(Bloomberg) -- Credit Suisse Group AG continues to help rich Americans hide assets from the IRS 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 industry.
The committee uncovered “major violations” of the $2.6 billion plea deal Credit Suisse reached with the Justice Department in 2014, according to a report released Wednesday. Among other items, it cited “what may be an ongoing criminal tax conspiracy” involving almost $100 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.
Several other Swiss banks — Union Bancaire Privee, PKB Privatebank AG and Bank Leumi — received undeclared funds in 2012 and 2013 from the family, the committee said. UBP had no immediate comment, while PKB and Bank Leumi didn’t immediately respond to requests for comment.
Industry Turmoil, UBS Liability
The committee said Credit Suisse has identified at least $780 million in undeclared assets disclosed since the bank’s guilty plea in 2014, but much of it was first revealed to the US by whistleblowers. The assets include:
- $220 million from Dan Horsky, a US taxpayer who pleaded guilty in 2016
- Nearly $100 million from the family of US-Latin American citizens
- 23 other accounts of at least $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 in California. 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 SA and BNP Paribas SA, as they investigate suspected tax fraud and money laundering.
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UBS’s acquisition of the beleaguered lender for 3 billion francs ($3.26 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 $9 billion after pleading guilty to US charges for processing transactions for sanctioned Sudanese, Iranian and Cuban entities.
UBS Due Diligence
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.
“Our clear policy is to close undeclared accounts when identified, and to discipline any employee who fails to comply with bank policy or falls short of Credit Suisse’s standards of conduct,” the bank said in a statement Wednesday.
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 Sergio Ermotti as chief executive officer.
Under the 2014 plea agreement, Credit Suisse still must identify all undeclared accounts to the US Internal Revenue Service. The committee uncovered two dozen “large, potentially undeclared accounts,” including 10 clients identified last year and 13 disclosed by the bank in recent days. Each had $20 million or more.
Wyden said the Senate’s investigation shows Credit Suisse didn’t live up to the 2014 deal and that its pending acquisition by UBS “does not wipe the slate clean.” He said the Justice Department must crack down on “repeat offenders like Credit Suisse” and pursue criminal investigations of individual bankers.
“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 $300 million of the assets — those involving Horsky and the family — were revealed by whistleblowers. The report includes detailed case studies of the bank’s failure to flag those assets to the IRS around the time of its guilty plea.
Potential Breach of Plea Deal
In 2013, the year before the bank’s plea, the family contacted “at least two former Credit Suisse bankers” for help in “discretely transferring funds,” the report said. Weeks later, the bank “began quietly and methodically closing the family’s accounts and transferring funds to other banks in Switzerland, Israel and elsewhere,” the panel found.
Under the plea agreement, the bank had to disclose all undeclared US accounts closed and transferred from August 2008 to May 2014. Disclosing those account holders, known to prosecutors as “leaver lists,” was a US requirement for Credit Suisse, several other Swiss banks that faced criminal charges, and 80 Swiss banks that made deals to avoid prosecution.
One informant believed closing those accounts required “discussions with Credit Suisse management and compliance,” the report said. “These allegations would constitute a major violation of Credit Suisse’s plea agreement with DOJ, as well as a conspiracy to allow the family to continue to conceal their assets from the IRS.”
The whistleblowers’ lawyer, 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.”
--With assistance from Myriam Balezou.