(Bloomberg) New York’s top banking regulator is investigating whether Credit Suisse Group AG’s private banking practices resulted in the evasion of state taxes, according to a person with knowledge of the matter.
Benjamin Lawsky, superintendent of New York’s Department of Financial Services, sent the Zurich-based bank a demand for documents last month, said the person, who asked not to be identified because the probe is confidential. Credit Suisse fell as much as 2.8 percent in Swiss trading.
Lawsky also petitioned the U.S. Senate’s Permanent Subcommittee on Investigations for material gathered during that panel’s probe of Credit Suisse’s private banking and wealth management business, the person said.
On March 25, by unanimous consent, the Senate approved resolution No. 398, “to authorize the production of records by the Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs.” That resolution came in response to Lawsky’s petition, the person said.
Marc Dosch, a Zurich-based spokesman for Credit Suisse, declined to comment on the probe.
Credit Suisse shares were 1.8 percent lower at 28.93 Swiss francs by 11:54 a.m. in Zurich, trimming the gain this year to 6.1 percent.
Federal Prosecutors
Switzerland’s bank secrecy began to erode in February 2009, when the U.S. charged UBS AG, the country’s largest bank, with helping Americans cheat the Internal Revenue Service. UBS avoided prosecution by paying $780 million, admitting it fostered tax evasion and handing over data on thousands of American accounts.
Federal prosecutors have been investigating Credit Suisse’s alleged role in helping Americans evade taxes for three years. The firm is one of about a dozen Swiss banks under criminal investigation by the U.S. Department of Justice.
Credit Suisse restated its fourth-quarter loss last week after it set aside 468 million Swiss francs ($526 million), including 425 million francs earmarked for the U.S. tax probe.
The provision increases the money Credit Suisse has set aside for U.S. tax matters to 720 million francs. The bank also agreed to pay $196.5 million in February to settle a related investigation by the Securities and Exchange Commission, bringing the total cost of the U.S. probes to more than $1 billion.
Very Annoying’
“For Credit Suisse, this will be very annoying,” said Christopher Wheeler, a London-based analyst with Mediobanca SpA who rates the bank outperform. “Having looked like they were close to dealing with this issue following the additional provisions it took last week, now it is back in the spotlight.”
Last month, a former banker at a Credit Suisse unit pleaded guilty to helping American clients evade taxes, implicating his superiors. Andreas Bachmann, 56, a Swiss citizen, entered his plea in federal court in Alexandria, Virginia, where he and six other Credit Suisse bankers were indicted in 2011 on a charge that they helped U.S. clients hide $4 billion in assets from the IRS. Bachmann, who is cooperating with prosecutors, said superiors at his unit condoned violations of U.S. law.
In February, the Senate subcommittee, headed by Michigan Democrat Carl Levin, presented the findings of its investigation into offshore tax evasion, focusing on the private banking and wealth management business of Credit Suisse. Brady Dougan, the bank’s chief executive officer, deflected blame to a small group of employees for helping clients hide billions of dollars from the IRS during his testimony at the hearing.
Hidden Accounts
The subcommittee said in its report that 1,800 Credit Suisse employees helped Americans open 22,000 accounts, most of which were hidden from U.S. tax authorities. The report criticized the bank for failing to discipline senior executives and the Justice Department for not using all of its legal tools and for failing to get the names of individual account holders.
The report said Credit Suisse used a branch office at the Zurich airport code named “SIOA5,” as well as a remote-controlled elevator and other tactics for avoiding detection.
U.S. Deputy Attorney General James Cole promised more action in the coming months during his testimony to the Senate subcommittee hearing in February.
—With assistance from David Voreacos in federal court in Newark, New Jersey, and Jeffrey Vögeli in Zurich.
