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$2.6 Billion Fine Levied Against Swiss Bank for Aiding U.S. Citizens with Tax Evasion

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Brady Dougan, CEO of Credit Suisse, nearly lost his job amid U.S. tax evasion investigation.
Brady Dougan, CEO of Credit Suisse, nearly lost his job amid U.S. tax evasion investigation.
Credit Suisse,Switzerland’s second-largest bank plead guilty Monday to helping U.S. citizens cheat on their taxes and has agreed to pay $2.6 billion in penalties. The fine would represent the largest fine ever in a criminal tax case. The case represents an growing aggressive approach by the Department of Justice to go after big banks for criminal actions.

“This case shows that no financial institution, no matter its size or global reach, is above the law,” Attorney General Eric Holder said during a press conference Monday. He said “a company’s profitability or market share can never and will never be used as a shield from prosecution or penalty. And this action should put that misguided notion definitively to rest.”

According to court papers Credit Suisse helped clients use phony entities to hide undeclared accounts, didn’t properly maintain U.S. account information, and in some cases destroyed records sent to U.S. clients. “We deeply regret the past misconduct,” Credit Suisse Chief Executive Officer Brady Dougan said in a statement.

For centuries, Switzerland has been known for the world’s strictest bank-secrecy laws, which turned the country into a haven for asset hiding and made “Swiss bank account” its own term with implications of shady finance.

A treaty signed with the U.S. last year opened doors, which allowed Swiss banks to disclose information to the U.S. government about their American clients that could be used in tax-evasion and other cases. Previously, Swiss law had forbade the banks from cooperating, putting financial institutions in a bind between the two countries’ laws. In exchange, the U.S. agreed to allow banks to settle cases and avoid potential criminal prosecutions.

It is reported that the Justice Department is also close to reaching either a settlement or guilty plea with France’s BNP Paribus for alleged violations of U.S. sanctions lodged against countries such as Iran and Sudan, according to the Wall Street Journal, citing people familiar with the investigation.

Holder wanted it to be clear that no individual or company, no matter how large or how profitable, is above the law. “When the Department of Justice conducts investigations, we will always follow the law and the facts wherever they lead.”

Mr. Holder’s critics have said that the Department of Justice, instead of criminally going after banks, has resolved cases with settlements and by paying fines — promising not to break the law in the future. The Department of Justice has entered into at least 20 such agreements with financial institutions during Mr. Holder’s five-year tenure, according to data published by law firm Gibson, Dunn & Crutcher.

More than a year ago, Mr. Holder told Congress that criminal charges against large, multinational banks could damage national or global economies.

That the size of some of these institutions becomes so large that it does become difficult for us to prosecute them,” he said in March 2013.

Last year the government’s $13 billion settlement with J.P. Morgan Chase didn’t include a guilty plea. The last company to plead guilty was Crédit Lyonnais, which in 2004 admitted making false statements to the Federal Reserve.

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