August 18, 2022

DealBook: Credit Suisse Discloses U.S. Inquiry Over Taxes

An office of the Swiss bank Credit Suisse in Zurich.Arnd Wiegmann/ReutersAn office of the Swiss bank Credit Suisse in Zurich.

7:50 p.m. | Updated

Credit Suisse disclosed Friday that it was being investigated by the Justice Department to see whether its private banking unit helped Americans evade taxes, raising the possibility that the bank could face legal proceedings similar to those that led its Swiss rival, UBS, to pay a costly settlement and open its books to American tax authorities.

Citing “a broader industry inquiry,” Credit Suisse said it had previously received subpoenas and other information requests from the Justice Department and other government agencies regarding the cross-border services that its private banking arm provided to its rich American clients. The bank also said it was told it was “a target” of the investigation on Thursday.

“Subject to our Swiss legal obligations, we will continue to cooperate with the U.S. authorities in an effort to resolve these matters,” the bank said.

Jeffrey A. Neiman, a former federal prosecutor who had been assigned to the UBS case, called Credit Suisse’s disclosure “déjà vu all over again.”

“The Justice Department could not signal more strongly to an individual entity that they consider them to be in gross violation of the law than by calling them the target of an investigation,” he said. “The bank, and its U.S. clients, should take that very seriously.”

Four private bankers tied to Credit Suisse were indicted in the United States in February for helping American citizens evade taxes. The four — Marco Parenti Adami, Emanuel Agustoni, Michele Bergantino and Roger Schaerer — were also linked to Bank Leumi, the big Israeli bank, and Bank Frey and Maerki Baumann, two smaller Swiss private banks. They have been accused of conspiracy and fraud.

The bankers, three of whom had left Credit Suisse before they were indicted, were accused of helping American clients set up offshore accounts under false names, and shifting money from Credit Suisse accounts to smaller Swiss private banks.

At the time, Credit Suisse said it was not the object of an investigation by the Justice Department, and industry analysts thought the bank might be able to strike a deal with American authorities by paying a fine, much like UBS did in 2009.

The announcement on Friday raises the stakes for Credit Suisse. UBS paid a $780 million fine and handed over data on thousands of clients to avoid a conviction in a similar case that could have cost it its banking license in the United States.

On Friday, a Swiss court upheld the Swiss government’s decision to force UBS to hand over client data, citing “virtually uncontrollable economic repercussions for Switzerland” if it had not done so. That decision implies that Credit Suisse, too, may be ordered to surrender information about customers’ accounts to American authorities.

“The U.S. government will most likely demand not just payment of back taxes but the disclosure of client data,” Mr. Neiman said, suggesting that there could be no half measures because of Swiss banking secrecy laws. “They don’t reach resolution with a corporate entity unless they cooperate fully,” he said.

In March, an American citizen, Edward Gurary, pleaded guilty to tax evasion and admitted hiding assets not only at UBS, but also at Credit Suisse. The Justice Department began its investigation of Credit Suisse’s private banking operations, along with those of HSBC, in 2008, as an outgrowth of the UBS inquiry. The investigation began by focusing on suspicions that the two banks held $30 billion in offshore accounts that American clients had not declared to the Internal Revenue Service.

Last month, Steven T. Miller, the deputy commissioner for services and enforcement at the I.R.S., said during a conference on taxation in Washington that the authorities planned to take action against one or more banks soon, without mentioning any by name, an attendee at the meeting said.

Credit Suisse has tangled with the Justice Department before and lost. In December 2009, Credit Suisse paid $536 million to settle charges that it had broken American sanctions by helping Iranian banks to hide the identity of their clients in international dealings.

Representatives for the Justice Department and the Internal Revenue Service declined to comment.

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