Credit Suisse to Plead Guilty, Pay $2.6 Billion

Credit Suisse AG will plead guilty to charges that it aided and assisted U.S. taxpayers in filing false income tax returns and other documents with the Internal Revenue Service (IRS).

The guilty plea by the Swiss corporation is the result of a years-long investigation by U.S. law enforcement authorities that has also produced indictments of eight Credit Suisse executives since 2011 — two of those individuals have pleaded guilty so far.

The company was represented by King & Spalding in Washington, D.C.

The plea agreement, along with agreements made by other federal regulators, provides that Credit Suisse will pay a total of $2.6 billion – $1.8 billion to the Department of Justice, $100 million to the Federal Reserve, and $715 million to the New York State Department of Financial Services.

Earlier this year, Credit Suisse paid approximately $196 million in disgorgement, interest and penalties to the Securities and Exchange Commission (SEC) for violating the federal securities laws by providing cross-border brokerage and investment advisory services to U.S. clients without first registering with the SEC.

“This case shows that no financial institution, no matter its size or global reach, is above the law,” said Attorney General Holder. “Credit Suisse conspired to help U.S. citizens hide assets in offshore accounts in order to evade paying taxes.  When a bank engages in misconduct this brazen, it should expect that the Justice Department will pursue criminal prosecution to the fullest extent possible, as has happened here.”

As part of the plea agreement, Credit Suisse acknowledged in a detailed statement of facts that, for decades prior to and through 2009, it operated an illegal cross-border banking business that knowingly and willfully aided and assisted thousands of U.S. clients in opening and maintaining undeclared accounts and concealing their offshore assets and income from the IRS.

Prosecutors said that one key reason Credit Suisse was forced to plead guilty was the fact that it deceived federal prosecutors.

“Credit Suisse deceived the IRS, the Federal Reserve, the Securities and Exchange Commission, and the Department of Justice,” Holder 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. And when the bank finally began to feel pressure to correct illegal practices and comply with the law – as a result of the Justice Department’s investigation, of which they were notified in 2010 – Credit Suisse failed to retain key documents, allowed evidence to be lost or destroyed, and conducted a shamefully inadequate internal inquiry.”

Public Citizen’s Bartlett Naylor said that the prosecution of Credit Suisse “does little to repair the damaging message that the Justice Department has sent repeatedly to Wall Street, where until now, no major bank has pleaded guilty to a criminal offense.”

“Even in this enforcement action, prosecutors took care to win assurance from U.S. regulators that they would not revoke licenses or otherwise curtail the firm’s businesses,” Naylor said. “That courtesy wouldn’t apply to a small firm. There cannot be a separate justice system for the large and another system for the small.”

University of Virginia Law Professor Brandon Garrett, author of the upcoming book — Too Big to Jail: How Prosecutors Compromise with Corporations (Harvard University Press, October 2014) —  told Corporate Crime Reporter that “one conviction of a major bank does not end ‘too big to jail’ concerns.”

“This was not a prosecution of a bank for conduct related to the financial crisis,” Garrett said. “This does not answer concerns about individual bankers being held accountable.  And even if there is a conviction, there is the concern that whatever the type of agreement, the terms of corporate prosecution deals are too lenient. In fact, this agreement was only possible because prosecutors debunked the ‘chicken little’ claims of the company that a conviction would result in loss of a charter. Too big to jail concerns extent to prosecutions of all sorts of companies, too, and not just banks. And this was a prosecution of a foreign bank – convictions have been more common for foreign companies in the past – raising still more questions.”

“One hopes that prosecutors always do as careful a job to ask whether a deferred prosecution or non-prosecution is really necessary,” Garrett said. “Many of the past deferred and non prosecution agreements may not have been necessary at all.  I hope that this means the end of over-enthusiasm with corporate non-prosecution deals, but time will tell.”

Copyright © Corporate Crime Reporter
In Print 48 Weeks A Year

Built on Notes Blog Core
Powered by WordPress