The U.S. Justice Department on Monday filed criminal charges against Credit Suisse, alleging the Swiss financial giant helped Americans open offshore accounts in order to dodge taxes.
Credit Suisse is pleading guilty to the charges and will pay a total of $2.6 billion to settle the federal lawsuit.
"Credit Suisse conspired to help U.S. citizens hide assets in offshore accounts in order to evade paying taxes," U.S. Attorney General Eric Holder said in a press conference to announce the settlement. "When a bank engages in misconduct this brazen, it should expect that the Justice Department will pursue criminal prosecution to the fullest extent possible, as has happened here."
The agency said the bank set up "sham entities" for clients seeking to hide assets in overseas accounts. Credit Suisse also falsified and destroyed U.S. tax records to cover up the scheme, according to the complaint. The company helped customers withdraw funds from the undeclared accounts by hand-delivering cash, through correspondent banks, and by providing accountholders with offshore credit and debit cards so they could illegally repatriate funds, according to the government.
Credit Suisse "failed to take even the most basic steps to ensure compliance with tax law," Holder said, noting that eight employees of the bank have been indicted in connection with the tax-evasion probe, while two have pleaded guilty.
"We deeply regret the past misconduct that led to this settlement," Credit Suisse CEO Brady Dougan said in a statement. "The U.S. cross-border matter represented the most significant and longstanding regulatory and litigation issue for Credit Suisse. Having this matter fully resolved is an important step forward for us."
Under the deal with the Justice Department, Credit Suisse formally pleaded guilty to one count of conspiracy to assist U.S. customer in filing false income tax returns.
Of the financial penalty against Credit Suisse, the U.S. Treasury Department will get $1.8 billion, while the Federal Reserve and New York State Department of Financial Services will receive $100 million and $715 million, respectively.
The penalty resolves a years'- long criminal investigation into allegations that the bank, Switzerland's second-largest, recruited U.S. clients to open Swiss accounts, helped them conceal the accounts from the Internal Revenue Service and enabled misconduct by bank employees. The case is part of an Obama administration crackdown on foreign banks believed to be helping U.S. taxpayers hide assets.
attacked the federal government for not doing more to punish Credit Suisse. The Senate Permanent Subcommittee on Investigations alleged that from 2001 through 2008 the financial firm helped U.S. customers hide income from the IRS and enabled other abuses.
Such criticism echoed complaints that federal prosecutors have been soft in holding Wall Street bankers accountable for their role in the 2008 financial crisis.
Holder said earlier this month that "There is no such thing as too big to jail" and highlighted what he described as ongoing investigations into corporate wrongdoing.
The Justice Department's settlement with Credit Suisse is unlikely to allay criticism that the government has failed to prosecute senior bankers linked with the housing crash. That's because the allegations against the company focus on tax evasion, rather the mortgage lending and securitization practices that experts say helped trigger the housing crash.
The government's legal action against Credit Suisse is a rare case of a big bank admitting wrongdoing in recent years, although the Justice Department stopped short of targeting top officials at the bank. Wall Street firms implicated in the financial crisis have typically settled any charges under so-called deferred prosecution agreements, in which banks agreed to pay fines and vowed to reform their practices.
"This is the largest bank to plead guilty in 20 years," Holder said in touting the penalty against Credit Suisse.
Credit Suisse said it has seen no material financial impact recently on its business related to the tax-evasion probe.
Justice Department officials said the agency will continue to crack down on banks and other financial professionals around the world that facilitate tax evasion.
In 2013, another large Swiss bank, Wegelin & Co., paid nearly $58 million in pleading guilty to aiding Americans hide more than $1.2 billion from the IRS.