The head of Credit Suisse (NYSE: CS – news) expressed regret that his bank helped US clients hide billions of dollars from the tax man, but blamed the wrongdoing on a small band of rogue employees.
Chief executive Brady Dougan conceded that the bank, Switzerland’s second largest, undertook elaborate efforts to gain new, secret American clients.
“Credit Suisse’s management team regrets very deeply that despite the industry-leading compliance measures we put in place, we have some Swiss-based private bankers who appear to have violated US law,” Dougan, the first American to lead a major Swiss bank, told US lawmakers.
“While I am extremely dismayed by the conduct, Mr Chairman, I also believe that leadership requires facing up to the past, and taking responsibility for what our employees did.”
An internal probe found no evidence that Credit Suisse management was aware of the problems, the bank said.
“Credit Suisse acknowledges that misconduct, centered on a small group of Swiss-based private bankers, previously occurred at our bank,” Credit Suisse said in a statement to a US Senate panel that led a years-long investigation of “Swiss bank secrecy.”
A damning Senate report found that the bank at its peak in 2006 had more than 22,000 US customers with Swiss accounts whose assets stood as high as $12 billion.
No one has stood trial, and the bank has not been held accountable, according to the report.
Analysts say Credit Suisse could face fines of up to $2.0 billion, which would dwarf the $196 million fine regulators imposed last week for providing unregistered brokerage and investment advisory services to US clients.
- Secret wooing of clients –
Senator Carl Levin, chairman of the subcommittee that led the two-year investigation, took Credit Suisse to task for failing to live up to promises of transparency after a similar 2008 investigation.
“It’s five years later, and the sad truth is that the era of bank secrecy is not over,” Levin said.
He demanded that the bankers “turn over the names of the people you aided and abetted in tax evasion,” noting that so far, they had given only 238 names.
Among the practices revealed by the Senate, several Swiss bankers were sent to the United States to secretly find new clients, leaving no paper trail, at events like golf tournaments sponsored by the bank.
Levin said former Credit Suisse clients were taken to meetings in Zurich on remote-controlled buttonless elevators, received bank statements hidden inside magazines, and were issued secret US credit cards allowing them to draw on their Swiss accounts.
“We should have caught it,” Dougan said, but he insisted the offenders consisted of just 10 to 15 bankers.
Dougan testified alongside Hans-Ulrich Meister, who heads Credit Suisse’s private banking division; Robert Shafir, running the bank’s US business; and chief council Romeo Cerutti.
Meister said his bank shared “absolutely the same goal” as US authorities in ending secretive accounts.
- Swiss laws shield banks -
Levin countered that banks continued to hide behind Switzerland’s secrecy laws, and that US authorities have yet to make arrests in the case.
Department of Justice officials have denied inactivity on the issue. “Just because we can’t disclose what we’re doing doesn’t mean we’re not actively pursuing these cases,” Deputy Attorney General James Cole told the hearing.
The goal is to gather evidence and build a strong criminal case against banks and bankers implicated in tax evasion schemes, he said, adding that more than 43,000 taxpayers have now reported previously secret accounts and paid over $6 billion in back taxes, interests and penalties.
From 2008 to 2011, after a tax-evasion scandal at Swiss bank UBS (Xetra: UB0BL6 – news) , which ended up paying $780 million in fines, Credit Suisse began phasing out its evasive practices, asking clients to close their accounts or declare them.
By late 2013, the number of Swiss accounts held by US clients at Credit Suisse fell by 85 percent, the report said.
Swiss President Didier Burkhalter downplayed the harsh tone of the hearings and noted that the US Senate has yet to ratify a double-taxation deal to underpin closer cooperation on tax issues between the two countries.
Credit Suisse is one of 14 Swiss banks under US investigation for allegedly accepting tens of billions of undeclared dollars from US citizens.
Credit Suisse 'regrets' misconduct, blames rogue staff
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