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 (Updated 3:04 pm) EST

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 Levin's subcommittee says prosecutors have withdrawn subpoenas and become bogged down in a treaty process between the U.S. and Switzerland over the transfer of data about American client accounts, according to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)

  @IN Wire

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