Credit Suisse AG was sentenced today for conspiracy to aid and assist U.S. taxpayers in filing false income tax returns and other documents with the Internal Revenue Service (IRS). Credit Suisse pleaded guilty to conspiracy on May 19. * * * *
At sentencing in the U.S. District Court for the Eastern District of Virginia, U.S. District Chief Judge Rebecca Beach Smith entered judgment and conviction and a restitution order requiring Credit Suisse to pay approximately $1.8 billion dollars to the United States by Nov. 28, per the plea agreement. Credit Suisse will pay the Justice Department’s Crime Victims Fund, through the District Court Clerk’s Office for the Eastern District of Virginia, a fine of approximately $1.136 billion and will pay the IRS $666.5 million in restitution. The parties agreed that Credit Suisse cannot challenge the restitution amount, which can also provide a basis for an IRS civil tax assessment.
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The plea agreement, along with agreements made with state and federal agencies, provides that Credit Suisse will pay a total of approximately $2.6 billion—approximately $1.8 billion in a criminal fine and restitution, $100 million to the Federal Reserve and $715 million to the New York State Department of Financial Services. Earlier this year, Credit Suisse negotiated cease and desist orders with the Federal Reserve and the state of New York requiring the bank to take certain remedial steps to ensure its compliance with U.S. law in its ongoing operations in addition to the civil penalties. Credit Suisse also paid approximately $196 million in disgorgement, interest and penalties to the Securities and Exchange Commission (SEC) for violating the federal securities laws by providing cross-border brokerage and investment advisory services to U.S. clients without first registering with the SEC. Together, these actions by U.S. law enforcement and state and federal partners appropriately punish Credit Suisse for its past behavior in these matters.
As part of the plea agreement, Credit Suisse acknowledged that, for decades prior to and through 2009, it operated an illegal cross-border banking business that knowingly and willfully aided and assisted thousands of U.S. clients in opening and maintaining undeclared accounts and concealing their offshore assets and income from the IRS.
According to the statement of facts filed with the plea agreement, Credit Suisse employed a variety of means to assist U.S. clients in concealing their undeclared accounts, including by:
- Assisting clients in using sham entities to hide undeclared accounts;
- Soliciting IRS forms that falsely stated, under penalties of perjury, that the sham entities were the beneficial owners of the assets in the accounts;
- Failing to maintain records in the United States related to the accounts;
- Destroying account records sent to the United States for client review;
- Using Credit Suisse managers and employees as unregistered investment advisors on undeclared accounts;
- Facilitating withdrawals of funds from the undeclared accounts by either providing hand-delivered cash in the United States or using Credit Suisse’s correspondent bank accounts in the United States;
- Structuring transfers of funds to evade currency transaction reporting requirements; and
- Providing offshore credit and debit cards to repatriate funds in the undeclared accounts.
As part of the plea agreement, Credit Suisse further agreed to make a complete disclosure of its cross-border activities, cooperate in treaty requests for account information, provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed and to close accounts of account holders who fail to come into compliance with U.S. reporting obligations. Credit Suisse has also agreed to implement programs to ensure its compliance with U.S. laws, including its reporting obligations under the Foreign Account Tax Compliance Act and relevant tax treaties, in all its current and future dealings with U.S. customers.
On December 5, two former employees of a Credit Suisse subsidiary will be sentenced for their involvement in assisting U.S. customers to evade their taxes. On March 12, Andreas Bachmann, a former banker at Credit Suisse Fides pleaded guilty to a superseding indictment in connection with his work as a banker at Credit Suisse Fides. On April 30, Josef Dörig, a former Credit Suisse Fides employee and owner/operator of a trust company, pleaded guilty to conspiring to defraud the IRS in connection with his role managing offshore entities used by U.S. taxpayers to conceal their accounts at Credit Suisse. The pleas were accepted by U.S. District Judge Gerald Bruce Lee in the Eastern District of Virginia. Bachmann and Dörig each face a statutory maximum sentence of five years in prison.JAT Comments:
1. I did not include in the excerpts the claims that CS had been held "fully accountable for helping U.S. taxpayers engage in tax evasion” and that CS has been held "responsible for its decades-long pervasive conduct of aiding U.S. taxpayers in the commission of tax crimes." I suspect that it is only crimes in that category that may not yet be known or full understood by DOJ. And, of course, if it is full recompense for CS decades-long behavior is not likely (considering the time value of money and appropriate interest factoring). CS certainly got a very good deal (that's why CS agreed to it via plea.) These events are just costs of doing business for Swiss banks.
2. The quote above includes: "The parties agreed that Credit Suisse cannot challenge the restitution amount, which can also provide a basis for an IRS civil tax assessment." What assessment? Maybe readers can help me with this. The taxes evaded are the U.S. taxpayer's taxes; that portion of the restitution must relate to U.S. taxpayer's taxes. But I don't think that the relative new statute permitting immediate tax assessment can apply to assessing the tax liabilities of the U.S. taxpayer's taxes. And, if so, do the U.S. taxpayers then have cancellation of indebtness income. And, on and on and on (such as the effect of the statute of limitations on the U.S. taxpayers for assessment and cancellation of indebtedness income)? I hope readers will comment on these issues and, if so, spur me to write separately on them.