Credit Suisse's US clients in identity crisis over tax evasion probe
Thousands in limbo as prosecutors work with Swiss bank to get names of Americans that were helped to hide billions of dollars from taxman
Thousands of Credit Suisse's clients in the United States still do not know whether tax authorities will learn their identities as prosecutors work to conclude a three-year probe of how the bank helped them evade taxes.
US senators last week faulted the Department of Justice for securing names for only 238 of 22,000 Americans with Credit Suisse accounts, saying the bank helped them hide as much as US$10 billion from the Internal Revenue Service.
The pressure of a subcommittee report and hearings will force prosecutors to act more aggressively as they negotiate a settlement with Credit Suisse to end the probe and get more names, said Jeffrey Neiman, a former federal prosecutor.
"These hearings are going to give some sort of momentum to the justice department," said Neiman, now at law firm Marcus Neiman Rashbaum. "Criminal cases are all about momentum, where one event leads to another, which leads to culmination."
Credit Suisse is the largest of 14 Swiss banks under criminal investigation for helping Americans cheat the IRS. At the February 26 Senate hearing, chief executive Brady Dougan apologised, saying a small group of Swiss-based bankers appear to have broken US law and fooled top managers. The bank began slashing its US client list in 2008, and the 3,500 remaining comply with US tax laws, general counsel Romeo Cerutti said.
Democratic Senator Carl Levin, who led the hearing, said that was not enough. Credit Suisse cannot move forward until it helps the justice department identify account holders still shielded by Swiss bank secrecy, he said.
"If you're serious about the future, and all of us want to talk about the future, you damn well better have accountability for the past," Levin said.
Levin, chairman of the Senate Permanent Subcommittee on Investigations, criticised the justice department for failing to enforce grand jury subpoenas or file civil court actions to identify account holders. He said prosecutors relied too heavily on requesting names under a US-Swiss tax treaty, which he said is a "highly restrictive, maddeningly slow and unproductive process".
Swiss law makes it a crime to release account holders' names, except in treaty requests involving suspected tax fraud rather than evasion.
Levin repeatedly criticised Deputy Attorney General James Cole for deferring to Swiss bank secrecy instead of enforcing US laws more vigorously.
Cole pointed to successes in a five-year crackdown on offshore tax evasion, including the 43,000 Americans who told the IRS about offshore accounts and paid back taxes and penalties to avoid prosecution and the 106 Swiss banks seeking non-prosecution deals.
Cole declined to answer the subcommittee's questions about the criminal probe of Zurich-based Credit Suisse. Seven of its bankers were indicted in 2011, when prosecutors said the bank was a target of the probe.
Levin said an amendment to the treaty, which has been blocked in the Senate, is intended to give Swiss regulators more authority to identify owners of accounts held after September 2009.