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.

Investigations prompted New York Superintendent of Financial Services Benjamin Lawsky's office to launch a parallel investigation into the bank's activities, which complicated a deal in the final days of negotiations and increased the size of the penalty the bank had to pay, according to the sources.

Credit Suisse's legal team had initially tried to keep the fine below $600 million or $800 million, but the numbers quickly outstripped that target, one of the sources said.

Credit Suisse will pay financial penalties to the Justice Department, the Internal Revenue Service, the Federal Reserve and New York's banking regulator to settle the matter. It has already paid just under $200 million to the U.S. Securities and Exchange Commission.

The bank will take an after-tax charge of 1.6 billion Swiss francs ($1.79 billion) in the second quarter.

"We deeply regret the past misconduct that led to this settlement," 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."

FINAL DAYS

As late as this month, Credit Suisse was trying to avoid having to plead guilty, insisting that only a small division was responsible for the alleged crime and the entire bank should not have to pay for it. It wanted a deferred prosecution agreement, suggesting it would work with the Swiss government to provide the names of account holders to prosecutors, one of the sources said.

But prosecutors did not see that as a serious offer.

On Thursday last week sources familiar with the talks said the bank had reached a deal in principle with prosecutors, agreeing to a roughly $2 billion fine, including $100 million to the U.S. Federal Reserve and a $200 million credit for the SEC settlement in February over related activity.

Talks, however, hit an impasse with New York state banking regulators.

Lawsky, a former federal prosecutor who has extracted large penalties from other banks such as Standard Chartered Plc, by threatening to revoke its license to operate in New York, was looking into whether Credit Suisse had lied to New York authorities about creating tax shelters.

Sources said Lawsky's office was playing hardball in negotiations, knowing it held the ultimate leverage - the power to pull the bank's state license.

Lawsky's office made an opening bid for Credit Suisse to pay $1 billion to New York regulators, one of the sources said. The office also sought reforms, including the right to

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