Credit Suisse, DOJ in Senate crosshairs on Swiss tax dodging
02/25/2014 3:59 PM
02/26/2014 5:44 AM
The Department of Justice has neglected to collect billions in unpaid U.S. taxes by failing to aggressively prosecute Swiss banking giant Credit Suisse Group AG, a Senate investigative report said late Tuesday, shortly before executives from the bank are scheduled to testify under oath.
Credit Suisse opened and managed more than 22,000 accounts for U.S. customers, with assets in the range of $10 billion to $12 billion, most of them hidden from U.S. tax authorities, according to the 175-page bipartisan report from the Senate Permanent Subcommittee on Investigations.
Tax evasion committed abroad isn’t considered a crime in Switzerland, for centuries a haven for illicit and legitimately gotten gain. Failure for U.S. citizens and residents to declare income and pay taxes on it is a crime, but Swiss law continues to hamper enforcement.
The Senate committee has used its investigatory powers for several years to try to force the Bush and Obama administrations to get tough with Switzerland over blatant efforts to help American citizens skirt U.S. tax laws with offshore accounts.
A report by McClatchy last year, relying on thousands of pages of court documents, showed how Switzerland’s oldest bank, Wegelin & Co., used spylike tactics to meet with American clients on U.S. soil and abetted the evasion of U.S. tax law. In one extreme case, a client sent a 5-year-old with about $100,000 in a paper bag to a courier who was retrieving money to be placed in Swiss accounts.
The committee will hear Wednesday from Credit Suisse’s chief executive officer and the general counsel of its U.S. operations, as well two Switzerland-based co-heads of private banking and wealth management.
They’ll be asked why it took five years since 2008 to close almost 19,000 accounts held by U.S. residents _ more than half of whom still hold accounts elsewhere in Switzerland. The Justice Department has indicted seven lower-level Credit Suisse bankers, but neither the DOJ nor the bank has placed blame higher up.
However, the committee’s chairman and its top Republican – Sen. Carl Levin, D-Mich., and Arizona Sen. John McCain, respectively – said roughly 1,800 Credit Suisse officials had knowledge of U.S.-controlled accounts. They made it clear that much of their criticism will be aimed at the DOJ.
Briefing reporters before the report’s release, Levin decried a “lack of determination to pursue these cases” by the DOJ, adding that “I don’t know what their excuse will be. We’ll find out tomorrow.”
Deputy Attorney General James Cole and Assistant Attorney General for the Tax Division Kathryn Keneally also are scheduled to testify Wednesday.
“Since 2009, the department has publicly charged 73 (Swiss) account holders and 35 bankers and advisors with offenses related to offshore tax evasion,” a DOJ spokeswoman told McClatchy in an email, speaking only on the condition of anonymity as a matter of agency policy and not specifically addressing the allegations about Credit Suisse. “And we have acknowledged that as many as 14 Swiss financial institutions are currently under investigation, and we won’t hesitate to indict if and when circumstances merit.”
Levin noted that rather than bring a criminal case against Credit Suisse and try to force Swiss authorities to hand over names, the Justice Department has chosen to try to get the names of U.S. account holders through a relatively new tax treaty. To date, the Swiss have shared only 258 names out of a universe of at least 22,000 accounts thought to have U.S. owners.
Credit Suisse has been in the crosshairs of investigators and prosecutors for at least five years, and its leaders have suggested in the past that any wrongdoing occurred lower down the executive ladder and was unknown to top bank officials.
“If you believe that, I have some beachfront property in Arizona I’d like you to look at,” said McCain.
Multiple news reports have said the DOJ is nearing a deferred prosecution agreement with Credit Suisse like the one it reached earlier with UBS. The settlement, suggest reports, would be in the ballpark of $800 million. Levin said that would be a large sum but one that “doesn’t fit the malpractice of the bank.”
The committee’s latest investigation finds that Credit Suisse sent relationship managers to the United States to meet with clients at balls and golf courses and in many cases allegedly helped sham companies that existed for the purposes of skirting U.S. taxes. The committee estimates that Credit Suisse is sheltering almost $6 billion in foreign entities, effectively sham companies, controlled by U.S. taxpayers.
The committee in 2008 relentlessly and successfully pursued rival Swiss giant UBS AG, which eventually entered into a deferred prosecution agreement with the Justice Department and handed over the names of almost 5,000 U.S.-based offshore account holders.
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