Credit Suisse Case Called a Warning to Foreign Banks

Emmanuel Dunand, AFP/Getty Images

WASHINGTON -- Credit Suisse's guilty plea and $2.6 billion payment in a high-profile case brought by the Justice Department are being held out as a warning to foreign banks believed to be helping U.S. taxpayers conceal assets.

Culminating a yearslong criminal investigation, Switzerland's second-largest bank pleaded guilty Monday to helping wealthy Americans avoid paying taxes through secret offshore accounts. Credit Suisse (CS) was the largest bank to plead guilty in more than 20 years.

The settlement resolves the investigation into allegations that Credit Suisse, Switzerland's second-largest bank, recruited U.S. clients to open Swiss accounts, helped them conceal the accounts from the Internal Revenue Service and enabled misconduct by bank employees.

The case is part of an Obama administration crackdown on foreign banks believed to be helping U.S. taxpayers hide assets. Justice Department officials said their investigations into secret bank accounts held by Americans in Switzerland and other countries likely will bring forth additional resolutions.

"We are mindful that guilty pleas by a bank can have impacts far beyond" the parties involved in the case, Deputy Attorney General James Cole told reporters.

"This plea demonstrates that the Department of Justice and bank regulators are prepared to hold banks and their relevant employees accountable while being mindful of the impacts on depositors and the American public," he said.

Switzerland's largest bank, UBS (UBS), in 2009 entered a deferred prosecution agreement with the Justice Department in which it agreed to pay $780 million in fines and turn over the names of thousands of customers suspected of evading U.S. taxes. The country's oldest bank, Wegelin & Co., pleaded guilty in January 2013 to U.S. tax charges, admitting that it helped American clients hide more than $1.2 billion from the IRS.

In the Credit Suisse case, officials said a criminal charge was necessary to account for the bank's pattern of misconduct, which included a lack of cooperation and document destruction. But the deal was structured in such a way as to allow the bank to continue operating. Zurich-based Credit Suisse is on a regulators' list of 29 "global systemically important banks" whose failures would be considered a threat to the entire financial system.

The $2.6 billion in penalties -- which happens to be roughly equivalent to Credit Suisse's net income for 2013 -- will be paid to the Justice Department, the Federal Reserve and the New York State Department of Financial Services.

Attorney General Eric Holder, criticized last year after telling Congress that large banks had become hard to prosecute, appeared to foreshadow the guilty plea in a video message earlier this month in which he said no financial institution was "too big to jail."

"A company's profitability or market share can never and will never be used as a shield from prosecution or penalty," Holder said Monday. "And this action should put that misguided notion definitively to rest."

The criminal resolution follows a Senate subcommittee investigation that found the bank provided accounts in Switzerland for more than 22,000 U.S. clients totaling $10 billion to $12 billion. The report said Credit Suisse sent Swiss bankers to recruit American clients at golf tournaments and other events, encouraged U.S. customers to travel to Switzerland and actively helped them hide their assets. In one instance, a Credit Suisse banker handed a customer bank statements hidden in a Sports Illustrated magazine during a breakfast meeting in the United States.

Credit Suisse chief executive Brady Dougan has said previously that senior executives at the bank were not aware that some Credit Suisse bankers were helping U.S. customers evade taxes. More than a half-dozen former bankers have been charged for their role in aiding the tax evasion. The case was filed in federal court in suburban Alexandria, Virginia, where individual bankers have been charged.

We deeply regret the past misconduct that led to this settlement.

"We deeply regret the past misconduct that led to this settlement," Dougan said in a statement Monday.

Because the deal puts the longstanding legal dispute to rest and doesn't hinder the bank's operations, the market reaction Tuesday in Zurich was calm. Shares in the Swiss bank edged down 0.9 percent after opening higher.

The administration's action against Credit Suisse, a banking fixture on Wall Street, comes amid public outrage that boiled over from the financial crisis that plunged the economy into the deepest recession since the Great Depression of the 1930s. Calls for holding big Wall Street banks accountable, and sending top executives to jail, have come from consumer advocates, lawmakers and others, putting the Justice Department on the defensive.

The case against Credit Suisse was intended in part to counter criticism that the U.S. government has not been aggressive enough in its pursuit of banks. A report from the Senate subcommittee that investigated Credit Suisse accused the Justice Department of lax enforcement and faulted the government for gleaning only 238 names of U.S. citizens with secret accounts at Credit Suisse, or just 1 percent of the estimated total.

The Justice Department's highest-profile settlement over sales of risky mortgage securities in the run-up to the financial crisis -- the $13 billion deal among the department, state regulators and JPMorgan Chase -- was a civil case, and no bank executives were charged. Federal prosecutors in California have been conducting a related criminal investigation.

