr. Clemens lied to the Committee. Our only conclusion is that significant questions have been raised about Mr. Clemens's truthfulness and that further investigation by the Department of Justice is warranted."

Newsday reports that the Justice Department "may already have decided to begin its own investigation prior to this recommendation, considering its continued involvement with this case."

Wesley Snipes, the unlikely face of the tax denial movement, has been acquitted of the most serious charges in his tax evasion case. He was found guilty of three of six lesser charges and could face up to three years in prison. He will also have to pay as much as $17 million in back taxes, interest, and penalties.

A jury found him not guilty on two felony charges of fraud and conspiracy, and other charges related to failing to file and pay taxes from 2002 to 2004. However, he was found guilty of failing to file returns or pay taxes from 1999 through 2001.

However his co-defendants, tax advisers, were convicted of the more serious charges, a sign that "I was just listening to my advisers" defense can work.

According to the New York Times, "Instead of prosecuting all offenders, the Justice Department brings cases against well-known individuals, hoping that widespread news coverage will encourage compliance, a policy known as general deterrence. The Snipes prosecution, like the three earlier cases that resulted in full acquittals, appears to have backfired."

The failure to convict Snipes on the most serious charges will probably embolden tax deniers. The feds had been looking to make a strong statement about the importance of paying taxes and appear to have failed miserably.

Google (NASDAQ: GOOG) has complained to the Justice Department that Microsoft's (NASDAQ: MSFT) new Vista operating system made it difficult for companies to run desktop search functions on the system from the world's largest software company.

Rather than put up a fight over the antitrust implications, Microsoft has made changes to Vista to avoid a battle with both federal and state governments. The Justice Department and seventeen states have agreed to Microsoft's solution to the problem.

Perhaps Microsoft is getting wise in its old age. Or, perhaps it is getting timid. The company has been hit with antitrust actions in Europe and the U.S. over matters that range from using its operating system to give its internet browser advantages over Netscape to harming RealNetworks (NASDAQ: RNWK) by pushing the Window Media Player with its operating system. Microsoft ended up paying billions of dollars in fines and settlements.

The news certainly represents a change for heart. Microsoft has gotten out in front of the problem rather than waiting to fight an accusation brought by a government agency.

For better or worse, this is a new Microsoft.

Douglas A. McIntyre is a partner at 24/7 Wall St.

It's never good when a key member of Congress makes a negative comment about a merger, especially when it is aimed at the Justice Department and FCC.

Sen. Herb Kohl, the chairman of the Antitrust, Competition Policy and Consumer Rights Subcommittee, said that the merger of Sirius (NASDAQ: SIRI) and XM (NASDAQ: XMSR) would create a monopoly [subscription], plain and simple. In a letter to the two agencies he wrote that the combination "would cause substantial harm to competition and consumers, would be contrary to antitrust law and not in the public interest."

This is not the end of the merger, but it may be the beginning of the end. XM recently took its morning hosts, Opie and Anthony, off the air for lewd remarks. The move may have been taken so that the FCC would not feel that the merger would open the door to a business supported by off-color programming. Howard Stern, the shock jock, is the morning host at Sirius.

Sirius is still a fairly small business with big debts, In the last quarter, it had revenue of $204 million, slightly below Wall St. estimates. The company has over $1 billion in debt.

In other words, it may need the merger to stay viable.

Douglas A. McIntyre is a partner at 24/7 Wall St.

The U.S. Justice Department wants to extend its oversight of Microsoft for two more years, until 2009. Microsoft has already agreed to it; I bet they weren't excited about it, though. AP reported today the Justice Department wants the extension because of lapses under the 2002 landmark antitrust settlement.

A U.S. judge must approve this extension of two years, which the Justice Department and 17 states support because of lapses under the current settlement.  AP also reports that government lawyers are prepared to extend oversight of Microsoft's business through 2012 if necessary.

Costs of settling the antitrust suit brought by the Justice Department and 17 states, plus all the related actions filed by individual companies hurt by Microsoft's business practices, have already cost the company billions.   Wonder where Microsoft's Internet business would be today if it had spent the billions on developing MSN and its Internet ad business instead rather than fighting these suits?