Credit Suisse close to pleading guilty and paying US$2.5b over tax charge

Zurich-based bank close to pleading guilty and paying US$2.5b in fines to resolve investigation into whether it helped Americans evade taxes

PUBLISHED : Saturday, 17 May, 2014, 2:02am
UPDATED : Monday, 19 May, 2014, 7:35pm

Credit Suisse Group is close to reaching an agreement to plead guilty and pay about US$2.5 billion to the US Department of Justice and regulators to resolve investigations into whether it helped Americans evade taxes.

The Zurich-based bank would pay about US$1.7 billion to the justice department, at least US$600 million to the New York Department of Financial Services and US$100 million to the Federal Reserve. The proposed accord could be announced as early as next week, people familiar with the matter said.

"That seems higher than what everybody was anticipating," said William Sharp, an American tax lawyer who splits his time between Switzerland and the US. "It's mutually beneficial for both the bank and the US government to put this dispute behind them. It's been dragging on for many years, and frankly could drag on for several more years."

The parent company would plead guilty in federal court in Alexandria, Virginia, one of the people said. A guilty plea by Credit Suisse's parent company would be the first by a major global bank in the US in more than two decades.

Switzerland's second-largest bank would admit to a statement of facts still being negotiated, and the firm would not have to disclose the names of US account holders, the person said.

US Attorney General Eric Holder is seeking to blunt criticism from lawmakers that the Justice Department considered large banks immune from prosecution after the 2008 financial crisis because of their size and importance to the economy. Holder has been faulted for settlements that let banks escape criminal charges while paying fines and admitting wrongdoing.

The US has not pressed criminal charges against a global bank's holding company since the 1992 guilty plea of the Bank of Credit and Commerce International, once the seventh-largest closely held bank. Banks including Credit Suisse, UBS, HSBC and JP Morgan Chase avoided convictions through settlements in recent years.

While prosecutors have extracted guilty pleas from subsidiaries of some large banks, they have spared holding companies.

US authorities are also seeking more than US$3.5 billion from BNP Paribas to settle federal and state investigations into the Paris-based lender's dealings with sanctioned countries including Sudan and Iran, according to people familiar with the matter.

Calvin Mitchell, a spokesman for Credit Suisse, and justice department spokeswoman Dena Iverson, declined to comment on the matter.

Last month, Credit Suisse set aside 425 million Swiss francs (HK$3.7 billion) in provisions for the probe, in addition to 295 million francs for US tax matters in 2011. It agreed to pay US$196.5 million in February to settle a related investigation by the US Securities and Exchange Commission.

Seven Credit Suisse bankers and a trust company manager were indicted in Alexandria in July 2011 on a charge of conspiring to help US clients hide US$4 billion in assets from the Internal Revenue Service.

The justice department told the bank that month that it was a target of prosecutors.

The bank is the largest of 14 Swiss firms facing similar criminal investigations. The US legal assault seeks to chip away at the promotion of tax evasion through bank secrecy in Switzerland, the world's largest cross-border financial centre.