Credit Suisse Pleads to One Count of Conspiracy to Aiding and Assisting (5/19/14; 5/20/14)

The key documents are:

• Criminal Information, here.
• Plea Agreement, here.
• Statement of Facts, here.

FROM THE CRIMINAL INFORMATION (THE ACTUAL CHARGING DOCUMENT):

Title of Case:  United States v. Credit Suisse AG (ED VA Alexandria Div.  No. 1:14-CR-1:14CR2188)  (I am not sure the docket number is correct, but will confirm and correct latler if necessary).

Defendant:  Credit Suisse AG.  Two subsidiaries are included in the definition of Credit Suisse AG.  The two subsidiaries are Credit Suisse Fides and Clariden Leu Ltd.

Charge:  One count of conspiracy under 18 USC 371.  The charge is an offense conspiracy to violate Section 7206(2), aiding and assisting  Section 7206 is here.  The charge is not the defraud / Klein obstruction conspiracy.

Factual allegations in the Information:  "For decades prior to an through in or about 2009, the exact dates being unknown to the United States Attorney, in the Eastern Distrist of Virginia and elsewhere" the defendants committed the crime.

There are bare bones allegations of "manner and means" and "overt acts."  Only two clients' situations are alleged as overt acts, but presumably they are not unrepresentative of thousands of other clients over the years.

I should note that Dana Boente, the United States Attorney, formerly served in the DOJ Tax Division both as trial attorney and Principal Deputy Assistant Attorney General.

The DOJ Tax attorney signing the information is Mark F. Daly who has played a prominent role in DOJ Tax's actions in the offshore bank account initiative.

FROM THE PLEA AGREEMENT (SELECTED EXCERPT):

2. Factual Basis for the Plea 

The defendant will plead guilty because the defendant is in fact guilty of the charged offense. The defendant admits the facts set forth in the Statement of Facts filed with this plea agreement and agrees that those facts establish guilt of the offense charged beyond a reasonable doubt. The Statement of Facts, which is hereby incorporated into this plea agreement, constitutes a stipulation of facts for purposes of Section I B 1.2(a) of the Sentencing Guidelines. 

* * * * 

5. Restitution 

Defendant agrees that restitution is mandatory pursuant to 18 U.S.C. §3663A. Defendant agrees to the entry of a Restitution Order for the full amount of the victim's losses. Pursuant to 18 U.S.C. § 3663A(c)(2), the defendant agrees that an offense listed in§ 3663A(c)(l) gave rise to this plea agreement and as such, victims of the conduct described in the charging instrument, statement of facts or any related or similar conduct shall be entitled to restitution. The Government is currently aware that the fo llowing victim has suffered the following losses:

Victim Name/ Address          Amount of Restitution
IRS- RACS                           $666,500,000
Ann.: Mail Stop 6261, Restitution
333 West Pershing Avenue
Kansas City, MO 64108 

The parties agree that restitution shall be paid directly to the Internal Revenue Service, pursuant to payment instructions provided to Credit Suisse AG. If the Court orders the defendant to pay restitution to the IRS for the fai lure to pay tax, either directly as part of the sentence or as a condition of supervised release, the IRS will use the restitution order as the basis for a civil assessment. See 26 U .S.C. § 6201(a)( 4). The defendant docs not have the right to challenge the amount of this assessment. See 26 U.S .C. § 6201 (a)(4)(C). Neither the existence of a restitution payment schedule nor the defendant's timely payment of restitution according to that schedule will preclude the IRS from administrative collection of the restitution-based assessment, including levy and distraint under 26 U.S.C. § 6331. 

* * * * 

7. Agreed Disposition 

A. The Office of the U.S. Attorney for the Eastern District of Virginia and the Tax Division, Department of Justice (co llectively, "the United States") and Credit Suisse AG agree pursuant to Fed. R. Crim. P. II (c)( I )(C) that the following sentence, which comprises a Two Billion dollar ($2,000,000,000) resolution with the Department of Justice as detailed below, is the appropriate disposition of the Information: 

    1. a criminal fine in the amount of One Billion. Three Hundred Thirty-Three Million, Five Hundred Thousand dollars ($1,333,500,000), less a credit of One Hundred Ninety-Six MiIlion, Five Hundred Eleven Thousand, Fourteen Dollars ($196,51 I ,0 14) for Credit Suisse Group AG's payment to the U.S. Securities and Exchange Commission pursuant to its order of February 21, 2014 in Administrative Proceeding File No. 3-15763, for a final payment of One Billion, One Hundred Thirty-Six Million, Nine Hundred Eighty-Eight Thousand, Nine Hundred Eighty-Six Dollars ($1,136,988,986), to be paid within one week of the date of sentencing; 

    2. a mandatory special assessment of $400, which shall be paid to the Clerk of Court on or before the date of sentencing; and 

    3. restitution to the U.S. Internal Revenue Service in the amount of Six Hundred Sixty-Six Million, Five Hundred Thousand dollars ($666,500,000), to be paid within one week of sentencing.  