-Associated Press writer John Heilprin in Geneva contributed to this report.

Credit Suisse Pleads Guilty in Criminal Tax Case

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The "Offshore Compliance Initiative Amnesty" of 2009 - the reason Romney finally disclosed his Swiss accounts in his 2010 return - [the option - own up and pay the taxes or go to jail] also the reason it was the only return he could show. The "Prudent Observer" easily concludes the return - was filed without the required attendant documentation on Mitt's Swiss Account because an "Amnesty Deal" was involved.

If the average American gets caught with his/her hand in the cookie jar the IRS is all over them for a few thousand. If you are Rich - You get the opportunity to sign up for Amnesty after cheating the Tax System out of Billions.

May 20 2014 at 1:47 PM Report abuse -2 rate up rate down Reply

It is about time that there is a crackdown on those individuals who are underminding the economy of the United States which I consider a national security problem. I hope those bankers involved in this illegal conspiracy are punished with real jail time not just a slap on the wrist fine.

May 20 2014 at 12:55 PM Report abuse +1 rate up rate down Reply
worried man

Great ! I was going to hide my $100 bucks in the bank now. If you remember the Strawberry report warned us that the US would be going after your money one way or another. Not only did we pay for the bailouts and now the government gets the billions of dollars in fines against the banks. No doubt the money will be used to fund illegal aliens. Now is a good time to send 5000 more agents to cover the borders and deport ALL illegals, build a few more aircraft carriers and 5000 more jet fighters since China is pissed at us now

May 20 2014 at 12:41 PM Report abuse +1 rate up rate down Reply
1 reply to worried man's comment

it would cost you more to smuggle out your hundred bucks than to pay the dollar tax on it anyway. now if that would the billions or the trillions they smuggle out ,that would be a different story. Do the math

May 20 2014 at 12:59 PM Report abuse rate up rate down Reply

Such hypocrisy...

Go after the foreign banks while Holder blatantly ignores the American Criminal Banking Enterprises.

That said:

Credit Suisse is said to have harbored TRILLIONS of dollars to shelter American persons and corporations from US Taxes.

The fine?

A few paltry billion.

Once again proving to the worldwide Bankster community that crime DOES pay!

May 20 2014 at 12:16 PM Report abuse +2 rate up rate down Reply
1 reply to juststeve35's comment

haven't you ever heard of the international banking system ? they are all crooks in conspiracy. Great that he is attacking the foreign branches.Be a ciitizen first , politics are second to our welfare

May 20 2014 at 1:01 PM Report abuse +1 rate up rate down Reply

Name names!

May 20 2014 at 10:47 AM Report abuse +1 rate up rate down Reply

Till tens of thousands of bank CEOs, hedge fund managers, commodities brokers, investment analysts, mortgage brokers and all the other flavors of finance salestrash see long, hard prison terms our economy will never improve.

May 20 2014 at 10:07 AM Report abuse +4 rate up rate down Reply
1 reply to hsenpfeffer's comment

Let's start with the politicians too! The economy has flatlined because of government fees, license's, regulations, and restrictions.

May 20 2014 at 10:30 AM Report abuse -1 rate up rate down Reply

How long will it take the 0 administration to waste away this money? A Fair tax of about 10% on all items purchased is absolutely necessary and eliminate the tax system that ONLY benefits the politicians. Just think, then we could eliminate the IRS!

May 20 2014 at 9:51 AM Report abuse -2 rate up rate down Reply
1 reply to jrb359's comment

Wrong, that only hurts working people who spend a larger percent of their income. To fix the tax code we need the following:
1. financial transactions tax - it discourages non productive speculation like high speed trading and makes the finance scammers pay for their own bailout
2. tax capital gains the same as income people actually work for - the so called "investors" are not creating jobs or our economy would have been booming a long time ago. There is no reason for the preference.
3. tax hedge fund manager income the same as income people work for. - See above. Also send a bunch of them to jail.
4. 100 percent inheritance tax - people should be rewarded for what they do not who their grandma had sex with.

May 20 2014 at 10:05 AM Report abuse rate up rate down Reply
2 replies to hsenpfeffer's comment

Maybe we should just give our paychecks to the government each week? You must not like living in a Capitalist country.

