Credit Suisse has agreed to pay a $2.5 billion fine to authorities in the United States for helping Americans evade taxes after becoming the largest bank in 20 years to plead guilty to a U.S. criminal charge.
The bank’s guilty plea resolves its long-running dispute with the United States over tax evasion, but could have implications for the clients and counterparties that do business with the group.
Credit Suisse said it had not seen a material impact in the past few weeks on its business, and that clients faced no legal obstacles from doing business with it despite the guilty plea.
Switzerland’s second largest bank escaped what could have been the worst outcome for its business – its top management stayed in place and it will not have to hand over client data, protected by Swiss secrecy laws. And the New York state bank regulator decided not to revoke the bank’s license in the state.
U.S. prosecutors said the bank helped clients deceive U.S. tax authorities by concealing assets in illegal, undeclared bank accounts, in a conspiracy that spanned decades, and in one case began more than a century ago.
“This case shows that no financial institution, no matter its size or global reach, is above the law,” Attorney General Eric Holder said at a news conference in Washington.
CEO Dougan Brady of Swiss bank Credit Suisse attends the company’s annual shareholder meeting in Zurich, Switzerland, May 9, 2014.CEO Dougan Brady of Swiss bank Credit Suisse attends the company’s annual shareholder meeting in Zurich, Switzerland, May 9, 2014.
“We deeply regret the past misconduct that led to this settlement,” Credit Suisse CEO Brady Dougan said on Tuesday.
The Justice Department has not often pursued such convictions of financial companies, especially large ones that could become destabilized following an indictment. But U.S. politicians have pushed for tougher punishment for big banks in response to the 2007-2009 financial crisis.
Fine to be paid
Credit Suisse will pay the penalties to the U.S. Department of Justice, the Internal Revenue Service, the Federal Reserve and New York’s banking regulator, the New York State Department of Financial Services. It had already paid just under $200 million to the Securities and Exchange Commission.
Switzerland’s left-wing Social Democrats renewed a call first made last week for Dougan and other executives to step down to allow the bank to make a fresh start.
Asked whether he had considered such a move, Dougan, a 24-year veteran of the bank who took over as CEO in 2007, said resignation had “never been a consideration” and he remained committed to the bank.
New York bank regulators discussed replacing Dougan and others, a source familiar with the negotiations said. But in the end, the option was not made a condition of the deal.
The Swiss government said its main concern was that Credit Suisse was managed well and could move on, and that any change in leadership “wasn’t the concern of politics.”
The bank’s chairman, Urs Rohner, told Swiss radio on Tuesday that he and CEO Dougan personally had a clean record, but the same could not be said for the bank’s behavior in past decades.
Switzerland’s regulator effectively cleared the two, saying it had found no evidence that Credit Suisse top management knew of specific misconduct.
Switzerland’s largest bank, UBS, in 2009 entered a deferred prosecution agreement with the Justice Department in which it agreed to pay $780 million in fines and turn over the names of thousands of customers suspected of evading U.S. taxes, an AP report said.
The country’s oldest bank, Wegelin & Co., pleaded guilty in January 2013 to U.S. tax charges, admitting that it helped American clients hide more than $1.2 billion from the IRS.
Bank can continue operating
In the Credit Suisse case, officials said a criminal charge was necessary to account for the bank’s pattern of misconduct, which included a lack of cooperation and document destruction. But the deal was structured in such a way as to allow the bank to continue operating, the AP reported.
Zurich-based Credit Suisse is on a regulators’ list of 29 “global systemically important banks” whose failures would be considered a threat to the entire financial system.
The criminal resolution follows a Senate subcommittee investigation that found the bank provided accounts in Switzerland for more than 22,000 U.S. clients totaling $10 billion to $12 billion, according to the AP.
The report said Credit Suisse sent Swiss bankers to recruit American clients at golf tournaments and other events, encouraged U.S. customers to travel to Switzerland and actively helped them hide their assets. In one instance, a Credit Suisse banker handed a customer bank statements hidden in a Sports Illustrated magazine during a breakfast meeting in the United States.
Shares in Credit Suisse climbed Tuesday, gaining 2.84 percent to reach 26.81 Swiss francs on the Swiss stock exchange’s SMI index, the French news agency AFP reported.
Analysts said that the fact that Credit Suisse had drawn a line under its legal problems outweighed the importance of paying what is the heaviest fine ever levied in a U.S. tax case, $2.5 billion.
Some information for this report was provided by Reuters, AP and AFP.