By Peter Schroeder - 02/25/14 05:03 PM EST
The Swiss bank Credit Suisse has helped roughly 22,000 wealthy Americans hide up to $12 billion in assets from the U.S. government, according to a Senate report released Tuesday.
The report, which was years in the making, alleges that Credit Suisse officials actively recruited U.S. clients to hide their money in foreign accounts, often traveling to America under the guise of tourism to work with customers.
“The battle against tax havens using secrecy laws to facilitate U.S. tax evasion has bogged down, causing a huge loss to our treasury,” Levin said. “It’s time to ramp up the collection of taxes due from tax evaders on the billions of dollars hidden offshore.”
The investigation, based on a review of roughly 100,000 documents and more than 40 interviews and briefings, found Credit Suisse went to great lengths to cultivate a secret American clientele.
For example, roughly 10,000 accounts were housed at a bank branch set up in the Zurich airport. The report also cites an example where a Credit Suisse employee met with a client over breakfast at a Washington hotel and provided account statements hidden inside a copy of Sports Illustrated.
The report claims the bank would refer Americans to intermediaries to help them set up shell corporations while taking steps to avoid a paper trail.
Credit Suisse declined to comment on the report, while noting that top executives were set to address the findings at a hearing on Wednesday.
Levin, who has waged a one-man crusade against tax evasion from his subcommittee perch, is trying to put the spotlight on foreign banks as he serves out his final year in the Senate. Swiss banks, infamous for their secrecy, have long been in his crosshairs.
The Senate’s Permanent subcommittee on Investigations is pushing Credit Suisse to reveal its U.S. client sheet while pressuring government investigators to exhaust every avenue to track down taxes that are owed.
Levin will have a chance to grill Credit Suisse officials on Wednesday, when top executives from the bank as well as Justice Department officials are slated to testify.
The 178-page report was released at a time when the federal government is putting pressure on foreign banks to reveal their American customers.
Earlier this week, Group of 20 officials agreed to new rules meant to streamline the sharing of tax information worldwide to prevent people from skirting tax laws.
In 2009, the U.S. filed charges against the Swiss bank UBS for helping thousands of wealthy clients escape U.S. tax bills. The bank ultimately agreed to a $780 million settlement wherein they provided information on 4,700 accounts with U.S. client names.
In addition, the Treasury Department is putting the final touches on regulations to implement the Foreign Account Tax Compliance Act (FATCA), a 2010 law that requires foreign banks to disclose U.S. customer accounts or pay a hefty tax on U.S. investment income.
But while “significant progress” has been made, the Senate report argues the administration is still not doing enough to prevent people from dodging their tax bills.
Levin said the Justice Department, which first began investigating Credit Suisse in 2010, has shown a “lack of determination” in pursuing the matter.
He contended that U.S. investigators have shown too much deference to the Swiss government and Swiss court system. Seven Credit Suisse bankers were indicted in 2011 but have yet to stand trial, according to the report. And after two years of haggling with the Swiss Supreme Court, the U.S. has obtained information on just 238 accounts for U.S. customers out of a peak level of roughly 22,000.
“The Department of Justice must use the legal tools that they have, that we have, and not depend on the Swiss,” Levin said.
Levin pointed out that the government actually filed subpoenas and summons in its case with UBS. In doing so, it managed to obtain the names of about 4,700 U.S. accounts and prosecute 72 taxpayers.
In response to the report, the Justice Department contended it has been tough with banks that enable tax cheats, noting thousands who have voluntarily disclosed their offshore holdings after the department began to investigate Swiss banks.
"The prospect of U.S. prosecution has been forceful enough to cause 43,000 taxpayers to self-report and pay nearly $6 billion in taxes and penalties," a department official said.
The department said many banks are still under investigation, and that charges will come if they have merit.
"We have acknowledged that as many as 14 Swiss financial institutions are currently under investigation, and we won't hesitate to indict if and when circumstances merit," the official said.
The report notes that Switzerland has said there is no longer a need to force their banks to name U.S. clients, as the enactment of FATCA this summer will do the job.
But the Senate report criticizes the regulations written under FATCA as introducing “gaping loopholes” for banks and U.S. tax evaders. It says the rules allow banks to avoid reporting accounts where information is kept on paper instead of electronically while permitting them to hide accounts opened by offshore shell corporations, even if an American taxpayer formed them.
The Justice Department announced in August a program meant to encourage Swiss banks to cooperate with U.S. authorities. Banks could obtain a non-prosecution agreement from the department if it agreed to pay penalties, disclose offshore activity, and close accounts that do not meet U.S. reporting obligations.
But the report claimed that the Swiss government has never agreed to permit banks to provide names attached to those accounts, making it impossible for the U.S. to track down taxes due.
Sen. John McCain (R-Ariz.), the ranking member of the panel, also backed the report, saying Creidt Suisse must be held accountable for its actions.