In light of the fine, restitution, and other payments to be paid by Credit Suisse AG to the United States and federal and state regulatory authorities, the United States will forgo the payment of additional penalties available under the relevant statutes, rules, and regulations.  

B. Credit Suisse AG further agrees to lawfully undertake the following: 

    1. Credit Suisse AG must promptly disclose all evidence and information described in Sections II.D. I. and II.D.2 of the Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks and in the format requested by the United States; 

    2. Credit Suisse AG will provide, at its own expense, fair and accurate translations of any foreign language documents produced by Credit Suisse AG to the Government either directly or through the Swiss Federal Tax Administration; 

    3. Credit Suisse AG will provide testimony or information. including testimony and information necessary to identify or establish the original location, authenticity, or other basis for admission into evidence of documents or physical evidence in any criminal or other proceeding as requested by the Government, including but not limited to the conduct set forth in the Statement of facts; 

    4. Credit Suisse AG will provide all necessary information for the United States to draft treaty requests to seek account records and other information, and will collect and maintain all records that are potentially responsive to such treaty requests to facilitate prompt responses; 

    5. Credit Suisse AG will close any and all accounts of recalcitrant account holders, as defined in Section 1471(d)(6) of the Internal Revenue Code; will implement procedures to prevent its employees from assisting recalcitrant account holders to engage in acts of further concealment in connection with closing any account or transferring any funds; and will not open any U.S. Related Accounts (as defined in paragraph 1.8.9 of the Program for NonProsecution Agreements or Non-Target Letters for Swiss Banks, without regard to the dollar limit or the applicable time period) except on conditions that ensure that the account will be declared to the United States and will be subject to disclosure by Credit Suisse AG; and 

    6. Credit Suisse AG agrees that no portion of the fine or other payments made pursuant to this plea  agreement will serve as a basis for Credit Suisse AG to claim, assert,or apply for, either directly or ind irectly, any tax deduction, any tax credit, or any other offset against any U.S. federal , state, or local tax or taxable income. 

C. The United States specifically may. at its sole option, be released from its commitments under this plea agreement, including, but not limited to, its agreement that this paragraph constitutes the appropriate disposition of this case, if at any time between its execution of this plea agreement and sentencing, Credit Suisse AG: 

    1. Fails to truthfully admit its conduct in the offense of conviction; 

    2. Falsely denies, or frivolously contests, relevant conduct for which Credit Suisse AG is accountable under U.S.S.G. § I B 1.3; 

    3. Gives false or misleading testimony in any proceeding relating to the criminal conduct charged in this case and any relevant conduct for which Credit Suisse AG is accountable under U.S.S .G. § I B 1. 3; 

    4. Engages in acts which form a basis for finding that Credit Suisse AG has obstructed or impeded the administration of justice under U.S.S.G. § JCI.I; or 

    5. Attmpts to withdraw its plea. 

D. Credit Suisse AG expressly understands and acknowledges that it may not withdraw its plea of guilty, unless the Court rejects this plea agreement under Fed. R. Crim. P. II (c)(5). 

E. Credit Suisse AG agrees that it shall not, through its attorneys, agents, officers, or employees, make any statement, in litigation or otherwise, contradicting the Statement of Facts or Credit Suisse AG's representations set forth in this plea agreement; provided, however, that the restrictions set forth in this paragraph are not intended to and shall not apply to any current or former Credit Suisse AG employee, or any other individual or entity, in the course of any criminal, regulatory, or civil case, investigation, or other proceeding initiated by the Government or any other governmental agency or authority against an individual or entity, whether in the United States or any other jurisdiction, provided that the individual or entity is not authorized to speak on behalf of Credit Suisse AG. Any contradictory statement by Credit Suisse AG shall
constitute a breach of th is plea agreement, and trigger the provis ions of sub-paragraphs 12a-12c.  The decision as to whether any contradictory statement will be imputed to Credit Suisse AG for the purpose of determining whether Credit Suisse AG has breached this plea agreement shall be at the sole discretion of the Un ited States. Upon a determination by the United States that a contradictory statement has been made by Credit Suisse AG, the United States shall promptly notify Credit Suisse AG in writing of the contradictory statement, and Credit Suisse AG may avoid a breach of this plea agreement by repudiating the statement both to the recipient of the statement and to the United States within 72 hours after receipt of notice by the Un ited States. Credit Suisse AG consents to the public release by the United States, in its sole discretion, of any repudiation.

FROM THE STATEMENT OF FACTS:

This is a more detailed statement, but still summary, of the history and manner and means of the skullduggery.  I don't cut and paste it here, for it is fun reading and should be read in its entirety.

OTHER MATTERS

The IRS press release is here.  Some excerpts:

The guilty plea by the Swiss corporation is the result of a years-long investigation by U.S. law enforcement authorities that has also produced indictments of eight Credit Suisse executives since 2011; two of those individuals have pleaded guilty so far. 

The plea agreement, along with agreements made with state and federal partners, provides that Credit Suisse will pay a total of $2.6 billion - $1.8 billion to the Department of Justice for the U.S. Treasury, $100 million to the Federal Reserve, and $715 million to the New York State Department of Financial Services.  The plea agreement was filed in the Eastern District of Virginia today.  Earlier this year, Credit Suisse 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.  That settlement with the SEC is also reflected in today’s plea agreement.  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. 

