How Credit Suisse got a stiffer penalty than UBS

May 20 2014, 19:19 IST
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SummaryU.S. prosecutors first raised the specter of a criminal plea by Credit Suisse Group AG more than two years after starting an investigation into whether the Swiss bank had helped wealthy Americans evade taxes.

send data to U.S. officials. The government was later backed on appeal, but rebuked by Switzerland's highest court over its methods in the case.

American officials grew increasingly impatient.

In October of last year, Kathryn Keneally, the head of the Justice Department's tax division, called the bank's lawyers and said she was prepared to recommend prosecution, the source said.

By January, prosecutors had decided they wanted to indict the bank and expected it to plead guilty, the source said.

The bank, U.S. authorities and Swiss government declined to comment beyond their public statements.

U.S. prosecutors said Credit Suisse helped clients deceive U.S. 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.

Credit Suisse, which has a large business managing rich clients' money, helped them withdraw funds from their undeclared accounts by either providing hand-delivered cash to the United States or using Credit Suisse's correspondent bank accounts in the United States, the Justice Department said. Prosecutors said Credit Suisse had around 22,000 U.S. client accounts worth around $10 billion, which included both declared and undeclared accounts.

The bank was forced to plead guilty not only because of its complicity in tax evasion, but also because of its poor co-operation in the investigation, prosecutors said. It did not begin an internal probe until early 2011, and did not preserve some evidence of the wrongdoing, documents showed.

Still, the bank escaped a much worse fate. Critically, the New York state bank regulator decided not to revoke its license, sparing it from what could have been a devastating blow for a foreign bank as it could effectively have cut off its direct access to the U.S. bank market.

And top executives, including Chief Executive Brady Dougan, remained in their seats, despite suggestions by New York state regulators at one point that they resign and pressures from some critics of the bank's leadership outside and within the bank as the probe dragged on and the costs of settling the matter kept rising.

Interviews over the past few days with sources familiar with negotiations between the bank and various U.S. authorities, including the Department of Justice prosecutors and the New York Department of Financial Services, reveal that a turning point in the long-running probe came in February this year, when U.S. senators grilled bank executives and scolded prosecutors for dragging their feet.

A report by the Senate Permanent Subcommittee on

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