Updated Tuesday, July 22, 2014 as of 9:44 PM ET
Practice - Regulatory/Compliance
Credit Suisse Pleads Guilty, Pays $2.6 Billion in Tax Probe
by: David Voreacos and Tom Schoenberg
Monday, May 19, 2014
Print
Email
Reprints

(Bloomberg) -- Credit Suisse agreed to pay $2.6 billion in penalties and pleaded guilty to helping Americans cheat on their taxes, making it the first global bank in a decade to admit to a crime in a U.S. courtroom.

The plea also signals a tougher posture by the Justice Department, which has faced criticism that it avoided pursuing large banks after the 2008 financial crisis because of the potential economic fallout. The firm said the deal will cut second-quarter earnings by 1.6 billion francs ($1.79 billion).

“This case shows that no financial institution, no matter its size or global reach, is above the law,” Attorney General Eric Holder said during a press conference. He said “a company’s profitability or market share can never and will never be used as a shield from prosecution or penalty. And this action should put that misguided notion definitively to rest.”

The bank will pay $1.8 billion to the U.S., which includes almost $670 million in restitution to the Internal Revenue Service. The penalty also involves a $715 million payment to New York’s Department of Financial Services and $100 million to the Federal Reserve. The state banking regulator also called for the termination of certain employees and an independent monitor, the person said.

EXECUTING STRATEGY

Credit Suisse AG is the bank subsidiary of the ultimate parent, Credit Suisse Group AG. Credit SuisseAG has dozens of subsidiaries that conduct most of the firm’s business, according to its most recent annual report. The bank was charged by the U.S. along with two subsidiaries earlier today.

Credit Suisse Group AG 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.

“We can now focus on the future and give our full attention to executing our strategy,” Dougan said today in a statement, in which the company estimated what effect the deal will have on the quarter’s earnings. “We have seen no material impact on our business resulting from the heightened public attention on this issue in the past several weeks.”

The company will reduce risk-weighted assets to a level at or below what it was at the end of 2013 and take other steps to bolster capital, such as selling surplus real estate and other non-core assets, Dougan said.

Get access to this article and thousands more...

All On Wall Street articles are archived after 7 days. REGISTER NOW for unlimited access to all recently archived articles, as well as thousands of searchable stories. Registered Members also gain access to exclusive industry white paper downloads, web seminars, blog discussions, the iPad App, CE Exams, and conference discounts. Qualified members may also choose to receive our free monthly magazine and any of our daily or weekly e-newsletters covering the latest breaking news, opinions from industry leaders, developing trends and growth strategies.

Already Registered?

Lists
2014 Summer Reading List for Advisors

Current Issue

The June Issue is now online!


TWITTER
FACEBOOK
LINKEDIN

Industry Events

August 10, 2014 |

September 9, 2014 |

September 17, 2014 |

September 20, 2014 |

September 28, 2014 |

Already a subscriber? Log in here