* * * *  

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.

Statement of Attorney General Holder here.  Some excerpts:

Today, the Department of Justice filed a criminal information against Credit Suisse AG –a bank that is one of the largest wealth managers in the world.   In the course of our painstaking, years-long investigation, the Department discovered that Credit Suisse and its subsidiaries engaged in an extensive and wide-ranging conspiracy to help U.S. taxpayers evade taxes.   The bank actively helped its account holders to deceive the IRS by concealing assets and income in illegal, undeclared bank accounts.   These secret offshore accounts were held in the names of sham entities and foundations.   This conspiracy spanned decades.   In the case of at least one wholly-owned subsidiary, the practice of using sham entities to conceal funds began more than a century ago.   Credit Suisse not only knew about this illegal, cross-border banking activity; they willfully aided and abetted it.   Hundreds of Credit Suisse employees, including at the manager level, conspired to help tax cheats dodge U.S. taxes.

In the course of these activities, Credit Suisse deceived the IRS, the Federal Reserve, the Securities and Exchange Commission, and the Department of Justice.   The bank went to elaborate lengths to shield itself, its employees, and the tax cheats it served from accountability for their criminal actions.   They subverted disclosure requirements, destroyed bank records, and concealed transactions involving undeclared accounts by limiting withdrawal amounts and using offshore credit and debit cards to repatriate funds.   They failed to take even the most basic steps to ensure compliance with tax laws.   And when the bank finally began to feel pressure to correct illegal practices and comply with the law – as a result of the Justice Department’s investigation, of which they were notified in 2010 – Credit Suisse failed to retain key documents, allowed evidence to be lost or destroyed, and conducted a shamefully inadequate internal inquiry.

Today, I can announce that Credit Suisse has agreed to plead guilty to criminal charges related to this pervasive illegal activity.   This is the largest bank to plead guilty in 20 years.   The bank will pay a total of $1.8 billion in the form of a fine of over $1.13 billion and nearly $670 million in restitution to the IRS.  They have admitted criminal wrongdoing in a detailed Statement of Facts filed alongside the information in this case.   And they have stopped these activities, fundamentally changed their business operations, and agreed to provide critical information that will aid in our enforcement efforts – so the bank can move forward in full compliance with the law.

 Statement of Kathryn Keneally, Assistant Attorney General, here.  Some excerpts:

Also, through the information that Credit Suisse has agreed to provide, the Internal Revenue Service and the Department of Justice will be able to make treaty requests to Switzerland for account records.  For those account holders who closed their accounts knowing that our investigations were focusing on Credit Suisse, we are obtaining information that is enabling us to follow the funds to other Swiss banks or to banks in other tax haven and bank secrecy countries.  * * * *

We also appreciate that Switzerland has taken important steps to ensure that its banking community will no longer be a haven for U.S. tax evasion.   Switzerland’s ratification, in September 2009, of the Protocol amending U.S.–Swiss tax treaty, and its inter-govermental agreement with the United States concerning FATCA implementation, were significant steps toward this goal.   We are also grateful for the support of the Swiss Financial Market Supervisory Authority, FINMA, and the Swiss government for the Swiss Bank Program that the Department announced in August 2013.   Through this program, Swiss banks are cooperating to provide valuable information that will further our global investigations, and those Swiss banks in turn have a path to resolution for past activities.

JAT Comment:   As I posted in an earlier blog today, there was a report that the nature of the charge would be a watered down conduct that the bank did not know about, which seemed strange for a tax related charge, particularly with such tools as willful blindness / conscious avoidance.  Here, it seems to me that Credit Suisse has admitted total Cheek willful culpability -- intent to violate a known legal duty.  This is because Section 7206(2) has willfulness as an element.  And the offense conspiracy has the same level of mens rea as the underlying offense.  See Ingram v. United States, 360 U.S. 672, 678 (1959), here.

Early reporting from the press:

Ben Protess and Jessica Silver-Greenberg, Credit Suisse Pleads Guilty in Tax Evasion Case (NYT Dealbook 5/19/14), here.  Excerpts:

The Credit Suisse plea won’t be the last. The case, which comes some three years after federal prosecutors in Virginia indicted eight Credit Suisse bankers, will provide a template for prosecuting other financial misdeeds — both present and future. BNP Paribas, France’s largest bank, is next in line to plead guilty in the coming weeks, the people briefed on the matter said. The bank, which is suspected of doing business with countries like Sudan and Iran that the United States has blacklisted, will also pay more than $5 billion in fines, the people briefed on the matter said, and Mr. Lawsky is planning to penalize a dozen or so bank employees. 

The BNP and Credit Suisse cases may also lay the groundwork for criminal actions against American banks. The new strategy applies to American banks like JPMorgan Chase and Citigroup, which are both the subject of criminal investigations, but those inquiries are at an earlier stage and it is unclear whether they would warrant charges.

The balance of the NYT Dealbook article deals with other criminal initiatives that might be pursued against other banks, even U.S. banks.