Credit Suisse ‘cloak-and-dagger’ tactics cost US taxpayers billions

Posted by Anton Murray Consulting on 26 Feb, 2014

Dominic Rushe

Credit Suisse used “cloak-and-dagger schemes that belong in a spy novel” to help 22,000 US customers hide billions of dollars from US tax inspectors, top senators said Tuesday as they released their latest report into offshore tax schemes.

Senators Carl Levin and John McCain had harsh words for the Justice Department and the Swiss government, too, as they released a 178-page permanent subcommittee on investigation (PSI) report into offshore tax avoidance. McCain said US authorities had done too little to prosecute bankers, and accused the Swiss government of trying to “close the door” on misconduct.

The PSI report was released before a congressional hearing Wednesday at which Credit Suisse CEO Brady Dougan and three other senior bank officers are scheduled to appear.

Levin and other US officials have for more than six years been investigating how Americans dodged taxes by hiding assets in secret Swiss bank accounts.

At a press briefing, McCain said offshore tax practices operated by Credit Suisse and other institutions had cost US taxpayers $337.3bn in potential revenue, which he called “the largest amount of tax revenue lost due to evasion in the world.” He said Credit Suisse, Switzerland’s second largest bank, had “greatly profited from this infamous business model”.

The report sets out in detail some of the practices used by Credit Suisse to help its customers avoid the US authorities – practices McCain said “belong in a spy novel.”

According to the report, bankers filed false visa applications pretending they were tourists, and conducted business at sponsored golf events. One customer told the investigation that his bank statements were passed to him over a business breakfast hidden inside a copy of Sports Illustrated. US clients who visited the bank in Switzerland were whisked to meetings in a button-less, remote controlled elevator. Once they arrived, they would be advised on the best way to circumvent US tax laws, said Levin.

Credit Suisse’s US office used a series of intermediaries, some of which have since come under indictment, to set up a series of offshore shell companies for US clients “in order to hide their assets,” according to Levin. Large sums were divided into smaller ones before they were sent to the US so as not to trigger investigations by US tax authorities.

The practices went on from at least 2001 to 2008, according to the report. In 2011, the Department of Justice told the bank and seven of its bankers that they were the subject of an investigation, but neither the bank nor its bankers have yet been held accountable, said the senators. Over the past five years the Justice Department has “obtained information, including US client names, for only 238 undeclared Swiss accounts out of the tens of thousands opened offshore,” said Levin.

“The bottom line is this: collecting taxes owed by tax evaders is vitally important.”

The terms of the Senate hearing prevent Credit Suisse from commenting on the report.

An investigation into similar practices at UBS, Switzerland’s biggest bank, ultimately led to the recovery of $6bn in undeclared taxes from US customers, Levin said.

“You might remember that just a few days ago we struggled to avert a $6bn cut to retirement benefits for our veterans. It’s a basic question of fairness. Individuals who use bank secrecy to hide income, to evade taxes, are cheating not just the government but honest Americans who pay what they owe,” said Levin.

The senator claimed investigations into the tax schemes had been hampered by the Swiss government. “Instead of turning over the names of US taxpayers who have Swiss accounts like UBS did, the Swiss government has delayed requests for assistance and prevented banks from turning over information in an effort to close the door on past conduct,” said Levin

Last week Credit Suisse agreed to pay $197m to regulators after it admitted to servicing thousands of US clients without approval. The agreement left unsettled a criminal probe into Credit Suisse and others over whether they helped Americans evade taxes.

McCain said: “This fine pales in comparison to the full range of wrongdoing perpetrated by the bank and its unwillingness to take responsibility for its actions immediately.”

He added: “No one, no individual has been held responsible. Individuals should be identified.” The senators said the Justice Department had decided to tackle the issue by filing treaty requests, with little success. McCain said he would be quizzing Justice Department officials about why they had not made more progress.

The Guardian

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