Credit Suisse Charged With Conspiracy To Aid Tax Evasion, Expected To Plead Guilty

Switzerland’s second largest bank is expected to plead guilty as part of a Justice Department push to pursue more criminal cases against financial institutions.

Arnd Wiegmann / Reuters / Reuters

Credit Suisse, Switzerland's second largest bank, was charged today with conspiracy to aid tax evasion. The charges, filed in federal court in Alexandria, Virginia, are the culmination of a long investigation into Credit Suisse's offshore tax services for U.S. clients. Credit Suisse is expected to plead guilty and pay upwards of $2.5 billion in fines and penalties, according to Bloomberg News. This would be the first guilty plea by a major financial institution to criminal charges since the investment bank Drexel Burnham Lambert plead guilty to securities fraud in 1989.

The expected amount of the fine well exceeds the money the bank set aside in April — $477 million — to deal with the tax shelter investigation.

The charges mark a departure from the huge settlements reached by the Justice Department and other regulators in lieu of pursuing criminal cases. The scheme to hide assets from the U.S., prosecutors say, extended to setting up false entities to own assets actually controlled by clients and destroying records so as to hide money from U.S. tax authorities.

Earlier this month, Attorney General Eric Holder said in a video posted to the Justice Department's website that "it is fully possible to criminally sanction companies that have broken the law, no matter the size." Holder's comments were part of an effort by federal prosecutors to answer critics who say they have not aggressively pursued criminal prosecutions against large banks, either for their role in the 2008 financial crisis, tax-evasion, money laundering, or avoiding U.S. sanctions laws.

Three years ago, seven Credit Suisse bankers were indicted in federal court in Virginia. The bankers were accused of assisting Americans with hiding their assets offshore and keeping these clients away from the scrutiny of U.S. tax authorities. In March, one of the indicted executives, Andreas Bachmann, plead guilty and in February, the bank settled with the Securities and Exchange Commission over charges that it provided brokerage and investment advising services to U.S. clients without properly registering with the Commission.

Credit Suisse paid $196 million to settle the charges and admitted wrongdoing. This was part of SEC head Mary Jo White's push to make banks and individuals who settled with the SEC do something more than write a large check and not admit any wrongdoing. Prosecutors referenced the SEC's allegations, saying that Credit Suisse used its own employees as undeclared investment advisors for clients whose accounts were not declared to the U.S.

While regulators have reached out to banks to assure them that Credit Suisse's U.S. business won't collapse overnight thanks to the plea, according to Bloomberg, no one knows exactly how the financial system would react to a guilty plea. Goldman Sachs CEO Lloyd Blankfein told reporters after the bank's annual meeting last week "People transact, and no one can ever understand the full integration and the full knock-on effects of pulling a thread out."

"A company's size will never be a shield for prosecution or penalty," Holder said two weeks ago.

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