Credit Suisse accused of aiding more tax evasion during broader tumult

New Jersey - Credit Suisse Group continues to help rich Americans hide assets from the taxman almost a decade after a unit pleaded guilty to a tax evasion conspiracy, the US Senate Finance Committee said, as the bank’s woes mount amid broader tumult in the sector.

The committee uncovered “major violations” of the US$2.6 billion plea deal Credit Suisse reached with the Justice Department in 2014, according to a report released on Wednesday. Among other items, it cited “what may be an ongoing criminal tax conspiracy” involving almost US$100 million (S$133 million) in secret offshore accounts belonging to a family of dual US-Latin American citizens.

In a statement, Senator Ron Wyden, the Oregon Democrat who chairs the committee, slammed “greedy Swiss bankers” who appear to be engaged in a “massive, ongoing conspiracy to help ultra-wealthy US citizens to evade taxes and rip off their fellow Americans”, despite Credit Suisse’s promises.

UBS liability

The committee said Credit Suisse has identified at least US$780 million in undeclared assets disclosed since the bank’s guilty plea in 2014, but much of it was first revealed to the United States by whistle-blowers. The assets include:

US$220 million from Dan Horsky, a US taxpayer who pleaded guilty in 2016

Nearly US$100 million from the family of US-Latin American citizens

23 other accounts of at least US$20 million each

The panel’s report comes as the bank is being sold to rival UBS in an emergency deal amid global turmoil in the industry, set off by the run on Silicon Valley Bank.

Meanwhile, UBS and Credit Suisse are under a Justice Department probe into whether financial professionals helped Russian oligarchs evade sanctions. On top of all that, the report came out right after prosecutors in France raided some of the nation’s largest lenders, including Societe Generale and BNP Paribas, as they investigate suspected tax fraud and money laundering.

UBS’ acquisition of the beleaguered lender for 3 billion francs (S$4.3 billion), brokered by the Swiss government, is the culmination of years of scandal and mismanagement at Credit Suisse. The report raises new challenges for UBS as it takes over a bank that could face further action from the Justice Department.

As the Credit Suisse rescue plan emerged, UBS expressed concern about taking on its rival’s potential legal liabilities. Banks can face severe penalties for breaching US sanctions. BNP Paribas in 2014 agreed to pay almost US$9 billion after pleading guilty to US charges for processing transactions for sanctioned Sudanese, Iranian and Cuban entities.

Credit Suisse said it does not tolerate tax evasion and that its new management is “actively cooperating” with the Justice Department to address any legacy conduct or policy concerns.

UBS said in a statement that it “made an assessment of outstanding litigation and investigation matters” as part of its due diligence for the acquisition and that it expects the deal to benefit its shareholders “in a wide range of business scenarios”.

To oversee the historic acquisition, it is bringing back Mr Sergio Ermotti as chief executive officer.

‘Repeat offenders’

Senator Wyden said the Senate’s investigation shows Credit Suisse did not live up to the 2014 deal and that its pending acquisition by UBS “does not wipe the slate clean”.

“It is deeply concerning that almost nine years after executives testified before Congress that the bank would clean up its act, Credit Suisse is still disclosing hundreds of millions of dollars in secret offshore accounts belonging to wealthy US taxpayers,” the committee said in its report.

More than US$300 million of the assets – those involving Horsky and the family – were revealed by whistle-blowers. The report includes detailed case studies of the bank’s failure to flag those assets to the Internal Revenue Service around the time of its guilty plea.

The whistle-blowers’ lawyer, Mr Jeffrey Neiman, said his clients “came forward with credible, now verified information that – even after 2014 and up until its demise – Credit Suisse continued to actively help Americans evade taxes and hide their money in offshore accounts”. BLOOMBERG