Justice Dept. Asked to Examine Whether Swiss Bank Kept Helping Tax Dodgers

WASHINGTON – The chairman of the Senate Finance Committee on Tuesday asked Attorney General Merrick B. Garland for information on whether Credit Suisse continues to help rich Americans defraud the IRS, even after signing a settlement agreement with the Justice Department promising to to finish the practice.

It’s about a retired professor named Dan Horsky, who Credit Suisse helped avoid tax payments on assets of $ 200 million. In the summer of 2014, a whistleblower drew the attention of the federal prosecutor’s office to Mr. Horsky’s account and clearly violated the provisions of the settlement agreement that Credit Suisse had agreed a few weeks earlier.

However, the Justice Department under the Obama and Trump administrations never punished Credit Suisse for violating the agreement, despite the whistleblower’s information leading to Mr Horsky pleading guilty of tax evasion in 2016.

Senator Ron Wyden, Democrat of Oregon and chairman of the Senate Finance Committee, asked Mr. Garland for more information about the Horsky account and anything else that could reveal whether Credit Suisse executives have made false statements to Congress, the Department of Justice, and the courts when it said it vowed to work with the US government’s efforts to force the richest Americans to pay their taxes.

The review of Credit Suisse’s private wealth management practices comes at a sensitive time for the bank. Significant losses were reported last week on loans to a collapsed investment firm and the Swiss financial regulator said it was investigating the bank’s risk management practices. Regulators are also investigating a spying scandal and sales of billions of dollars worth of investments reminiscent of the bad subprime mortgage bonds that led to the 2008 global financial crisis.

“Public reports and documents from the federal court raise important questions as to whether Credit Suisse has complied with its declaration of consent in full,” wrote Wyden in a letter to Garland.

“The plea agreement expressly depends on Credit Suisse fulfilling all essential obligations,” added Wyden. it “stipulates that the agreement not to initiate further prosecution will be void if Credit Suisse fails to fully comply with its obligations.”

Should prosecutors decide that Credit Suisse is in breach of its agreement with the Justice Department, the bank could face legal liability and higher fines.

Mr. Wyden requested the Justice Department to report the Horsky case by May 11th.

A spokesman said the Justice Department received the letter but had no immediate comment. A Credit Suisse spokeswoman said the company “has been and will continue to have fully cooperated with the US authorities since the 2014 settlement.”

Wyden also asked the department to help determine whether Credit Suisse executives had made false statements to the Senate in February 2014 when they testified whether the bank had stopped helping wealthy Americans evade taxes.

Brady Dougan, then managing director of Credit Suisse, told the senators that the bank had strived to “meet 100 percent of the US taxpayer’s requirements,” wrote Wyden. At the same hearing, the bank’s general counsel, Romeo Cerutti, testified that Credit Suisse is “really looking into whether someone is a US person” in an attempt to eradicate Americans who were hiding their assets from the IRS

For nearly 15 years, Republicans and Democrats have been participating in a well-known campaign to weed out tax evaders with Swiss bank accounts, with a focus on UBS and Credit Suisse, both of which are headquartered in Zurich.

When Credit Suisse executives testified in 2014, they were in the midst of negotiations with the Justice Department about an agreement on the bank’s treatment of US tax dodgers.

The two sides signed the deal in May 2014, in which Credit Suisse pleaded guilty to assisting some American clients with tax evasion and fined a total of $ 2.6 billion. But even higher fines were avoided because federal prosecutors swore they had abandoned the practice of “closing down all accounts of recalcitrant account holders” and helping the US with other criminal investigations.

The confession of guilt and the heavy fine were rare in 2014, and it was the first time in more than 20 years that a lender of his size had admitted wrongdoing in an American court.

But a whistleblower surfaced in July of that year telling Justice Department tax officials and federal attorneys who worked on the case about an account owned by Mr. Horsky, a retired economics professor who lived in Rochester. NY and amassed much of his fortune by investing in start-ups in the 1990s.

In September 2014, when Credit Suisse appeared in court to plead guilty, the judge asked both the bank and prosecutors if they had any information that would affect the settlement agreement. Both sides said no.

But the whistleblower spike let prosecutors find out that with the help of Credit Suisse bankers using offshore shell companies, Mr. Horsky had hidden a fortune of $ 200 million, court documents show. The deal lasted months after the bank signed its pleading agreement.

As part of the scheme to hide Mr. Horsky’s assets, it was placed by bankers in the name of a relative of Mr. Horsky who lived abroad. When an account of this size changes hands, it is subject to advanced due diligence, including notifying bank managers of the change.

Mr Wyden also sent a letter to Credit Suisse Tuesday asking for information on when the Justice Department told Credit Suisse about the Horsky account. He asked if the bank had informed the government of the account before reporting the whistleblower, and if not, whether it was due to poor internal controls or a deliberate decision not to report the existence of these accounts to US government agencies. ”

It is unclear why the Justice Department failed to inform the court of the whistleblower claim and change the terms of its settlement. The department would have had the authority to review the Credit Suisse case for possible violations and to pursue the bank.

Jack Ewing contributed to the coverage.

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