Tuesday, May 20, 2014


Breaking news!  Tax evasion is a crime. Well..........maybe. Aiding and abetting evaders is a crime. Well, maybe.

Even though tax evaders are going to have a harder time hiding from the IRS now that one of their favorite shelter has been forced out into the limelight there's still a long way to go before we see any of them doing the "perp" walk.

In a sign that banking giants are no longer immune from criminal charges, despite concerns that financial institutions have grown so large and interconnected that they are too big to jail, federal prosecutors demanded that Credit Suisse’s parent company plead guilty to helping thousands of American account holders hide their wealth.

As part of a deal announced on Monday, the Swiss bank met the demands, agreeing to one count of conspiring to aid tax evasion in a scheme that “spanned decades.” Credit Suisse, which has a giant investment bank in New York and whose chief executive is an American, will also pay about $2.6 billion in penalties and hire an independent monitor for up to two years.

The rebuke from federal prosecutors as well as from the Federal Reserve and New York’s state banking regulator, Benjamin M. Lawsky, is intended as a blow against overseas tax dodging and the shadowy world of Swiss bank secrecy. The deal also signals a shift in prosecutors’ tactics. It is the most prominent bank to plead guilty in the United States since Drexel Burnham Lambert in 1989, and the largest to do so since the Bankers Trust in 1999, a bank a fraction the size of Credit Suisse.

For Credit Suisse, other than the fines and the reputational stain of being a felon, the implications are likely to be limited. The bank may lose some clients but is otherwise expected to survive largely unscathed. The plea deal also enables it to move beyond a case that had prompted a congressional hearing and had thrust the bank into an international squabble over tax dodging. If the bank had continued to fight the case, it would have been indicted, calling into question its very existence.

The Justice Department sought to contain the damage. Recognizing that criminal charges could prompt regulators to revoke a bank’s license to operate, the corporate equivalent of the death penalty, prosecutors met with the Fed and Mr. Lawsky to discuss punishing Credit Suisse without putting it out of business and imperiling the economy, according to people briefed on the matter who were not authorized to speak publicly. Authorities agreed to announce the plea after the markets closed in the United States, preventing the bank’s stock from plummeting.

Last week, the Securities and Exchange Commission also voted to grant Credit Suisse a temporary exemption from a federal law that requires a bank to hand over its investment-adviser license in the event of a guilty plea, according to two of the people briefed on the matter. That decision effectively spares Credit Suisse from one of the harshest repercussions of pleading guilty.

The plea from Credit Suisse, some three years after federal prosecutors in Virginia indicted eight bank employees, is expected to provide a template for prosecuting other financial misdeeds. BNP Paribas, France’s largest bank, is next in line to plead guilty in the coming weeks, the people briefed on the matter said. The bank, which is suspected of doing business with countries like Sudan that the United States has blacklisted, will also pay more than $5 billion in fines, the people briefed on the matter said.

The BNP and Credit Suisse cases may also lay the groundwork for criminal actions against American banks. While the new strategy applies to American banks like JPMorgan Chase and Citigroup, those inquiries are at an earlier stage and it is unclear whether they warrant charges.
Prosecutors were not always so aggressive. In the wake of the 2008 financial crisis, the Justice Department did not file any criminal cases against a Wall Street bank or top executives. And in 2012, the British bank HSBC escaped charges of money laundering, stoking a public outcry.

Against that backdrop, prosecutors homed in on the Credit Suisse case as a turning point in their pursuit of big banks. While Credit Suisse’s lawyers proposed a more modest guilty plea from a subsidiary rather than the parent company, people briefed on the matter said, prosecutors rebuffed the overtures.

“This case shows that no financial institution, no matter its size or global reach, is above the law,” the United States attorney general,Eric H. Holder Jr., said at a news conference on Monday.

The decision to seek a guilty plea stems in part from Credit Suisse’s failure to fully cooperate with the federal government. The bank, prosecutors say, was slow to turn over documents, deleted important emails and conducted an internal investigation that “failed to interview a number of the culpable individuals.”

The bank also kept three of the eight indicted employees on its payroll. Under the terms of the deal with Mr. Lawsky, Credit Suisse must fire the employees.

Long before the Credit Suisse case came to a head, prosecutors in Washington drafted a document outlining a possible chain reaction of a guilty plea, the people briefed on the matter said. The prosecutors, required under federal guidelines to weigh collateral consequences of charging a corporation, explained that some regulators have legal authority to withdraw a bank’s charter.

For Mr. Holder, blamed for enabling the idea that banks are “too big to jail,” the new strategy offers an opportunity to rewrite his legacy. But the public and congressional lust for Wall Street accountability may linger all the same.

For one, the plea deal will not require the bank to turn over the names of its American account holders, a hot-button issue in Congress. Credit Suisse has argued that Swiss law prevented it from turning over the names.

What is more, the cases against Credit Suisse and BNP will not quell the lingering outrage over the financial crisis. While the Justice Department levied billions of dollars in penalties on JPMorgan Chase and other banks, those cases were civil rather than criminal.

Credit Suisse Pleads Guilty in Felony Case