Despite stories of unmarked elevators and secret wire transfers, the most damaging charge against Credit Suisse Group AG has been comparatively mundane: as it courted Americans for offshore accounts, the bank failed to register its bankers with the Securities and Exchange Commission.
Credit Suisse Group AG bankers courted American tax evaders, between 2002 and 2008, schooling them in how to do an end-run around the Internal Revenue Service and hide behind Swiss secrecy rules, according to a 181-page report from the Senate’s Permanent Subcommittee on Investigations. Beyond just offering American clients undeclared Swiss accounts, Credit Suisse bankers helped set up “shell entities” to “mask their U.S. ownership.” The bankers also offered helpful tips in hiding financial activity, like keeping transactions below a certain dollar amount to avoid triggering greater scrutiny, according to the report.
Credit Suisse acknowledges the “misconduct, centered on a small group of Swiss-based private bankers, previously occurred at our bank,” according to the bank’s statement submitted to the subcommittee. Bank officials “deeply regret these employees’ actions.” Since 2008, after the allegations came to light, Credit Suisse, “took proactive and decisive steps to ensure that only U.S. clients who established compliance with U.S. tax laws could remain at the Bank,” according to the statement. The bank says it shut down the unit responsible for in 2009.
Despite the color of the alleged tax evasion, the most painful charge against the bank has been less sexy: As bankers recruited American clients, they failed to register with the SEC. Credit Suisse agreed to pay the SEC $196 million over those charges last month, in a case that bore a striking resemblance to the allegations against another Swiss bank, UBS AG. “It’s Deja Vu all over again,” said John C. Coffee, a professor at Columbia Law School.