News Column

Swiss bank admits aiding U.S. tax evaders

February 26, 2014

By Kevin McCoy, @kmccoynyc, USA TODAY

Credit Suisse CEO Brady Dougan admitted Wednesday that the Swiss banking giant had helped U.S. clients evade paying taxes in a secret operation that the bank "regrets very deeply."

Testifying at a Senate hearing on offshore tax evasion, Dougan said the operation was chiefly limited to a small group of Swiss-based employees who hid their efforts from executives of the Zurich-based bank.

The acknowledgment and mea culpa followed a Senate subcommittee report that showed Credit Suisse bankers from at least 2001 to 2008 enabled as many as 22,000 Americans controlling an estimated $12 billion in secret offshore accounts to duck paying the IRS.

"Credit Suisse's management team regrets very deeply that despite the industry-leading compliance measures we put in place, we had some Swiss-based private bankers who appear to have violated U.S. law," said Dougan during his oral testimony for the Senate Permanent Subcommittee on Investigations hearing.

The subcommittee report showed that bankers from Credit Suisse, Switzerland's second-largest bank, traveled to the U.S. on tourist visas to solicit wealthy American clients at New York parties and Florida golf outings. They also met existing U.S. clients in luxury hotels, in one case passing account statements hidden inside a Sports Illustrated magazine, the report showed.

Questioned by Sen. Carl Levin, D-Mich., who chairs the subcommittee, Dougan said a continuing internal investigation by the bank had confirmed much of the subcommittee report, finding that:

•The Credit Suisse bankers' trips were specifically arranged to help Americans open secret offshore accounts.

•The bankers in some cases helped U.S. clients structure transactions below $10,000 in an effort to avoid disclosure laws that govern higher amounts.

•Some clients were referred to intermediaries who helped set up accounts in the names of offshore shell companies. Credit Suisse then treated those accounts as international clients.

"I view that just as egregiously as you do," Dougan told Levin.

He said the bank has tightened internal controls and is cooperating with a Department of Justice tax probe that targets Credit Suisse and 13 other Swiss banks.

But in response to subcommittee questioning, Credit Suisse executives said few if any bankers involved had been fired specifically over the activity.

Subcommittee members peppered Dougan and three other bank executives with criticism of the clandestine operation.

"Billions in unpaid taxes remain uncollected, thanks to tax evaders' use of bank secrecy," said Levin, who charged that Credit Suisse had held back about how bad the problem was at the bank.

Sen. John McCain, R-Ariz., the subcommittee's ranking minority member, also criticized the Swiss government for invoking historic secrecy laws to bar Credit Suisse and other banks from complying with U.S. subpoenas and other information requests.

"Any idea that the Swiss government is cooperating with us is a joke," said McCain.

Levin, noting that profits of Credit Suisse and other Swiss banks are generated in part by U.S.-based divisions, said, "You want to do business here, you've got to comply with our laws."

Panel members also rapped what they called weak Department of Justice efforts to force bank disclosure of U.S. client names. They noted that since 2009, prosecutors reached final legal outcomes with just two Swiss banks.

Deputy Attorney General James Cole said prosecutors have focused on building additional criminal cases that would press banks in Switzerland and elsewhere to identify U.S. tax evaders.

A total of 106 Swiss banks have said they will seek non-prosecution agreements requiring them to pay high penalties and provide financial data, though not client names, said Assistant Attorney General Kathryn Keneally.

Win McNamee, Getty Images

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Source: USA Today

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