Credit Suisse Charged by U.S. With Aiding Tax Evasion

May 19, 2014 5:18 pm ET

(Updates with New York penalty in fifth paragraph.)

May 19 (Bloomberg) -- Credit Suisse AG was charged by the U.S. with conspiring to help American citizens evade income taxes through the use of secret accounts.

The charge was filed against the bank today in federal court in Virginia as a criminal information, which signals a plea deal is likely. The Justice Department also charged two Credit Suisse subsidiaries.

The charge marks a tougher stance by the Justice Department, which has faced criticism that it shied away from prosecuting large banks after the 2008 financial crisis because of their size and influence on the economy. Credit Suisse is said to have reached an agreement to pay $2.5 billion to resolve the case, concluding the three-year U.S. probe, a person familiar with the matter has said.

A plea agreement hearing has been scheduled for 5:30 p.m. in Alexandria, Virginia. Calvin Mitchell, a Credit Suisse spokesman, declined to comment.

The penalty includes a $715 million payment to New York’s Department of Financial Services, a person with knowledge of the matter said. The state’s top banking regulator also called for the termination of certain employees and the installation of an independent monitor, the person said.

Credit Suisse AG is the bank subsidiary of the ultimate parent, Credit Suisse Group AG. Credit Suisse AG in turn has dozens of subsidiaries that conduct most of the business of the firm, according to its most recent annual report.

Sham Entities

Credit Suisse assisted U.S. clients in using sham entitities to disguise undeclared accounts, failed to maintain U.S. account information and destroyed records sent to U.S. clients, according to the charging papers.

The bank also helped clients withdraw money from the accounts by providing hand-delivered cash or using Credit Suisse’s correspondent bank accounts in the U.S. and structured such transactions in a way that would evade currency reporting requirements, according to the document.

Credit Suisse Chief Executive Officer Brady Dougan, an American, downplayed the offshore business and the extent of the wrongdoing during a Senate hearing in February. Dougan, 54, is starting to lose support in Switzerland, with the Swiss Social Democrats, the second-biggest party in parliament, calling for his resignation along with that of Chairman Urs Rohner.

Credit Suisse hasn’t identified as many account holders as bigger rival UBS AG did in its earlier agreement. In 2009, UBS avoided prosecution by paying $780 million, admitting it fostered tax evasion and disclosing to the U.S. the names of 250 American clients. UBS later settled a U.S. lawsuit by revealing the names of 4,450 more account holders.

--With assistance from Greg Farrell in New York.