WASHINGTON (Reuters) - U.S. senators
lashed out at federal prosecutors on Wednesday for a lack of zeal in
going after Swiss banks that helped Americans dodge taxes, blaming
both sides for billions of dollars in missed revenues.
The Senate Permanent Subcommittee on Investigations this week
alleged new misdeeds by Switzerland's Credit Suisse, citing secret
meetings in luxury hotels and hidden elevators one senator said
belonged in a spy novel.
But the senators saved some their harshest criticism for two Justice
Department officials who testified at the hearing after a morning
session with bankers.
"You have been incredibly slow over a five-year period," said
Arizona Senator John McCain, referring to the moment that Swiss bank
UBS admitted to helping U.S. clients hide money from the tax man and
handed over their names.
"You're doing a job that, frankly, has not shown any progress. ...
The taxpayers' dollars are not well spent by the way you and your
organization," said McCain, the highest ranking Republican on the
committee.
The Justice Department is probing 14 Swiss banks over taxes after
UBS became the first major bank to settle over the charges. Two
smaller Swiss banks have had to close shop as a result of the U.S.
investigation.
In a lengthy report this week, the senators said Credit Suisse
bankers secretly traveled to the United States, sometimes on tourist
visas, describing one customer who got bank statements tucked into
the pages of an issue of Sports Illustrated magazine at a hotel
meeting.
The report said Credit Suisse opened accounts for more than 22,000
U.S. customers, with combined assets of $12 billion. The bank has
accepted responsibility for wrongdoing by its staff.
Switzerland has amassed assets worth trillions of dollars from
foreigners over the past decades, aided by its tight bank secrecy
laws, but the business has come under threat from politicians and
regulators abroad.
TREATY SITUATION CITED
During the hearing, Credit Suisse bank laid out a detailed defense,
saying that the perpetrators were a small group of Swiss-based
bankers, and that while it wanted to hand over more client names, it
was caught between U.S. and Swiss law.
"Credit Suisse is ready to provide the additional information
requested by the U.S. authorities on U.S. account holders, but we
have been unable to do so," the bank said in a statement provided at
the hearing.
Credit Suisse had provided as much information as allowed under
Swiss law, it said, and while it wanted to provide more client
names, the U.S. Senate had not ratified a bilateral treaty with
Switzerland that would allow it to do so.
Subcommittee Chair Carl Levin, a Michigan Democrat, poured cold
water on that argument, saying the treaty will only expose U.S.
accounts at Swiss banks after 2009, when it was signed.
If U.S. customers closed their accounts before 2009, they could
evade detection and years of U.S. tax bills, Levin said, which
Credit Suisse bankers acknowledged.
"We can't collect taxes owed by those folks, which is what the heart
of the problem is. ... Don't tell us the treaty is going to get us
what we want," he said. "It won't."
Levin also scolded the Justice Department for only having retrieved
238 client names from Credit Suisse - and none from the other banks
under investigation. But the Justice Department officials said their
work did show good progress.
Credit Suisse said it was a "demonstrably inappropriate assumption"
that all 20,000 U.S. clients were tax cheats, saying many U.S.
clients, such as expatriates living in Switzerland, had a valid
reason to hold a Swiss bank account.
NEW SEC PROBE
Credit Suisse last week settled charges levied by the U.S.
Securities and Exchange Commission, admitting to wrongdoing and
paying $196 million in fines. But a settlement with the Justice
Department is not imminent, a person familiar with the matter has
told Reuters.
"This fine ... pales in comparison with the severity of the full
extent of Credit Suisse's misconduct," said McCain.
Levin also grilled Credit Suisse over the way it accounted for new
client money it had earned, a matter the bank admitted some of its
staff had mishandled, even if the issue was not directly related to
helping clients avoid taxes.
The report cited emails from staff asking whether money could be
booked in a different region to make end-quarter numbers look
better. The bank did not condemn the practice per se but said the
emails looked out of line.
The U.S. securities regulator, the Securities and Exchange
Commission, has been investigating the bank over the issue since
last fall, a source familiar with the matter said. The SEC and
Credit Suisse declined to comment on that matter.
Credit Suisse's larger rival, UBS, admitted to helping U.S.
taxpayers hide money and paid a $780 million fine in 2009.
Evidence culled from the UBS probe, as well as thousands of
Americans coming forward under a tax amnesty program, has fed a
second wave of investigation, which has ensnared Credit Suisse and
13 other Swiss banks.
(Additional reporting by Aruna
Viswanatha in Washington; Editing by Kevin Drawbaugh, Stephen Powell
and Jonathan Oatis)
