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Swiss bankers say shielding U.S. money from taxes is 'mistake'

BusinessSwitzerlandLaws and LegislationCrime, Law and JusticeJustice SystemBankingCarl Levin

WASHINGTON — Credit Suisse executives admitted that the giant Swiss bank helped Americans shield as much as $12 billion from taxes and even acknowledged the practice was a "mistake" and "unacceptable."

But they said they couldn't do much beyond ending the active efforts of some employees to help U.S. customers evade taxes.

That's because Switzerland's long-standing bank secrecy law, they said, prevents them from turning over the names of most of their tax-evading former customers to U.S. authorities.

"We would all face criminal indictments in Switzerland and most probably prison terms if we would hand over these client names without the permission of the Swiss government," Credit Suisse General Romeo Cerutti said at a Senate subcommittee hearing Wednesday into the bank's activities.

Senators criticized the response, noting Credit Suisse has U.S. operations as well and is subject to federal laws that could land them in jail here too.

"Where would you like to spend time?" Sen. Tom Coburn (R-Okla.) asked Cerutti. And Sen. John McCain (R-Ariz.) said the bank "must answer for decades of ill-gotten profits."

An angry Sen. Carl Levin (D-Mich.), who has led a six-year crusade against offshore tax evasion, told four Credit Suisse executives that their regrets and promises of changed ways were hollow if they did not help U.S. authorities track down the tax cheats.

"You hide behind the Swiss law even though you're operating here, and that's just simply not going to cut it," he said

On Tuesday, the Senate's Permanent Subcommittee on Investigations released a report accusing Credit Suisse, Switzerland's second-largest bank, of actively helping U.S. citizens hide up to $12 billion in assets in 22,000 accounts at the bank from 2001 to 2008.

The report said bankers used "cloak and dagger" methods, including surreptitious trips to meet customers in the U.S. and the destruction of bank statements to avoid leaving paper trails.

The bipartisan report also criticized the Justice Department for not being more aggressive in pursuing tax evaders and the bankers who assist them.

In 2008, a subcommittee investigation focused on UBS, Switzerland's largest bank, which eventually provided U.S. officials with the names of nearly 5,000 account holders.

"The bottom line is that Credit Suisse was in it as deep as UBS, aiding and abetting U.S. tax evasion both in Switzerland and on U.S. soil," Levin said.

The Justice Department has been investigating Credit Suisse since at least 2011 and has indicted seven bank employees on charges of aiding and abetting U.S. tax evasion.

And last week, the bank agreed to pay $196 million and to admit wrongdoing to settle allegations by the Securities and Exchange Commission that the bank provided brokerage and investment advisor services to as many as 8,500 U.S. customers without registering with the agency.

"To our deep regret, it is … clear that some Swiss-based bankers at Credit Suisse appear to have helped their U.S. clients hide income and assets in the past," Credit Suisse Chief Executive Brady Dougan told the committee. Senior management was unaware of the activities, he said.

"Although it was not and is not illegal for Swiss banks to accept deposits from Americans, it is absolutely unacceptable for Swiss-based bankers to help U.S. taxpayers evade taxes or to provide them with securities advice in the U.S. without being properly licensed," Dougan said.

He noted he was the first U.S. citizen to head a major Swiss bank.

Credit Suisse now requires U.S. customers to show they are complying with tax laws, Dougan said, and the bank has led an effort to change a tradition of secrecy in Swiss banking.

But he said that effort has faced resistance in Switzerland.

A tax treaty between the two countries was amended in 2009 to make it easier to obtain information about U.S. accounts going forward. But the amendments have not been approved yet by the Senate.

The Swiss Embassy in Washington said the failure to approve the treaty was the "main reason why Swiss banks have been limited in their cooperation with U.S. authorities."

Levin said the treaty should be approved, but complained it had flaws. And he noted the treaty would not help get names behind most of the 22,000 accounts of American citizens.

So far, the U.S. has obtained just 238 names using the treaty process, the subcommittee report said.

Senators criticized Credit Suisse and Justice Department officials, who also testified, for not doing more to help track down tax offenders.

"Allowing Americans to evade their tax obligations through hidden offshore accounts deprives the government of needed revenue," Levin said. "More than that, it deprives honest American taxpayers of something vital to the legitimacy of our tax system: fairness."

Deputy Atty. Gen. James Cole told the subcommittee the Justice Department was committed to going after banks around the world that help Americans evade taxes.

Since 2009, Justice officials have filed tax-evasion related charges against 73 account holders and 35 bankers and advisors, Cole said. So far, 72 have been convicted or pleaded guilty.

The investigations led 43,000 U.S. taxpayers to disclose voluntarily their assets and pay more than $6 billion in back taxes and penalties through an Internal Revenue Service program started in 2009.

Levin and McCain said the Justice Department needed to be more aggressive in using indictments, subpoenas and other legal tools to obtain names of U.S. customers from banks in Switzerland and other tax havens.

Cole said the task was difficult.

"We're talking about people who are taking great pains to hide what they're doing," he said.

jim.puzzanghera@latimes.com

Copyright © 2014, Los Angeles Times
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BusinessSwitzerlandLaws and LegislationCrime, Law and JusticeJustice SystemBankingCarl Levin
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