‘Justice for Sale’? Critics Slam Fed Deal With Tax Dodger-Abetting Bank Behemoth

“As usual, no current senior officials were targeted. Pray tell, what is the deterrent value?”

Andrea Germanos

Swiss banking giant Credit Suisse pleaded guilty to criminal charges it abetted U.S. tax dodgers. But while the Justice Department is heralding the charges as showing that no institution “is above the law,” critics charge it is a “missed opportunity” to provide a real deterrent and show that justice isn’t for sale.

According to the terms of the agreement announced Monday, Credit Suisse will pay $2.6 billion — $100 million to the Federal Reserve, $715 million to the New York State Department of Financial Services and $1.8 billion to the Justice Department.

“This case shows that no financial institution, no matter its size or global reach, is above the law,” Attorney General Eric Holder said in a statement. “Credit Suisse conspired to help U.S. citizens hide assets in offshore accounts in order to evade paying taxes. When a bank engages in misconduct this brazen, it should expect that the Justice Department will pursue criminal prosecution to the fullest extent possible, as has happened here.”

“The bank actively helped its account holders to deceive the IRS by concealing assets and income in illegal, undeclared bank accounts,” Holder said on Monday.

He described the charges against Credit Suisse’s “extensive and wide-ranging conspiracy to help U.S. taxpayers evade taxes” as “a major step forward in our ongoing effort to protect the American people from financial misconduct.”

“This is the largest bank to plead guilty in 20 years,” Holder said, adding, “This case shows that no financial institution, no matter its size or global reach, is above the law.”

Yet the bank’s executives were not forced to step down, nor do they face jail time. The settlement also allows the banks to keep the veil of secrecy over who the tax-dodging Americans were.

As Naked Capitalism‘s Yves Smith noted Tuesday:

As usual, no current senior officials were targeted. Pray tell, what is the deterrent value? The fines, which are more than the bank expected to pay, ultimately come out of taxpayer hides.

Further, the deal was “a big, missed opportunity,” James Henry, former chief economist at McKinsey and Company, now a senior advisor to the Tax Justice Network and senior fellow at the Vale Columbia Center on Sustainable International Investment, told Democracy Now‘s Amy Goodman and Aaron Maté on Tuesday.

“The reason the Swiss stock market and in particular Credit Suisse is soaring this morning is because they are delighted with this deal,” Henry said.

“In this case we have the second largest Swiss bank with 45,000 employees and 1.26 trillion Swiss francs of client assets under management getting away with essentially a fine that amounts to three months of their net earnings. No senior executives [...] are going to jail…. Brady Dougan the CEO is expected to stay on, in fact, and he said in front of his shareholders this week that this will have very slight impact on Credit Suisse’s performance.”

“I think we’ve missed the opportunity to really send a message here because the way they structured this plea bargain was to rule out any impact on Credit Suisse’s license to operate in the United States which is the only impact that a criminal prosecution could have had. And I think that going forward banks in Switzerland will be looking for new ways, new inventive ways of serving Americans,” he said.

These rich Americans took advantage of a system not afforded to most, Henry continues. “This is just another case of where we’re transferring tax burdens to the poor and middle class who don’t have any choice but to pay up. So, [there's a] basic question about the rule of law here, about justice essentially being for sale.”

The outcome is not surprising, as “[t]his administration is permeated with people who are basically very sympathetic to Wall Street and to Swiss interests as well,” he said.

Senator Carl Levin (D-Mich.)—who, at a February Congressional hearing slammed Dougan’s secrecy over the names of the tax-evading Americans and called the bank’s actions a “classic case of bank secrecy and bank facilitation of US tax evasion”—issued a statementon Monday following the charges and again questioned the allowance of this ongoing secrecy.

“It is appropriate that U.S. law enforcement has imposed a $2.6 billion penalty and held Credit Suisse criminally liable for aiding and abetting tax evasion. This guilty plea strikes an important blow against tax evasion through bank secrecy. But it is a mystery to me why the U.S. government didn’t require as part of the agreement that the bank cough up some of the names of the U.S. clients with secret Swiss bank accounts. More than 20,000 Americans were Credit Suisse accountholders in Switzerland, the vast majority of whom never disclosed their accounts as required by U.S. law. This leaves their identities undisclosed, with no accountability for taxes owed,” Levin’s statement continued.