European banking giant Credit Suisse has pleaded guilty to helping American clients avoid paying taxes by concealing assets in illegal, undeclared bank accounts — becoming the largest bank to plead guilty to a criminal charge in 20 years. As part of the plea deal, Credit Suisse will pay about $2.6 billion in penalties and hire an independent monitor. But the bank will not be required to turn over the names of the Americans who used the bank to evade taxes. In addition, no senior Credit Suisse executives will face jail time, and the bank will be allowed to continue operating in the United States. According to The New York Times, the Securities and Exchange Commission voted last week to grant Credit Suisse a temporary exemption from a federal law that requires a bank to hand over its investment-adviser license in the event of a guilty plea.
James Henry talking:
it’s a big missed opportunity. You know, this investigation has been going on for four years. You know, this is one of several Swiss banks that are under investigation. Fourteen were all lined up. And the reason the Swiss stock market, and in particular, Credit Suisse, is soaring this morning is because they’re—they are delighted with this deal. They’re yodeling through the Alps over the light touch that Eric Holder—you know, who has a tradition of this. In 2000, he was the assistant attorney general who signed off on the Marc Rich pardon. Marc Rich was Swiss-based trader who was violating U.S. regulations and tax evading all over the place at that point.
President Clinton pardoned at that point, got enormous backlash for that. In this case, we have the second-largest Swiss bank, a bank with 45,000 employees and 1.26 trillion Swiss franc of client assets under management, you know, getting away with essentially a fine that amounts to three months of their net earnings. No senior executives, as you mentioned, are going to jail. [Brady] Dougan, the CEO, is expected to stay on, in fact, and he said in front of his shareholders this week that this will have a very slight impact on Credit Suisse’s performance. You know, I think we missed the opportunity to really send a message here, because the way they structured this plea bargain was to rule out any impact on Credit Suisse’s license to operate in the United States. It was the only impact that a criminal prosecution could have had. And I think, going forward, the banks in Switzerland will be looking for new ways, new inventive ways of serving Americans.
this is worse than the UBS settlement in 2009, in which some names were given up. And so, you know, this is part of a negotiation. The Justice Department can say, “Look, you know, no deal. You want your license? You give us information on these Americans who are evading.”
I guess you could call it the bankster party, agrees, which is, basically, they have been very soft on punishing corporate crime, in general, with respect to banks. And Wall Street banks have been serial violators here. We’re talking about, in this case, a Swiss bank that, you know, has been doing this kind of activity for decades. Dougan has been at the bank for 25 years, and throughout that period they have been operating this kind of money laundering for wealthy tax evaders.
For example, they had a department that’s set up so that wealthy Americans who came to Geneva Airport had a special office. And, you know, something like 10,000 clients of this bank went through that office and, you know, were able to bring in their transactions, check on their accounts in utter privacy. There’s no name on the door. But, you know, they would send bankers undercover to Art Basel, big Miami art convention, every year and meet clients. They sponsored a lot of these art shows.
Swiss bankers would come in on tourist visas. And they would be basically recruiting wealthy Americans to take their money secretly to Switzerland, put it there essentially tax-free, no reporting to the IRS. So, for wealthy Americans who were able to play that game, it was worth quite a bit. Of course, for the rest of us, the ordinary taxpayers who are, you know, withheld against and don’t have the option of going to Switzerland, you know, will never meet a Swiss banker in the United States. This is just another case of where we’re transferring tax burdens to the poor and the middle class, who don’t have any choice but to pay up. So, basic question about the rule of law here, about justice being essentially for sale.
You mentioned the Obama administration. Eric Holder used to be an attorney at Covington & Burling, after he left the Clinton administration. He was handling UBS as a client. The chief IRS legal counsel, Mr. Wilkins, used to be a registered representative for the Swiss Banking Association in Washington, when he was a partner at WilmerHale. You have the U.S. treasury secretary, was in charge of Citibank’s global private banking department when he was at Citibank in 2006. So this administration is literally—and, you know, one of the key golfing partners of the president of the United States, Robert Wolf, used to run UBS America. He was a big fundraiser for Obama in 2008. So this administration is permeated with people who are basically very sympathetic to Wall Street and to Swiss interests, as well.
There’s no evidence in the settlement that there’s anyone going to jail. At the senior levels of Credit Suisse, everyone is in place. The chairman of Credit Suisse today said that they were “white as snow” and that both he and Dougan would remain on. You know, so that’s just rhetoric. And I think the problem is, we have a lot of rhetoric, and major media are basically playing this up as a major settlement, a first criminal prosecution. The BBC yesterday said that this was the end of bank secrecy in Switzerland. This is just ludicrous. If you look below the covers, this is a big missed opportunity. It’s—you know, we’re not going to have this kind of opportunity again very soon.
If you’re a U.S. citizen, you have to report your income to—worldwide income to the Treasury and the state tax authorities, as well. there have been a lot of settlements with those folks, private settlements that—you know, the IRS did go after quite a few of them. One of the whistleblowers in that case got—Bradley Birkenfeld got a large settlement as a reward for his activity. But one of the issues here is that, in Credit Suisse, we didn’t have whistleblowers, and this Justice Department has really failed to produce or to take advantage of Swiss whistleblowers who were available to them. And so we don’t have any names from whistleblowers like we had in the UBS case. And in this case, they are invoking Swiss secrecy.
While no Credit Suisse executives will be heading to jail for facilitating widespread tax evasion, Occupy Wall Street protester Cecily McMillan has been sentenced to three months in jail and five years of probation.
this is just one of many such contrasts we have. The Obama administration, to me, is a mystery. I mean, they go after whistleblowers like, you know, no one has ever done before. They go after Aaron Swartz, who was a hacker up in Boston, a very talented guy.
Who ultimately committed suicide. I mean, I have—it’s hard for me, especially when I look at the history of the behavior of the financial institutions and the lack of integrity across the board, not only Credit Suisse, but the top 22 banks have been involved in—you know, as Credit Suisse was, in Libor rigging, currency rigging, the credit frauds of the mortgage collapse, money laundering—just rampant cases across the board. And they’re basically getting away with murder here. I think this is a disparity in sentencing. You know, it’s like they get time off for bad behavior.
— source democracynow.org
James Henry, former chief economist at McKinsey & Co., now a senior adviser to the Tax Justice Network and senior fellow at the Vale Columbia Center on Sustainable International Investment.