The SEC Order
On February 21, 2014, the Securities and Exchange Commission (SEC) issued an order instituting administrative and cease-and-desist proceedings against Credit Suisse for violations of U.S. securities laws. The SEC censured the bank and ordered it to cease and desist from violations and future violations of securities laws. The bank disgorged $82.2 million, paid prejudgment interest of $64.4 million, and paid restitution of $50 million to the SEC. (In the Matter of Credit Suisse Group AG, SEC Release No. 71593.)
The Senate Subcommittee Report
On February 26, the Permanent Subcommittee on Investigations of the U.S. Senate Committee on Homeland Security and Governmental Affairs released a 181-page report entitled "Offshore Tax Evasion: The Effort to Collect Unpaid Taxes on Billions in Hidden Offshore Accounts." The report focused on widespread misconduct by Switzerland-based banks, and used Credit Suisse as a case study.
The Information
On May 19, the U.S. Attorney filed an Information charging Credit Suisse, including subsidiaries Credit Suisse Fides and Clariden Leu Ltd., with one criminal count of conspiracy "to willfully aid, assist in, procure, counsel, and advise the preparation and presentation of false income tax returns and other documents to the Internal Revenue Service" (IRS). The Information explained how Credit Suisse carried out the conspiracy, and described the cases of two unidentified clients--one a naturalized U.S. citizen living in Charlottesville, Virginia, and the other a U.S. citizen living in Elizabeth, New Jersey. Credit Suisse waived its right to prosecution by indictment and consented to prosecution by information. (U.S.A. v. Credit Suisse AG, U.S. District Court, Eastern District of Virginia, Case. No. 1:14-cr-188.)
The Plea Agreement
Also on May 19, the U.S. Attorney filed a Plea Agreement in which Credit Suisse agreed to plead guilty to the one criminal conspiracy count. The parties agreed on a fine of $1.137 billion and restitution of $666.5 million to the IRS. Incorporated in the Plea Agreement was a Statement of Facts. The parties agreed that, if the matter had gone to trial, the U.S. government would have proven the facts beyond a reasonable doubt.
The New York Order
Also on May 19, the DFS issued a Consent Order "In the Matter of Credit Suisse AG." The bank agreed to pay a civil monetary penalty of $715 million to the DFS, engage an independent monitor, and file certain reports. The bank also agreed to terminate the employment of Markus Walder, Susanne Ruegg Meier, and Marco Parenti Adami, who had remained employed by the bank on administrative leave. In addition, the bank agreed to refrain from entering into any direct or indirect business relationship with the above mentioned three persons and six others found by the DFS to have participated in the conduct discussed in the order: Roger Schaerer, Emanuel Agustino, Michele Bergantino, Andreas Bachmann, Joseph Dörig, and Beda Singenberger.
Major Media Coverage
On May 20 and the next few days, major newspapers carried articles about the Credit Suisse case. The New York Times, The Wall Street Journal, and The Washington Post carried front-page stories on May 20.
General Observations
The Credit Suisse criminal guilty plea is reminiscent of Drexel Burnham Lambert in 1989 and Arthur Andersen in 2002. For that reason, there has been speculation about the impact of a criminal guilty plea on Credit Suisse. The regulators are determined to avoid having the criminal plea become a death sentence. For example, the SEC is not terminating securities licenses, the DFS is not terminating banking licenses, and the New York Federal Reserve Bank is not terminating Credit Suisse as a primary dealer in U.S. securities. It remains to be seen whether customers will continue doing business with a bank that pleaded guilty to criminal wrongdoing.
I am offering a complimentary 46-page PDF consisting of the 4-page Information, the 17-page Plea Agreement, the 16-page Statement of Facts, and the 9-page DFS Consent Order. Send an e-mail to jmbelth@gmail.com and ask for the Credit Suisse package.