May 20 2014 at 10:12 AM Report abuse rate up rate down

To bad your grandma had sex

May 20 2014 at 11:20 AM Report abuse rate up rate down

The study points out that the losers from widespread corporate tax avoidance include:
# The general public, who must pay higher taxes, lose public services, or be responsible
for big future debt burdens.
# Relatively disadvantaged industries and companies that will find it harder to compete for
investment capital with tax-favored corporations.
# The U.S. economy, which is harmed by the distortions that corporate subsidies produce.
# State governments and state taxpayers, which see their corporate tax systems erode
along with the federal system.
# The integrity and sustainability of the tax system as a whole.
“Most of the loopholes and tax dodges that corporations use to slash their taxes may be
technically ‘legal’ in the sense that the tax law allows them,” said McIntyre. “But remember
that these subsidies got into the tax code because corporations lobbied to put them there.
Saying something is ‘legal’ doesn’t mean that it’s right.”
Two pages of selected tables and charts from the study follow.
Citizens for Tax Justice and the Institute on Taxation and Economic Policy have analyzed
corporate profits and corporate income taxes in a series of reports dating back to the 1980s.
These reports are widely credited with helping persuade President Ronald Reagan and
Congress to enact the loophole-closing Tax Reform Act of 1986. ITEP’s research for the new
study was funded by a grant from the Nathan Cummings Foundation.
A copy of the full 68-page report can be found at or

May 20 2014 at 9:51 AM Report abuse rate up rate down Reply
1 reply to teaparty2implode's comment

Corporate America owes a lot thanks to the Bush administration which allowed them to pay no taxes and hide their money in overseas accounts.

May 20 2014 at 9:58 AM Report abuse rate up rate down Reply
3 replies to teaparty2implode's comment

Citizens for Tax Justice 1311 L St. NW, Washington, DC 202-626-3780
WEDNESDAY, SEPTEMBER 22, 2004 at 12:30 P.M. EDT
CONTACT: Bob McIntyre, 202/626-3780, ext. 22 (6 pages)
Bush Policies Drive Surge in Corporate Tax Freeloading
82 Big U.S. Corporations Paid No Tax in One or More Bush Years
Eighty-two of America’s largest and most profitable corporations paid no federal income tax
in at least one year during the first three years of the George W. Bush administration — a
period when federal corporate tax collections fell to their lowest sustained level in six
decades. This is one of the many troubling findings of a major new report on corporate tax
avoidance by Citizens for Tax Justice (CTJ) and the Institute on Taxation and Economic
Policy (ITEP). The report covered 275 profitable Fortune 500 corporations, with total U.S.
profits of $1.1 trillion over the three-year period.
“The sharp increase in the number of tax-avoiding companies reflects the results of
aggressive corporate lobbying and a White House and a Congress eager to do the
lobbyists’ bidding,” said Robert S. McIntyre, director of CTJ and co-author of the report with
T.D. Coo Nguyen of ITEP.
Skyrocketing Corporate Tax Avoidance
In part due to a major expansion in corporate tax breaks in 2002 and 2003, along with
continued failure by Congress and the White House to curb abusive corporate offshore tax
sheltering, corporate tax avoidance has skyrocketed. For example:
# Eighty-two of the 275 companies, almost a third of the total, paid zero or less in
federal income taxes in at least one year from 2001 to 2003. Many of them enjoyed
multiple no-tax years. In the years they paid no income tax, these companies earned
$102 billion in pretax U.S. profits. But instead of paying $35.6 billion in income taxes as
the statutory 35 percent corporate tax rate seems to require, these companies
generated so many excess tax breaks that they received outright tax rebate checks from
the U.S. Treasury, totaling $12.6 billion. These companies’ “negative tax rates” meant
that they made more after taxes than before taxes in those no-tax years.
# Twenty-eight corporations enjoyed negative federal income tax rates over the entire
2001-03 period. These companies, whose pretax U.S. profits totaled $44.9 billion over
the three years, included, among others: Pepco Holdings (–59.6% tax rate), Prudential
Financial (–46.2%), ITT Industries (–22.3%), Boeing (–18.8%), Unisys (–16.0%), Fluor
(–9.2%) and CSX (–7.5%), the company previously headed by our current Secretary of
the Treasury.
# In 2003 alone, 46 companies paid zero or less in federal income taxes. These 46
companies, one out of six of the companies in the study, told their shareholders they
earned U.S. pretax profits in 2003 of $42.6 billion, yet received tax rebates totaling $5.4
billion. In 2002, almost as many companies, 42, paid no tax, reporting $43.5 billion in
pretax profits, but $4.9 billion in tax rebates. From 2001 to 2003, the number of no-tax
companies jumped from 33 to 46, an increase of 40 percent.
# After 2001, the average effective rate for all 275 companies dropped by a fifth, from
21.4 percent in 2001 to 17.2 percent in 2002 and 2003, less than half the statutory 35
percent corporate tax rate that corporations ostensibly are supposed to pay.

May 20 2014 at 9:49 AM Report abuse rate up rate down Reply
Tony and Laurel

I wonder what happened to the 22,000 tax cheats? Are Federal prosecutions of tax fraud public knowledge somewhere?

May 20 2014 at 9:46 AM Report abuse +1 rate up rate down Reply