The Business Times

Credit Suisse tax whistle-blowers urge US to punish bank

Published Thu, Mar 11, 2021 · 06:23 PM

[NEW YORK] Former Credit Suisse Group bankers who blew the whistle on their employer for helping wealthy Americans dodge taxes are now urging US authorities to punish the bank beyond the US$2.6 billion it paid as part of a guilty plea seven years ago.

A lawyer for the bankers wrote a letter to the Internal Revenue Service's (IRS) whistle-blower's office last week that said the bank's conspiracy continued "well after the plea agreement and sentencing" in 2014.

Credit Suisse's "misrepresentations and material omissions" about one wealthy American caused the bank to violate its plea agreement after the Justice Department and IRS agreed to reduce its fine by US$1.3 billion, wrote the attorney, Jeffrey Neiman.

"With a new Justice Department, there is hope that Credit Suisse will finally be held accountable" over the affluent American, Mr Neiman said Wednesday in an interview. "They could find Credit Suisse in violation of its plea agreement and seek additional penalties. They could bring new charges against the bank, and they may even be able to revoke or suspend its licence to operate in the United States."

A spokesperson for the bank declined to comment. The Justice Department and IRS didn't immediately respond to a request for comment.

Credit Suisse declined about 1.9 per cent as of 10.23am in Zurich, after earlier dropping as much as 2.2 per cent. The Swiss bank has also come into the cross-hairs for its links to now-defunct supply chain finance firm Greensill.

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UNDISCLOSED US$200 MILLION

In May 2014, the bank unit pleaded guilty and admitted helping Americans use sham companies, foundations and trusts to hide their money from US tax authorities. At the time, the bank didn't tell the Justice Department about a US$200 million account held by an American client, Dan Horsky. Instead, the whistle-blowers told the US two months later.

When Credit Suisse was sentenced in November 2014, the judge knew nothing of his accounts, and it's unclear why the government didn't tell her. IRS agents approached Horsky in 2015, when he admitted wrongdoing and began to help US investigators. He pleaded guilty, got a seven-month jail term and paid back taxes, fines and penalties of US$125 million. The judge granted him leniency after prosecutors recommended a sentence of 20 months.

"Your honour, I have devoted the last two years to correct in part the damage I've caused," Horsky told the judge at his sentencing hearing in February 2017. "The government has expressed interest in my continuing to cooperate with them and I plan to help them in any way I can."

The ex-bankers later collected millions of dollars for blowing the whistle on Horsky, a retired business professor from Rochester, New York.

If Credit Suisse were found in violation of its plea agreement, the judge could theoretically make the bank pay more money. The whistle-blowers could be eligible for a further payout if the US collects more from the bank based on their information.

Mr Neiman declined to identify the bankers or how much they were paid for blowing the whistle.

In November 2016, Bloomberg News reported that US investigators wanted to know why the Swiss bank neglected to tell them about the Horsky account.

Horsky had been cooperating for more than a year with investigators examining whether the bank helped clients with ties to Israel evade US taxes, five people who weren't authorised to discuss the case publicly said at the time.

The Horsky accounts were considered "toxic" on the bank's Israel desk because they were hidden from the IRS using methods like those that led to Credit Suisse's guilty plea, the people said.

It's not immediately clear whether the Justice Department is still investigating Credit Suisse's conduct. Last year, Bloomberg wrote a letter to Horsky's sentencing judge asking him to unseal portions of the guilty plea and sentencing transcripts.

After consulting with the Justice Department and Horsky's attorneys, the judge declined to unseal the redacted portions of the transcript.

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