Credit Suisse pleads guilty to tax evasion
20 May 2014
Posted by: Author: Irish Times
Author: Irish Times
Swiss bank fined $2.5bn for helping Americans evade taxes but top managers stay in place
Credit Suisse became the largest bank in 20 years to plead guilty to a US criminal charge, and will pay a $2.5 billion fine to authorities for helping Americans evade taxes, Attorney General Eric Holder said. But the Swiss bank escaped the worst for its business - its top management stayed in place, and the New York state bank regulator said it had decided not to revoke the bank’s license in the state.
US prosecutors said the bank helped clients deceive US tax authorities by concealing assets in illegal, undeclared bank accounts, in a conspiracy that spanned decades, and in one case began more than a century ago.
"This case shows that no financial institution, no matter its size or global reach, is above the law,” Holder said at a news conference in Washington. The Justice Department has not frequently pursued such convictions of financial companies, especially large ones that could become destabilised following an indictment, but US politicians have pushed for tougher punishment for big banks in response to the 2007-2009 financial crisis.
Credit Suisse will pay financial penalties to the U.S. Department of Justice, the Internal Revenue Service, the Federal Reserve and New York’s banking regulator, the New York State Department of Financial Services, to settle the matter. It had already paid just under $200 million to the Securities and Exchange Commission. "We deeply regret the past misconduct that led to this settlement,” Credit Suisse Chief Executive Brady Dougan said in a statement. "We have seen no material impact on our business resulting from the heightened public attention on this issue in the past several weeks,” he said.
Switzerland’s second-biggest bank - the largest bank to plead guilty to a criminal charge in 20 years - will take an after-tax charge of 1.6 billion Swiss francs in the second quarter, it said. In a move aimed at appeasing investors, Credit Suisse also announced it would begin paying out roughly half its profits to shareholders once it hits a key capital ratio, and would reduce assets, sell real estate and take other actions to do so. The bank said it expects to reach the 10 per cent capital ratio goal by year-end.
"We see the size of the fine as affordable given the high ROE of Credit Suisse’s businesses,” said Nomura analyst Jon Peace, who rates the stock at buy. "The improved payout guidance should lend some yield support which would be 5.9 percent based on 2015 consensus compared with 4.7 per cent for the sector.” The settlement raises uncomfortable questions for CEO Dougan and chairman Urs Rohner, who had come under pressure from Swiss politicians to resign. One Zurich-based dealer said on Tuesday that the guilty plea may yet result in changes to top management and bank strategy further down the line.
This article first appeared on irishtimes.com.