WASHINGTON â€" Credit Suisse, a Zurich-based bank, actively helped its American customers hide billions of dollars of assets from American tax authorities, a report released on Tuesday by the Senate Permanent Subcommittee on Investigations contends.
The subcommittee will hold a hearing on Wednesday on the report, the product of a two-year investigation. Brady W. Dougan, the chief executive of Credit Suisse, and other top bank officials are scheduled to appear along with two Justice Department officials.
“It’s time to ramp up the collection of taxes due from tax evaders on the billions of dollars hidden offshore,†Senator Carl Levin of Michigan, the subcommittee’s chairman, said in a statement.
The report is scathing both to the financial institution and to American law enforcement, which the subcommittee accuses of dragging its feet in holding the bank and the relevant taxpayers accountable.
The 176-page report charges that from at least 2001 through 2008, the Swiss bank helped its American customers evade taxes through a variety of means, including opening accounts in the name of “shell†companies and sending Swiss bankers to the United States to “secretly†recruit new clients and avoid creating a paper trail.
The report describes one instance in which a Credit Suisse banker “traveled to the United States to meet with the customer at the Mandarin Oriental Hotel and, over breakfast, handed the customer bank statements hidden in a Sports Illustrated magazine.â€
The bank’s New York office also “kept a document listing ‘important phone numbers’ of intermediaries that formed offshore shell entities for some of the bank’s U.S. customers†and urged American customers to come to Switzerland to do their banking, opening a full-service office in the Zurich airport, the report said.
That office even had a code name, “SIOA5.†Mr. Dougan told the Senate investigators that the airport office was for the convenience of clients heading to and from Swiss ski resorts, so that they would not have to go out of their way to Zurich.
Another American client with an undisclosed Swiss account received a gift of gold from the bank, the report said. (The customer kept the gold in the bank’s custody, the report notes.)
One client also recalled, when visiting a Credit Suisse office, taking an elevator with “no buttons†that was “controlled remotely.â€
“Financial institutions like Credit Suisse have profited from their offshore tax haven schemes while depriving the U.S. economy of billions of dollars in tax revenues,†Senator John McCain of Arizona, the subcommittee’s Republican member, said in a statement.
“As federal regulators begin to crack down on these banks’ illicit practices, it is imperative that they use every legal tool at their disposal to hold these banks fully accountable,†he said.
The Senate report may put additional pressure on the Justice Department to prosecute or settle with the Swiss banks and bankers it has investigated for aiding tax avoidance.
The Justice Department indicted seven Credit Suisse bankers on charges of aiding tax evasion in 2011, and it is also investigating the bank itself. Credit Suisse is expected to settle with the Justice Department this year.
“The prospect of U.S. prosecution has been forceful enough to cause 43,000 taxpayers to self-report and pay nearly $6 billion in taxes and penalties,†said a Justice Department spokeswoman. “Since 2009, the department has publicly charged 73 account holders and 35 bankers and advisers with offenses related to offshore tax evasion. And we have acknowledged that as many as 14 Swiss financial institutions are currently under investigation, and we won’t hesitate to indict if and when circumstances merit.â€
Five years ago, the United States charged the largest Swiss bank, UBS, with aiding tax evasion. UBS admitted guilt and paid $780 million in fines and other costs.
Earlier this month, Credit Suisse said that legal costs were weighing on its bottom line. It reported net income of 267 million Swiss francs, or about $300 million, in the fourth quarter of 2013. It has set aside 514 million francs for legal costs, much related to its American mortgage business.
Last week, the bank paid a $196 million fine to the Securities and Exchange Commission for failing to properly register with the agency before advising American clients. The Swiss firm also admitted wrongdoing in the settlement.
According to the report, Credit Suisse held Swiss accounts for over 22,000 American customers. The assets in those accounts were worth $10 billion to $12 billion at their peak. Over the last five years, the bank has shut down accounts held by 18,900 United States clients.
