Senate committee faults Credit Suisse over tax dodgers

What could the implications be for wealthy individuas that use offshore banks?

Feb 25, 2014 @ 9:57 am

+ Zoom

A Senate committee report will reprimand Credit Suisse Group AG for helping American clients dodge taxes and will criticize the Justice Department for not pursuing offshore banks aggressively enough, according to two people with knowledge of the findings.

The report outlines how Credit Suisse, the second-biggest Swiss bank, helped clients hide cash transfers and offered accounts not declared to the Internal Revenue Service, according to the people, who asked not to be identified because the report is not yet public. The bank used a variety of other evasive techniques, including ferrying clients in a special elevator at Zurich airport and meeting them in off-site locations, one of the people said.

The Senate Permanent Subcommittee on Investigations, led by Michigan Democrat Carl Levin, will publish the report Tuesday before a hearing tomorrow that includes testimony by Credit Suisse chief executive Brady Dougan. The scrutiny puts pressure on the Justice Department to advance prosecutions against Swiss banks that helped Americans cheat on taxes.

Five years after the U.S. charged UBS AG, the largest Swiss bank, with helping Americans evade taxes, the Justice Department's 14 criminal probes against Swiss institutions have brought settlement with just three — UBS, Wegelin & Co. and Liechtensteinische Landesbank AG. UBS avoided prosecution in 2009 by agreeing to pay $780 million, admitting it fostered tax evasion and handing over data on 4,500 accounts.

'BOGGED DOWN'

The report criticizes the Justice Department for not concluding its probe of Credit Suisse, which has been under way since at least 2011, the people said. Mr. Levin's subcommittee says prosecutors have withdrawn subpoenas and become bogged down in a treaty process between the U.S. and Switzerland over the transfer of data about American client accounts, according to one of the people.

“The department's criminal investigations of offshore tax evasion are robust and ongoing,” Emily Pierce, a Justice Department spokeswoman, wrote in an e-mailed statement. “Together with the IRS, we are using a variety of tools to pursue taxpayers who have maintained secret accounts and the banks and banking professionals that facilitated their conduct.”

Marc Dosch, a spokesman for Credit Suisse in Zurich, declined to comment. The subcommittee didn't return e-mails seeking comment after regular business hours on Monday.

PAPER TRAIL

The report also describes how Credit Suisse bankers flew regularly to the U.S. to meet with clients to avoid creating a paper trail and structured transactions to sidestep reporting requirements for cash transfers, the people said. The details echo a 2011 indictment of seven Credit Suisse bankers. One client secretly carried $250,000 from the U.S. to Switzerland by hiding cash in pantyhose, according to the indictment.

Credit Suisse agreed to pay $197 million to U.S. regulators last week and admitted it served thousands of Americans without approval. Credit Suisse and prosecutors haven't been able to reach a settlement in the criminal case.

Wegelin, the oldest Swiss private bank, pleaded guilty last year, paid $74 million and closed for business. Liechtensteinische Landesbank, the oldest bank in Switzerland, wasn't prosecuted after agreeing to pay $23.8 million and admitting it helped American clients evade taxes.

Levin has long questioned the U.S. crackdown on the Swiss banking industry's use of secret accounts to hide offshore assets from the IRS. Levin estimates that offshore tax-avoidance costs the Treasury $100 billion a year.

Since 2009, the U.S. has charged more than 70 U.S. taxpayers and about three dozen offshore enablers with using undeclared accounts to hide assets from the IRS. More than 43,000 Americans avoided prosecution through an IRS amnesty program. A Justice Department program has drawn 106 Swiss banks seeking non-prosecution agreements.

(Bloomberg News)

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

RIA Data Center

Use InvestmentNews' RIA Data Center to filter and find key information on over 1,400 fee-only registered investment advisory firms.

Rank RIAs by

Upcoming Event

Oct 17

Conference

Best Practices Workshop

For the fifth year, InvestmentNews will host the Best Practices Workshop & Awards, bringing together the industry’s top-performing and most influential firms in one room for a full-day. This exclusive workshop and awards program for the... Learn more

Featured video

Events

Tech tools of tomorrow: Innovations your firms can't live without in 2020

Gadget Girl hits the tech pavilion at Pershing INSITE to see what exciting new tools advisers can't afford to miss.

Video Spotlight

Will It Last As Long As Your Clients Do?

Sponsored by Prudential

Video Spotlight

The Catalyst

Sponsored by Pershing

Latest news & opinion

Nationwide's 401(k) record-keeping fees are excessive, lawsuit claims

Plaintiffs claim practice of charging plans a percentage of assets is unreasonable.

Wealth management firms struggle with lower fees, fewer new clients

Advisers in North America earned less from clients last year and saw a decline in average fees, according to a new report by PriceMetrix.

These investors are allowed to put $500K into a Roth IRA at once

The HEART Act permits rolling all or part of life-insurance and combat-related-fatality payouts directly into the tax-free retirement plan, but few take advantage.

Brian Block denies cooking the books at Schorsch REIT

Former CFO claims everything he did was 'appropriate' and 'correct.'

Interns will take on several roles at advisory firms this summer

College students are helping with client prep, firm visioning and long-term projects, among other duties.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print