Credit Suisse Settlement with U.S. Could Top $800 Million

ZURICH—Talks between Credit Suisse Group AG and U.S. authorities on settling allegations the Swiss bank helped Americans evade taxes have intensified, and a settlement of more than $800 million could be struck in the first half of the year, people familiar with the situation said.

If the deal goes through, it would represent the biggest fine in the U.S. government's crackdown on offshore tax evasion in Switzerland.

The discussions between Zurich-based Credit Suisse and the Justice Department are in early stages, one of the people familiar with the situation said. Both people said any settlement would likely top the $780 million UBS AG agreed to pay in 2009 to settle with the U.S.

Representatives for Credit Suisse, the Justice Department and the Internal Revenue Service declined to comment.
Credit Suisse is one of about a dozen Swiss banks that are under criminal investigation by the U.S. for allegedly helping Americans evade taxes by using Switzerland's bank-secrecy laws to hide assets. In 2011, Credit Suisse set aside 295 million Swiss francs ($324 million) to deal with the issue, which has also dogged a large portion of the Alpine country's roughly 300 lenders.

Credit Suisse, the second-largest Swiss bank by assets behind UBS, reported a profit of 454 million francs for the third quarter of last year.

Like other Swiss banks, Credit Suisse has stopped accepting American private-banking clients as U.S. authorities have increased efforts to hunt down offshore tax cheats. The lender has long been expected to settle its tax issue with U.S. authorities, though it is only one player in a legal battle that has ensnared a significant portion of Switzerland's financial sector.

Jeffrey Neiman, a former prosecutor at the Justice Department now in private practice in Fort Lauderdale, Fla., said the possible deal shows that the U.S. isn't letting up its campaign against pursuing offshore tax evaders and those that enable it. But he said, "The real question is, will Credit Suisse and other banks be required to turn over client data directly to the U.S., as UBS was?"

Credit Suisse has been seen as eager to resolve the tax-evasion issue with the U.S., which has lingered for years. Chief Executive Brady Dougan noted during a conference call with analysts in October that settling with the U.S. is among the biggest items on the bank's "litigation docket."

Mr. Dougan has declined to comment about the timing of a settlement.

As part of a restructuring unveiled in October, Credit Suisse created a nonstrategic unit for its private-banking business designed to absorb litigation costs, including those related to the U.S. tax issue.

Credit Suisse and the other lenders under investigation by U.S. authorities aren't eligible to participate in a program unveiled by the Justice Department last year.

The program invites other Swiss banks to step forward and disclose any undeclared U.S. assets on their books. Banks participating in the program face the possibility of significant fines but may also receive assurances that they won't be prosecuted.

The Justice Department program has proved controversial in Switzerland, because it potentially exposes Swiss bankers and wealth advisers to legal risk in the U.S. even though their activities were allowed under Swiss law, which has protected banking secrecy since it was codified in the 1930s.

As of mid-December, more than half of Switzerland's government-backed banks said they would participate in the program, such as Valiant Bank, Migros Bank, Bank Coop and PostFinance, which is backed by the Swiss postal system.

In addition to Credit Suisse, other Swiss banks under investigation by the Justice Department and expected to reach settlements with the U.S. include Julius Baer Group AG and the Swiss unit of HSBC Holdings PLC.

The U.S. crackdown on the use of Swiss accounts to evade taxes intensified with the prosecution of UBS, which reached a deferred-prosecution agreement with the Justice Department in 2009.

Under that agreement, UBS acknowledged helping Americans hide money abroad. The bank paid $780 million and turned over more than 4,000 names to U.S. authorities in order to avoid criminal charges.

Since then, a number of Swiss bankers and advisers have been indicted in the U.S. for allegedly helping Americans evade taxes, including former Credit Suisse employees.

Source:
WSJ (Wall Street Journal)
By John Letzing, Francesco Guerrera and David Enrich

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