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DOJ Catch of the Week -- Credit Suisse

Posted  May 23, 2014

By the C|C Whistleblower Lawyer Team

This week’s Department of Justice “catch of the week” goes to Credit Suisse. On Monday the Swiss banking giant pled guilty to criminal charges of conspiring to help thousands of US taxpayers evade taxes and agreed to pay fines and restitution amounting to $2.6 billion. See DOJ press release. It is the first big bank to plead guilty to illegal activity since Drexel Burnham Lambert in 1989.

According to the government, the litany of illicit activities in which Credit Suisse engaged was as extreme as it was extended and involved hundreds of the bank’s employees, including at the manager level. The conduct, which apparently spanned several decades, included:

  • Actively helping account holders deceive the IRS by concealing assets and income in secret offshore accounts held in the names of sham entities and foundations.
  • Deceiving the IRS, the Federal Reserve, the Securities and Exchange Commission, and the Department of Justice.
  • Subverting disclosure requirements, destroying bank records, and concealing transactions involving undeclared accounts by limiting withdrawal amounts and using offshore credit and debit cards to repatriate funds.
  • Failing to take even the most basic steps to ensure compliance with tax laws.
  • Failing to cooperate with the government’s four-year investigation by allowing evidence to be lost or destroyed, and conducting a “shamefully inadequate” internal inquiry.

The government clearly wanted to set an example of what it considered to be the bank’s egregious failings. It also is hoping to use the settlement to counter the widely held view that the government has taken too soft an approach to dealing with financial fraud. Attorney General Eric Holder could not have been more clear in this regard in his announcement of the bank’s guilty plea:

When a bank engages in misconduct this brazen, it should expect that the Justice Department will pursue criminal prosecution to the fullest extent possible, as has happened here. This case shows that no financial institution, no matter its size or global reach, is above the law. . . . We will never hesitate to criminally sanction any company or individual that breaks the law. A company’s profitability or market share can never and will never be used as a shield from prosecution or penalty. And this action should put that misguided notion definitively to rest.

Does this unprecedented settlement represent a turnaround from what many have viewed as the government’s “too big to jail” approach to enforcing big bank fraud? Many still have their doubts, pointing to the fact that no senior executives of Credit Suisse have been criminally charged and that the settlement will have little impact on the bank’s ability to continue business as usual in the U.S. Apparently, even Credit Suisse’s investors seem to think the bank got off lightly as its share price actually rose the day after the settlement was announced. It thus remains to be seen whether the U.S. is really getting tougher on financial fraud, or if its Credit Suisse settlement is a lot more pomp than any real circumstance.

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