Credit Suisse CEO defends tax record
U.S. senators lashed out against federal prosecutors on Wednesday for a lack of zeal in going after Swiss banks that helped Americans dodge taxes, saying that offshore tax avoidance has cost billions of dollars in tax revenues.
The Senate Permanent Subcommittee on Investigations this week alleged new misdeeds by Switzerland's Credit Suisse, citing secret meetings in luxury hotels and hidden elevators, which one senator said belonged in a spy novel.
"Taxes owed on billions of dollars in hidden offshore assets remain uncollected,'' committee Chairman Carl Levin, one of Capitol Hill's toughest questioners, said in a public hearing where bankers testified before the subcommittee.
"To collect those unpaid taxes and hold U.S. tax evaders accountable, the critical first step is to get their names,'' said Levin, a Democrat from Michigan.
According to a pre-release of his speech, CEO Brady Dougan acknowledged that Swiss banking secrecy laws had historically been vulnerable to abuse.
"Credit Suisse acknowledges that misconduct, centered on a small group of Swiss-based private bankers, previously occurred at our bank. While that employee misconduct violated our policies, and was unknown to our executive management, we accept responsibility for and deeply regret these employees' actions," the speech, seen by CNBC, said.
"Although it was not and is not illegal for Swiss banks to accept deposits from Americans, it is absolutely unacceptable for Swiss-based bankers to help U.S. taxpayers evade taxes or to provide them with securities advice in the U.S. without being properly licensed."
The Justice Department is probing 14 Swiss banks over taxes, five years after UBS, Switzerland's largest bank, admitted to helping U.S. taxpayers hide money from the tax man and agreed to give client information to U.S. authorities.
Bankers secretly traveled to the United States, sometimes on tourist visas, the senators said in a lengthy report this week, describing one customer who got bank statements tucked into an issue of Sports Illustrated magazine at a hotel meeting.
The report said Credit Suisse opened accounts for more than 22,000 U.S. customers, with combined assets of $12 billion. The bank has accepted responsibility for wrongdoing by its staff.
At the same time, the bank laid out a detailed defense, saying that the perpetrators were a small group of Swiss-based bankers, and that while it wanted to hand over more client names, it was caught between U.S. and Swiss law.
"Credit Suisse is ready to provide the additional information requested by the U.S. authorities on U.S. account holders, but we have been unable to do so,'' the bank said in a statement provided at the hearing.
Treaty situation cited
The bank had provided as much information as allowed under Swiss law, it said, and while it wanted to provide more client names, the U.S. Senate had not ratified a bilateral treaty with Switzerland that would allow it to do so.
Levin scolded the Justice Department for only having retrieved 238 client names from Credit Suisse - and none from the other banks under investigation, upping the ante for Justice Department officials who were to testify later.
But Credit Suisse said it was a ``demonstrably inappropriate assumption'' that all 20,000 U.S. clients were tax cheats, saying many U.S. clients, such as expats living in the country, had a valid reason to hold a Swiss bank account. Our expert writers know how to write a good college essay.
Credit Suisse last week settled charges levied by the U.S. Securities and Exchange Commission, admitting to wrongdoing and paying $196 million in fines. But a settlement with the Justice Department is not imminent, a person familiar with the matter has told Reuters.
"This fine ... pales in comparison with the severity of the full extent of Credit Suisse's misconduct,'' said John McCain from Arizona, the subcommittee's highest-ranking Republican.
Switzerland has amassed assets worth trillions of dollars from foreigners over the past decades, aided by its tight bank secrecy laws. However, two small banks, Frey & Co and Bank Wegelin, have folded after U.S. authorities started targeting the country's banks over tax evasion.
In 2008, UBS faced similar allegations and had to appear before the Senate subcommittee before paying $780 million the following year. The settlement also involved the bank agreeing to hand over U.S. client names with secret Swiss accounts.
Evidence culled from the UBS probe, as well as thousands of Americans coming forward under a tax amnesty program, has fed a second wave of investigation, which has ensnared Credit Suisse and 13 other Swiss banks.
Fourteen institutions in total are under criminal investigation to determine whether they used hidden Swiss accounts to help U.S. clients cheat the tax system. A deal between the United States and Switzerland was agreed in August as part of a U.S. drive to lift the veil of Swiss bank secrecy and crackdown on wealthy Americans evading taxes.
Credit Suisse shares slipped around 2.7 percent in Europe on Wednesday.
The bank agreed to pay $197 million to regulators in a separate investigation last week after failing to register as a cross-border securities business while servicing thousands of U.S. clients. The Zurich-based lender set aside 295 million Swiss francs ($332 million) in 2011 to deal with any potential costs resulting from U.S. tax matters.
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