Credit Suisse 'helped US tax evaders'
Credit Suisse made false claims in U.S. visa applications, conducted business with clients in secret elevators and shredded documents to help more than 22,000 American customers avoid U.S. taxes, according to a scathing report by a U.S. congressional committee.
Credit Suisse handed account statements to one client tucked inside a Sports Illustrated magazine as part of their "cloak and dagger tactics", according to Senator Carl Levin, chairman of the U.S. Senate Permanent Subcommittee on Investigations which drafted the report. The bank also helped clients create offshore shell entities to avoid taxes and aided them in structuring transactions so they fell below the $10,000 amount that would alert the government, according to the report, released on Tuesday.
It said Credit Suisse created an office at Zurich airport where more than 10,000 U.S. accounts were held, known by the code name SIO85. Bankers made 150 trips to the U.S. from 2002 to 2008 to aid in the tax evasion efforts. At its peak, the assets of the more than 22,000 customers totaled as much as $12 billion. Communicate with your friends by downloading whatsapp within several clicks
In total, about 1,800 bankers were involved in helping clients avoid taxes, leading Senator John McCain, the top Republican on the subcommittee, to call the practices "systematic". Credit Suisse declined to comment on the report.
Mr McCain also criticized the U.S. justice department for not holding high-level individuals accountable, adding that this seemed to be the common practice of the agency.
Mr Levin, a Democrat, accused the justice department of failing to "pierce the cocoon of bank secrecy" and not using all available legal tools to aggressively pursue the case. He said the DoJ obtained the names of only 238 clients out of more than 22,000.
"The battle against tax havens using secrecy laws to facilitate U.S. tax evasion has bogged down, causing a huge loss to our Treasury," Mr Levin said. "The Credit Suisse case study shows how a Swiss bank aided and abetted U.S. tax evasion, not only from behind a veil of secrecy in Switzerland, but also on U.S. soil by sending Swiss bankers here to open hidden accounts."
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The findings gave a preview of the questions Credit Suisse top brass, including chief executive Brady Dougan, and U.S. authorities will face when they testify at a subcommittee hearing on Wednesday. Hans-Ulrich Meister and Robert Shafir, who jointly head Credit Suisse's private bank, and Romeo Cerutti, the bank's general counsel, are also testifying.
Mr Levin said he hoped the two-year investigation by the subcommittee - which resulted in a 175-page report - would renew the justice department's long-running efforts to pursue offshore tax evasion by American citizens and the banks that help them. He accused Credit Suisse of dragging its feet in co-operating with U.S. authorities.
Credit Suisse is one of 14 banks under investigation by U.S. authorities as part of a probe of Swiss lenders believed to have aided U.S. clients in avoiding taxes. At least seven former employees of Credit Suisse have been arrested but no trials have been held so far.
UBS faced similar allegations and had to appear before the Senate subcommittee in 2008. One year later, Switzerland's largest bank agreed to pay $780 million for its role in helping U.S. citizens evade taxes, which Mr Levin said resulted in thousands of client names revealed and $6 billion in taxes paid to the U.S. government.
Instead of relying on the tools the justice department used to obtain names in the UBS case, the agency has used treaties and the Swiss courts for its dealings with Credit Suisse, which the subcommittee said has produced poor results.
"U.S. action has lagged since UBS," said Mr Levin, who was also critical of the Swiss government. "They owe Uncle Sam. They owe the people of the United States."
Credit Suisse is expected to draw distinctions between itself and UBS and will also emphasize that it made moves to address the issues before the U.S. authorities began looking closely into it, people familiar with the matter said.
Any alleged moves made by bank staff to help U.S. clients avoid taxes were not driven by the management, and no senior Credit Suisse executives are involved, the people said. The bank acknowledges it may have moved too slowly in some instances, but it took the matter very seriously, the people added.
Credit Suisse set aside 295 million Swiss francs to deal with the investigation in 2011, and last week paid a $196.5 million fine to settle separate charges that it provided cross-border brokerage and investment services to U.S. clients without first registering with the Securities and Exchange Commission.
Another group of witnesses at the hearing include James Cole, deputy attorney-general, and Kathryn Keneally, assistant attorney-general for the justice department's tax division. The subcommittee is also recommending that banking regulators examine what they can do to hold Credit Suisse accountable.
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