By Tom Armitage

ZURICH, Aug 13 (Reuters) - Swatch Group denied on Friday that it had broken any laws as it investigated allegations by two former employees that the world's biggest watchmaker had evaded taxes with complex pricing methods.

A senior Swatch executive told Reuters that the company did not expect any impact on its finances from the investigation, which it launched after two former financial controllers filed complaints of discrimination in the United States.

"Although the investigation is not yet finished we are quite confident," General Counsel Hanspeter Rentsch said. When asked if he expected financial consequences before the release of first-half results on August 24, Rentsch replied: "No."

Swatch rejected the claims of tax evasion, made by the former employees in the course of an unfair dismissal complaint to U.S. authorities which was detailed in media reports Friday.

"The investigation has not yet brought anything to light which could be against the law," Chief Executive Nick Hayek told Swiss television from the Athens Olympics, where Swatch launched its high-profile role as official timekeeper on Friday.

The Wall Street Journal Europe reported the employees alleged in their complaint that the company evaded up to $180 million in taxes and customs duties by manipulating inter-company prices.

However, the U.S. Labor Department, where the claim was filed on June 25, said it had rejected the complaint as it fell outside the jurisdiction of U.S. whistle-blower protections.

"In order for the (Labor) Department to have jurisdiction the employees must be U.S. workers. These two were hired outside the United States, they worked outside the United States and the adverse actions they say they experienced also happened outside the United States," Labor Department spokesman Al Belsky said.

Belsky said a letter dismissing the complaint was sent to the attorney representing the two men on Aug. 4. The letter, a copy of which was seen by Reuters, said the "findings and preliminary order" could be appealed within 30 days.

Daniel Kaiser, a New York-based lawyer representing the two, had earlier on Friday dismissed Swatch's contention that the matter was purely a labor dispute but was later unavailable to discuss the dismissal of the complaint.

Kaiser's law firm partner, Henry Saurborn, told Reuters the Labor Department decision was viewed as preliminary and would be appealed.

Swatch has contended it was not subject to whistle-blower protections under the Sarbanes-Oxley financial reform law, as its shares are only traded over the counter SWGNF.PK in the United States and not listed on a main exchange.

INVESTORS JITTERY

Investors, made jittery by recent accounting mishaps at Swiss staffing firm Adecco ADEN.VX , sent Swatch bearer shares UHR.VX down as much as 11 percent on the reports.

The stock recovered to close down 3.6 percent at 141.50 francs, while registered shares UHRN.VX fell 2.6 percent.

Analysts said the sell-off appeared overdone since, even if the allegations proved founded, Swatch faced at worst a charge for tax arrears and a slightly higher tax rate in the future.

"If there is a fine and back taxes, the financial impact would appear to be manageable," LODH analysts said in a note.

Swatch, which owns 17 watch brands including Omega and Tissot, has net cash of over 1 billion Swiss francs ($796 million) and generates net profits of around 500 million, giving it an ample cushion against any potential one-off costs, analysts said.

The company denied its practices infringed laws, saying it did not use transfer pricing to avoid taxes illegally but to harmonize international prices and prevent a parallel market.

Analysts said the practice, whereby goods are charged at differing prices as they pass through company subsidiaries, is widespread among multinationals looking to minimize taxes.

"International tax optimization is normal and legal," ZKB analyst Patrik Schwendimann said in a note. "There is however always a certain room for maneuver in terms of what is and is not accepted by the tax authorities."

The Financial Times, like The Wall Street Journal, reported that the Swatch Group (Asia) -- registered in the British Virgin Islands -- was at the heart of the transfer pricing practices which affected various countries including the United States.