Credit Suisse’s efforts to resolve DOJ probe complicated by bank’s fall

By Evan Perez and Hannah Rabinowitz, CNN

Attorneys for Credit Suisse met with senior Justice Department officials Wednesday as turmoil in the banking industry throws new complications into efforts to resolve allegations that the bank continued to help wealthy clients evade taxes in violation of a years-old plea deal with the US, people briefed on the matter told CNN.

The meeting comes at a precarious time as Credit Suisse is being acquired by Switzerland’s largest bank UBS as part of an emergency rescue intended to stave off a global banking crisis. Credit Suisse’s fall now threatens to complicate ongoing discussions for a new settlement that, before the Swiss government-engineered rescue, was estimated could reach over $1 billion, people briefed on the matter said.

The Zurich-based bank agreed to pay a $2.6 billion fine and pleaded guilty in 2014 to aiding tax evasion. A Senate report published Wednesday estimated that Credit Suisse continued to hold more than $700 million in concealed accounts in violation of the 2014 plea deal, despite promising to cease doing business with clients seeking to evade taxes. The Justice Department has been investigating.

The emergency takeover has added hurdles to ongoing discussions to resolve the new Justice Department investigation, in part because some US government officials have expressed concerns that a large settlement could add fresh turmoil to the banking industry, people briefed on the matter said.

Credit Suisse has hired lawyers to conduct an internal investigation to identify accounts that could violate US law, as part of an effort to reach a new settlement with the Justice Department, the people briefed on the matter said.

Spokespeople for Credit Suisse and the Justice Department declined to comment on Wednesday’s meeting.

The turmoil also presents a predicament for Justice Department officials, who have promised a crackdown on white-collar crime and recidivist corporations that repeatedly break US law.

The two-year investigation published by Senate Finance Committee Chairman Ron Wyden, an Oregon Democrat, on Wednesday criticized the Justice Department, highlighting Credit Suisse as an example of the department failing to hold corporate criminals accountable.

The report alleges that “despite internal reviews, a court appointed monitor, several whistleblower disclosures to the Justice Department, a modernization of systems and significant sums spent on outside attorney,” the bank continued to hide millions of American dollars in dozens of offshore accounts.

Those violations, the report said, breached Credit Suisse’s 2014 federal plea deal in which the bank promised to stop helping Americans hide financial assets.

Jeffrey Nieman, an attorney who represents whistleblowers and informants cited in the Senate report, said Credit Suisse’s breach of its plea deal means that the Justice Department should insist on collecting at least $1.3 billion from the bank.

“Credit Suisse’s collapse—caused by its own misconduct and mismanagement—does not operate as a get out of jail free card in the United States, where no person or entity is above the law,” said Nieman, whose clients could receive a monetary award for their role. “We remain optimistic that the Justice Department will hold Credit Suisse, a repeat offender, accountable for continuously and blatantly having defrauded the United States.”

A Credit Suisse spokesperson said the bank’s new leadership cooperated with the Senate inquiry and that the bank does not tolerate tax evasion.

“In its core, the report describes legacy issues, some from a decade ago, and we have implemented extensive enhancements since then to root out individuals who seek to conceal assets from tax authorities,” the bank spokesperson said in a statement to CNN.

In one example, according to the Senate report, a former Credit Suisse banker gave the Justice Department documents and other information in April 2014 about an offshore account that violated the terms of Credit Suisse’s plea deal, but the Justice Department didn’t act on that information until a year later. Though the owner of that account was charged with a crime, the report claims that DOJ “appears to have taken no punitive action against Credit Suisse.”

For the next several years, the former Credit Suisse banker continued to hand over information about the bank’s practices, the report says, but “DOJ still took no action.”

“Now, nine years after Credit Suisse’s plea agreement, the bank continues to identify potential undeclared accounts, and DOJ has yet to impose additional penalties,” the report states. “This fact indicates a lapse in oversight by DOJ and a failure to evaluate the [account in 2014] as a potential systemic failure in Credit Suisse’s oversight and review process.”

“DOJ must correct its lax oversight of Credit Suisse, rigorously scrutinize the bank’s compliance with its 2014 plea agreement, and hold Credit Suisse accountable for any violations of its plea agreement,” the report said.

The report also found that several other Swiss banks could be repeatedly violating similar agreements with DOJ. According to the report, more than 80 Swiss banks have entered into agreements with DOJ over helping wealthy individuals hide money in accounts around the world to avoid paying taxes.

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