New Senate Report Shows Credit Suisse Aiding Tax Evasion, Draws Bipartisan Anger
by Jessica Schieder, 3/3/2014
Partisanship was noticably absent from last week‘s Senate hearing on efforts by a Swiss bank to profit by aiding U.S. tax evasion. Senators from both sides of the aisle were united in condemning the actions of executives from Credit Suisse.
The Senate Permanent Subcommittee on Investigations, led by chairman Sen. Carl Levin (D-MI) and ranking member Sen. John McCain (R-AZ), conducted the hearing, which revealed more than 22,000 U.S. customers were hiding more than 12 billion Swiss francs (CHF) in Swiss bank accounts in 2006, according to a report released in conjunction with the hearing.
Both Levin and McCain expressed frustration that of these 22,000 clients, the names of only 230 individuals have been turned over to the United States since the start of the multi-year investigation.
The subcommittee’s investigation, while focusing on tax evasion by U.S. clients, highlighted the role of Swiss secrecy laws in hiding the identities of wrong-doers, as well as strategies used by banks to disguise illicit transactions occurring in the United States.
“These alarming instances of illicit banking practices belong in a spy novel—not at one of the world’s top banks,” said McCain. Bankers were found to have hand delivered client bank statements hidden in Sports Illustrated magazines, utilized clients’ weddings to discuss accounts, and used golf tournaments to recruit new investors.
Credit Suisse executives tried to explain their secrecy by saying that disclosing client names would violate Swiss law. But the senators were clear in maintaining that, by choosing to operating in the U.S., the banks are bound to U.S. laws requiring investors to pay taxes. Sen. Tom Coburn (R-OK) pressed the point to Credit Suisse General Romeo Cerutti, asking, “Where would you like to spend [jail] time?”
In addition to presenting an extensive collection of e-mails documenting illicit conduct on the part of Credit Suisse and criticizing the institutionalized secrecy within the Swiss legal system, frustrations with the U.S. Department of Justice’s lack of enforcement were also raised.
The subcommittee report critically noted, “DOJ did not use any of the authorities and remedies available to it in U.S. Courts, such as enforcing the outstanding Grand Jury subpoenas or using a John Doe summons, to obtain U.S. client names and account information directly from Credit Suisse,” during the course of the 2011 investigation.
This investigation is only the most recent by the subcommittee, which previously investigated UBS AG, Switzerland’s largest bank, and LGT, a private bank associated with the royal family of Liechtenstein.