Credit Suisse, the second largest Swiss bank, plead guilty on Monday to criminal charges stemming from helping Americans hide millions of dollars for the purpose of tax evasion. As part of entering the guilty plea, Credit Suisse agreed to pay fines totaling $2.6 billion.
To help American clients, the bank created fake holding companies where wealthy Americans could place large amounts of cash without reporting those monies to the Internal Revenue Service (IRS). Credit Suisse provided those clients with credit cards tied to those accounts that allowed the Americans to access the funds. In addition, the bank helped those investors prepare and file fraudulent income tax returns.
Guilty Plea Ends Decades of Tax Evasion Assistance by Swiss Bank
Credit Suisse had helped Americans hide monies for 20 or more years. When Swiss-bank UBS agreed to pay over $750 million to the Justice Department in 2008 and gave up the names of the American clients who the bank had helped with tax evasion, Credit Suisse executives realized they had to stop the illegal practice.
Credit Suisse executives began to require that American investors either pay taxes or close their accounts. Since 2008, approximately 19,000 investors chose to close their accounts with Credit Suisse rather than pay income tax on those monies.
When the Justice Department began investigating Credit Suisse in 2009 related to tax evasion, Credit Suisse executives attempted to hide the activity by destroying records.
“The bank went to elaborate lengths to shield itself, its employees, and the tax cheats it served from accountability for their criminal actions,” noted Attorney General Eric Holder on Monday after news of the guilty plea was released.
In spite of the destruction of records, the fact the Justice Department was able to obtain a guilty plea from Credit Suisse, which is considered a great victory. The admission by the bank follows the indictment of eight Credit Suisse executives over the past four years. Two of those executives have also entered guilty pleas and will be sentenced later this year. The other six executives are believed to be in Switzerland, which to date has opted not to extradite them to the United States to face prosecution.
“We deeply regret the past misconduct that led to this settlement,” Brady Dougan, Chief Executive Officer of Credit Suisse. “Having this matter fully resolved is an important step forward for us.”
Credit Suisse will pay the fine to various entities, including $1.1 billion to the United States Department of the Treasury, $715 million to the Department of Financial Service of New York, $670 million to the IRS, and $100 million to the Federal Reserve.
Dougan indicated that because the payment of a fine by Credit Suisse was expected for weeks ahead of the formal announcement this week, he did not anticipate the guilty plea would impact the bank’s business operations.
The guilty plea and fine by Credit Suisse were not a complete victory by the Justice Department. Credit Suisse still refuses to release the names of all of its customers based in the United States. The Swiss government has supported Credit Suisse’s decision to withhold their American client list.
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Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.