Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

Credit Suisse admits to one felony for aiding tax evasion.

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After unspecified decades of deliberately helping unnumbered thousands of customers evade income taxes, on Monday Credit Suisse Group plead guilty to one felony charge of aiding tax evasion. They will pay a fine of $2.5 billion.

I think this may be the end of “too big to jail.” Perhaps.

I’ll take a look at the modest size of the fine in relation to earnings in the next post.

Full service money laundering

This isn’t just a case of giving a numbered account to someone who shows up in Geneva with a suitcase of cash. It has been running for decades and involves providing help with setting up conduits and then destroying documents when demanded by US authorities. The DoJ press release highlights a few of the Credit Suisse techniques. In case you were wondering if this was just an allegation, Credit Suisse agrees in writing that they did all the following plus more:

According to the statement of facts filed with the plea agreement, Credit Suisse employed a variety of means to assist U.S. clients in concealing their undeclared accounts, including by:

  • assisting clients in using sham entities to hide undeclared accounts;

  • soliciting IRS forms that falsely stated, under penalties of perjury, that the sham entities were the beneficial owners of the assets in the accounts;

  • failing to maintain in the United States records related to the accounts;

  • destroying account records sent to the United States for client review;

  • using Credit Suisse managers and employees as unregistered investment advisors on undeclared accounts;

  • facilitating withdrawals of funds from the undeclared accounts by either providing hand-delivered cash in the United States or using Credit Suisse’s correspondent bank accounts in the United States;

  • structuring transfers of funds to evade currency transaction reporting requirements; and

  • providing offshore credit and debit cards to repatriate funds in the undeclared accounts.

Looks to me like a full service money laundering operation.

With the hand-delivery of unreported cash in the US, it reminds me of the full-service laundering facilities of HSBC who helped unidentified parties from South America move $7B of currency (yes billions) into the US, including (if I recall correctly) the go-the-extra-mile, service-with-a-smile step of helping their customers load bales of currency in the back of vehicles.

Here I sit in my silly ignorance. I thought the numbered account system required you to deliver cash to a desk in Geneva or Zürich. The discreet Swiss bankers then just kept quiet. Little did I know the Swiss bankers had an extensive, coordinated, well-organized, systematized structure to actively and intentionally facilitate hiding money to evade taxes while fabricating a plausible cover.

Background

The Wall Street Journal reports Credit Suisse Pleads Guilty in Criminal Tax Case.

The article quotes the U.S. Attorney General to provide the scale of this massive tax evasion scheme:

“This conspiracy spanned decades,” Mr. Holder said. “Credit Suisse not only knew about this illegal, cross-border banking activity; they willfully aided and abetted it. Hundreds of Credit Suisse employees, including at the manager level, conspired to help tax cheats dodge U.S. taxes.”

Hundreds of employees over decades. The statement of facts suggests to me it could approach a thousand.  The statement of facts says at one point there were 485 staff working on one part of the scheme.

Let’s assume 40 years. That would make the penalty about $62M a year. More on that soon.

The feds worked to make sure this plea deal doesn’t collapse the firm. From the WSJ article:

Prosecutors took steps to limit the potential ripple effects from a guilty plea by winning assurances from state and federal regulators not to take punitive measures that would cripple the bank, such as stripping Credit Suisse of its ability to operate in the U.S.

USA Today reports Credit Suisse pleads guilty in $2.6B settlement.

The USA Today article provides some tidbits from hearings in the Senate earlier this year. Credit Suisse bankers would travel on tourist visas, pass bank account statements hidden between pages of a magazine, structure transactions to stay below the $10K reporting limit, and refer clients to intermediaries who could set up shell companies to hold title to accounts.

The plea agreement contains a number of conditions, including the now-criminal bank will provide a whole bunch of information in the future on its customers and agrees not to take a tax deduction for any of the penalties paid.

Since 1910?

I just glanced briefly at the statement of facts. One entertaining tidbit in paragraph 21 and 22 is that since 1910 Credit Suisse has operating a subsidiary that formed shell companies so its customers could hide ownership of accounts. 1910. Tax evasion. 1910. Intention to evade. Not an accident, oversight, blunder, or rogue assistant vice president in some remote office.

1910. Since before the Great Depression. Before Prohibition. They’ve been helping to hide ownership of money since before there was a U.S. Income Tax. Maybe Gatsby’s or Capone’s money is in Zurich right now waiting to be picked up.

Next post – Just how severe is that fine? Not as bad as you think.

Written by Jim Ulvog

May 20, 2014, 8:04 am at 8:04 am

Posted in Fraud, Other stuff

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  1. […] LIBOR and facilitating systemic tax evasion as an intentional client service for a century (Credit Suisse comes to mind). Add more as you […]

  2. […] like cash machine for rich clients- Part 2.  You can tell a story through statistics, such as Credit Suisse running a full service money laundering subsidiary since 1910 that will set up shell corporations to facilitate laundering and prepare all the needed fake […]

  3. […] on one hand this would seem to be the same problem for which Credit Suisse already wrote a $2.5 billion dollar check back in 2014 at the same time they pled guilty to one felony count of tax […]


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