Ex-Credit Suisse bankers say it still aids hidden accounts

Former Credit Suisse Group AG bankers have told criminal investigators that the bank is still helping U.S. clients hide accounts from the Internal Revenue Service, even after the firm paid $2.6 billion in penalties in 2014 and promised to stop the practice.

Those bankers “have come forward with credible information that Credit Suisse continued to assist additional Americans with concealing assets from the United States after 2014,” according to a Nov. 18 filing in a civil lawsuit. “In some instances, the concealment is ongoing today.”

The latest allegations of wrongdoing come during a tumultuous year for the Zurich-based bank, which lost $5.5 billion in the blowup of family office Archegos Capital Management and had to unwind client funds that were managed with collapsed lender Greensill Capital. It also is happening weeks after the U.S. Justice Department vowed to crack down on corporations that repeatedly violate the law.

The bankers who came forward said that Credit Suisse opened accounts for South American clients who held dual citizenship, but bank documents failed to indicate they were U.S. citizens, according to people familiar with the matter. Some of the accounts held tens of millions of dollars, the people said. U.S. taxpayers are supposed to pay taxes on income earned anywhere in the world, and disclose their offshore accounts to the Treasury Department, even if they have dual citizenship.

Credit Suisse shares were down more than 2% on Monday. The stock has slumped by more than a fifth this year, making it the worst-performing major bank in Europe.

Over the summer, those bankers, who were unidentified, were interviewed by U.S. tax prosecutors, IRS criminal agents and U.S. Senate investigators, the people said. Credit Suisse still faces fallout from the 2014 guilty plea of its main banking unit, which admitted helping thousands of Americans evade taxes.

“Following our settlement in 2014, Credit Suisse has cooperated fully with U.S. authorities and continues to do so,” the bank said in a statement.

The Justice Department declined to comment, and a spokesman for the IRS didn’t respond to several requests for comment made outside of normal business hours.

The allegations bring yet another headache for the bank as it struggles to convince investors that the strategic overhaul announced by Chairman Antonio Horta-Osorio this month is enough to put the turmoil of the past year behind it. Third-quarter net income was already dented by 564 million francs ($607 million) of litigation costs from a variety of issues including a fund-raising scandal in Mozambique.

Credit Suisse has been working to resolve its problem of U.S. accounts hidden from the IRS, according to a Nov. 4 filing in the civil lawsuit, which was filed this year by a whistle-blower in federal court in Alexandria, Virginia. The suit claims that the DOJ should have imposed an additional criminal fine because of Credit Suisse’s failure to disclose the existence in 2014 of more than $200 million in accounts held by a U.S. citizen, Dan Horsky, who later pleaded guilty and served seven months in prison.

Prosecutors and Senate investigators have examined who at the bank knew of Horsky’s accounts. In recent months, lawyers at an outside law firm working for the bank, Kirkland & Ellis, have told investigators that top executives didn’t know about Horsky’s accounts, and five bankers who did were terminated or left the bank, the people said.

Living document

The Justice Department said in a Nov. 4 filing that it’s investigating the 2014 plea deal in which the bank promised it would close “any and all accounts” not declared to the IRS. They also urged a judge to dismiss the whistle-blower lawsuit because they said it would interfere with “ongoing discussions with Credit Suisse regarding the identification and remediation of remaining Swiss accounts held by U.S. citizens.”

Prosecutors said the plea agreement was a “living document (i.e., one that requires continued cooperation on the part of Credit Suisse).” They also described “ongoing law enforcement activities related to the plea agreement.”

Last month, Deputy Attorney General Lisa Monaco said prosecutors would “consider the full criminal, civil and regulatory record of any company” in resolving criminal investigations. “Where they do not live up to their obligations,” she said in an interview on Bloomberg Television, “we will hold them accountable.”

The case is U.S. ex rel. John Doe v Credit Suisse, 1:21-cv-00224, U.S. District Court for the Eastern District of Virginia (Alexandria).