Published May 19, 2014
Credit Suisse (NYSE: CS) pleaded guilty Monday to a criminal charge that for decades the big Swiss bank has helped Americans illegally hide money from the Internal Revenue Service.
In an information filed in federal court in Virginia, the U.S. Department of Justice said Credit Suisse “intentionally and knowingly” helped U.S. clients prepare “false” tax returns.
Credit Suisse pled guilty to a single count of conspiring to aid tax evasion and agreed to pay a $2.6 billion fine. The fines break down as follows: $1.8 billion to the Department of Justice for the U.S. Treasury, $100 million to the Federal Reserve, and $715 million to the New York State Department of Financial Service.
The plea represents the first time in about a decade that the parent company of a large financial institution admitted guilt to a criminal charge brought by the government.
"The bank went to elaborate lengths to shield itself," Attorney General Eric Holder said in a press conference, adding that Credit Suisse "failed to take even the most basic steps to ensure compliance with bank laws."
According to the criminal information, Credit Suisse has been aiding U.S. clients in evading their taxes for decades, using all manner of strategies to deceive the IRS.
Credit Suisse bankers, the government alleged, set up “sham entities” to help mask the identities of U.S. clients with undeclared Swiss accounts, destroyed documents sought by the IRS, failed to maintain important U.S. records related to those accounts, and helped U.S. clients draw money from those accounts without alerting the IRS.
The settlement is part of a sweeping investigation by the U.S. Department of Justice and the New York State Department of Financial Services into allegations that several international financial firms helped wealthy U.S. citizens evade taxes.
The Credit Suisse deal is the biggest catch so far of the sweep.
Credit Suisse said it doesn't expect the pact to have a material impact on its operations. Still, it will reduce second-quarter net income by about $1.79 billion on an after-tax basis.
"We deeply regret the past misconduct that led to this settlement. The US cross-border matter represented the most significant and longstanding regulatory and litigation issue for Credit Suisse. Having this matter fully resolved is an important step forward for us," CEO Brady Dougan said in a statement.
The guilty plea, a significant step in the DOJ’s effort to hold big banks accountable for allegations of fraud and other acts of impropriety, won't lead to a ban on Credit Suisse from operating in the U.S., which could have served as a death-knell for the big bank.
The bank's chief executive and chairman are not expected to lose their jobs over the case, despite calls by some in Switzerland for them to leave the firm, the Wall Street Journal reported.
Credit Suisse had set its sights on a settlement of less than $500 million, according to published reports.
Government officials were reportedly leery of toppling the bank for fear of the impact on the broader economy, so instead negotiated the guilty plea gingerly with an eye toward punishing the bank and forcing it to admit guilt, but not putting it out of business.
Government investigators are also reportedly looking into criminal allegations against France-based BNP Paribas and seeking a similar guilty plea.