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Credit Suisse pleads guilty to conspiracy charge

June 2014

Credit Suisse is to pay more than $2.5bn (£1.5bn, €1.8bn) for helping at least 22,000 US clients to evade taxes by hiding assets offshore in an “extensive and wide-ranging conspiracy”.

The bank, Switzerland’s second biggest, pleaded guilty to one count of conspiracy and became the first large global institution in two decades to admit criminal offences.

The negotiated penalty consists of $1.8bn in fines and restitution, $715m payable to the New York state financial services department, and $100m to the Federal Reserve.

Eric Holder, the US attorney general, told the Alexandria federal court, Virginia, that hundreds of Credit Suisse employees, including managers, had been involved for decades.

He said: “The bank went to elaborate lengths to shield itself, its employees and the tax cheats it served from accountability for their criminal actions.

“They subverted disclosure requirements, destroyed bank records and concealed transactions involving undeclared accounts by limiting withdrawal amounts and using offshore credit and debit cards to repatriate funds.

“They failed to take even the most basic steps to ensure compliance with tax laws.

“These secret offshore accounts were held in the names of sham entities and foundations.

“This conspiracy spanned decades. In the case of at least one wholly owned subsidiary, the practice of using sham entities to conceal funds began more than a century ago.”

The assets of the clients participating in the evasion were put at between $10bn and $12bn.

Holder said investigations were continuing, and Chuck Grassley, an Iowa senator, said: “Maybe we’ll see some top individuals held criminally liable at some point.”

Credit Suisse has now agreed to dismiss three employees charged in the evasion investigation and is introducing checks, determined by the New York state financial department, to review its misconduct and recommend remedies.

Brady Dougan, the bank’s chief executive, said: “We deeply regret the past misconduct that led to this settlement.”
Despite the assurances, the bank may suffer some commercial damage.

A hedge fund consultancy overseeing $1bn of investments said it would “monitor developments and will be prepared to make any necessary adjustments”.

Another client warned: “All things being equal, institutional investors may still pull back some business temporarily or put Credit Suisse in a penalty box.”

Nevertheless, the bank’s guilty plea is thought to have minimised potential reputational harm and commentators judge that only a handful of clients will cut their ties. Goldman Sachs has indicated it will continue dealing with Credit Suisse.

A total of 119 more Swiss banks are being investigated for similar offences in the US, and most are expected to seek settlement without prosecution.

In a separate inquiry the justice authorities are encouraging BNP Paribas, France’s biggest bank, to admit violations of US sanctions banning business with countries including Cuba, Iran and Sudan. Observers say a negotiated settlement could be followed by fines up to $5bn.
 




Global | Tax

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