Credit Suisse, one of the world’s leading banks with operations in 50 countries, was just reprimanded by U.S. Attorney General, Eric Holder. The U.S. Justice Department accused Credit Suisse AG with helping wealthy Americans dodge paying taxes. As evidence began to mount that this was the case, Credit Suisse began to comply with federal prosecutors. However; some prosecutors claim, that the employees of Credit Suisse were deleting important emails and hiding other evidence. This debacle resulted into Credit Suisse pleading guilty to tax evasion on Monday.
This investigation was prompted by U.S. Democratic Senator Carl Levin. Senator Levin is chairman of the Senate Permanent Subcommittee on Investigations. He has led investigations of the 2008 financial crisis, the Enron collapse, speculation in energy and food markets, abusive offshore tax havens and money laundering by foreign leaders. In 2006, TIME magazine named him one of, “America’s Top 10 Senators”. Mr. Levin has called Credit Suisse’s case a classic case of Bank Secrecy. A template will be constructed from this case to use in future cases concerning what type of protocol will be followed during similar “Big Bank Shakedown” investigations.
While, the case is “settled” between the Justice Department and Credit Suisse, Brady Dougan, the company’s CEO will keep his job. However, many of his subordinates are being fired. Many of these employees did not comply with federal prosecutors during the investigation. The rendered fines are $1.8 billion to the Justice Department, $715 million to Mr. Benjamin Lawsky and $100 million to the Treasury. There was no operational impact on the company.
Credit Suisse was founded in 1856 by Alfred Escher. During the time, the Swiss railways were beginning to develop. There were no banking institutions in Switzerland large enough to hold the large capital needed for the rail construction companies. Mr. Escher did not like the idea of foreign lenders or their influence over the rail system. He succeeded and established his own bank, Schweizerische Kreditanstalt, which we know today as Credit Suisse AG. It has become Switzerland’s second largest bank, and a founding institution in Zurich’s financial economy.
The reputation of the bank has been derailed. However, many investors are not appearing to be the least bit worried. Note Credit Suisse Group AG (ADR) closed at $29.37 on May 21, 2014.