Swiss Urge U.S. to Treat Banks Fairly as Minister Meets Holder

May 02, 2014 7:24 pm ET

May 3 (Bloomberg) -- Switzerland urged U.S. authorities to conduct a “fair and balanced process” in the Department of Justice’s crackdown on Swiss banks that helped Americans evade taxes.

The government is seeking to ensure that “Swiss banks aren’t treated worse than other banks,” the finance ministry, led by Eveline Widmer-Schlumpf, said in a German-language e- mailed statement after she met in Washington yesterday with U.S. Attorney General Eric Holder.

The Justice Department is weighing charges against Credit Suisse Group AG, the largest of 14 Swiss banks under criminal investigation in a U.S. crackdown on offshore tax evasion, according to people familiar with the matter who requested anonymity because they aren’t authorized to discuss it publicly. The Swiss finance ministry’s statement made no reference to Credit Suisse, the nation’s second-largest lender.

Instead, it said a U.S. disclosure program for Swiss banks, which lets them seek non-prosecution agreements, is progressing well. The U.S. has said 106 banks sought to avoid charges after stating they had reason to believe they helped Americans violate tax laws. Banks must disclose how they helped Americans hide assets, hand over data on undeclared accounts and pay penalties.

Brian Fallon, a Justice Department spokesman, declined to comment on the meeting.

The meeting was supposed to occur in April during the International Monetary Fund and World Bank spring meetings and was reset, said Roland Meier, a Swiss Finance Ministry spokesman.

Guilty Pleas

Those under criminal investigation are known as Category 1 banks, while those seeking non-prosecution agreements are Category 2. If no undeclared U.S. accounts are found, banks can apply as Category 3. Category 4 banks are those with mainly local clients.

William Sharp, an American tax lawyer who splits his time between Switzerland and the U.S., said the Swiss are following the U.S. crackdown closely. He said that banks want to enter into deferred-prosecution or non-prosecution agreements with the U.S.

“From a Swiss perspective, Credit Suisse is the bellwether of the Category 1 banks,” Sharp said. “There’s no question that all of the Category 1 banks are seeking to avoid indictment because it’s the worst result possible. Instead, they’re most certainly seeking either DPAs or NPAs.”

The founder of a Swiss trust pleaded guilty this week to helping Americans evade taxes and said Credit Suisse was involved in the scheme, adding to pressure on the bank as it seeks to resolve a U.S. criminal probe.

Phony Trusts

Josef Dorig, 72, said in federal court in Alexandria, Virginia, that he helped the bank’s U.S. clients cheat the Internal Revenue Service by helping to hide the identities of account owners with phony trusts and foundations. He was indicted in 2011 with seven Credit Suisse bankers on a charge of conspiracy to defraud the U.S. by helping to hide $4 billion from the IRS. The U.S. told Credit Suisse then that it was a target of the probe.

Banks in Switzerland, the largest cross-border financial center with $2.2 trillion of assets, closely examined accounts before seeking to join the disclosure program.

The Swiss units of Goldman Sachs Group Inc. and Morgan Stanley are among the 106 banks seeking U.S. non-prosecution agreements, three people familiar with the firms’ actions said earlier this week.

Banks seeking non-prosecution agreements must disclose the total number of U.S. accounts since 2008, their highest dollar value, and the employees who managed them. The banks also must use independent examiners to certify findings.

To gain non-prosecution deals, banks must pay 20 percent of the value of accounts not disclosed to the IRS on Aug. 1, 2008, 30 percent for such accounts opened between then and February 2009 and 50 percent for accounts opened afterward. Banks submitted letters of intent by Dec. 31.

--With assistance from Zoe Schneeweiss in Zurich and Tom Schoenberg in Washington.