Credit Suisse Faces U.S. Probe Into 2014 Tax Fraud Plea Deal
Credit Suisse Faces DOJ Probe Into 2014 Plea Deal Over Tax Evasion
(Bloomberg) -- Credit Suisse Group AG faces a U.S. Justice Department investigation into whether it has complied with a 2014 guilty plea in which it paid $2.6 billion and admitted helping thousands of Americans evade taxes.
The Justice Department revealed in a court filing that it’s investigating the plea deal in which the bank promised it would close “any and all accounts” not declared to the Internal Revenue Service. Prosecutors warned in the filing that the probe may be compromised if a judge allows a former banker at Credit Suisse to proceed with a whistle-blower complaint alleging that the lender hasn’t lived up to its obligations.
The case “threatens to interfere with ongoing discussions with Credit Suisse regarding the identification and remediation of remaining Swiss accounts held by U.S. citizens,” according to the filing in federal court in Alexandria, Virginia.
Cooperation by Credit Suisse remains central to the seven-year-old plea deal, according to the filing.
“Because the plea agreement remains a living document (i.e., one that requires continued cooperation on the part of Credit Suisse),” according to the filing, the whistle-blower case “would interfere with ongoing law enforcement activities related to the plea agreement.”
A bank spokesperson had no immediate comment about the investigation. Regarding the banker’s lawsuit, he said: “Following our settlement in 2014, Credit Suisse has cooperated fully with U.S. authorities and continues to do so.”
Last week, Deputy Attorney General Lisa Monaco said prosecutors would “consider the full criminal, civil and regulatory record of any company” in resolving criminal investigations.
The bank had several settlements in recent years. In 2017, it agreed to pay $5.28 billion related to its sale of residential mortgage-backed securities. A year later, its investment bank in Hong Kong agreed to pay a $47 million criminal penalty for corruptly winning business by awarding jobs to friends and family of Chinese officials. Last month, it agreed to pay almost $475 million related to loans in Mozambique.
The banker’s lawsuit refers to a former U.S. account holder, Dan Horsky, who pleaded guilty in 2016 to conspiring to defraud the IRS and cooperated with U.S. authorities. Bloomberg News reported in 2016 that he was cooperating with criminal investigators who were examining whether the bank helped clients with ties to Israel evade U.S. taxes.
In his whistle-blower case, the banker said that in 2014, Credit Suisse falsely told prosecutors, a judge and a Senate subcommittee that it disclosed all U.S. accounts. In fact, the bank concealed more than $200 million in accounts held by Horsky.
Credit Suisse was sentenced in November 2014 but never told the judge about Horsky’s accounts. The bank paid a criminal fine of $1.33 billion, or half the statutory maximum. The settlement included civil payments to the U.S. and New York state. The lender’s misrepresentations and omissions about accounts defrauded the U.S. of at least $1.33 billion, claims the banker, who is referred to as John Doe.
But the Justice Department said the lawsuit makes mistaken assumptions and misapplies the law.
The whistle-blower’s “argument here is based on the speculative assumption that if Credit Suisse had disclosed additional illegal accounts, federal prosecutors likely would have pursued a higher negotiated criminal penalty than what is reflected in the plea agreement, or an additional penalty on top of what was already imposed by the plea agreement and paid by Credit Suisse,” according to the filing.
A Justice Department spokeswoman declined to comment on the investigation.
The Senate Finance Committee is also investigating the circumstances around Horsky’s accounts and whether the bank had other undisclosed accounts.
U.S. District Judge Claude Hilton set a hearing for Dec. 3 in Alexandria on the whistle-blower’s case.
The case is United States ex rel. John Doe v. Credit Suisse AG, 21-cv-224, U.S. District Court, Eastern District of Virginia (Alexandria).
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