DOJ Pushing Credit Suisse To Plead Guilty To Aiding Tax Evasion

Attorney General Eric Holder testifies on Capitol Hill in Washington, Wednesday, Jan. 29, 2014, before the Senate Judiciary C
Attorney General Eric Holder testifies on Capitol Hill in Washington, Wednesday, Jan. 29, 2014, before the Senate Judiciary Committee hearing oversight hearing on the Justice Department. As attorney general, Holder has approved pursuing the death penalty in at least 34 criminal cases, upholding a long-ago pledge to Congress that he would vigorously enforce federal law even though he?s not a proponent of capital punishment. (AP Photo/J. Scott Applewhite)

(Changes dateline from Washington, adds trader comment, shares)

By Mark Hosenball, Aruna Viswanatha and Oliver Hirt

WASHINGTON/ZURICH, May 6 (Reuters) - Credit Suisse Group AG is in talks with the U.S. Justice Department to pay as much as $1.6 billion to resolve an investigation into the bank's role in helping Americans evade U.S. taxes, a person familiar with the matter said.

Prosecutors have also been pushing for Credit Suisse to plead guilty in connection with the probe, two people with knowledge of the talks said.

A spokesman for Credit Suisse declined comment.

The penalty would exceed the 895 million Swiss francs ($1 billion) that Credit Suisse has set aside to pay potential penalties to the United States.

It's also much tougher than the settlement the Justice Department reached in 2009 with Credit Suisse's hometown rival UBS AG, which was also accused of helping Americans dodge taxes.

In that settlement, UBS paid $780 million to settle similar charges, roughly half the amount being discussed for Credit Suisse, even though the latter's offshore private banking business was much smaller than UBS's.

Also, UBS was allowed to enter a deferred prosecution agreement and criminal charges were later dropped against the firm.

Shares in Credit Suisse fell nearly 1 percent by 1000 GMT, lagging European banks as a whole, which were down 0.2 percent.

"The shares should have priced in the penalty of $1.6 billion and will likely bounce back when the final figure is on the table," a trader said.

"It's a hefty sum, but is not likely to knock Credit Suisse out. Worst-case scenario is the bank will simply report no profit, or just a small profit."

It was unclear what sort of impact a criminal plea could have on Credit Suisse. Historically, the Justice Department has rarely pursued criminal prosecutions against financial firms, especially global companies that could become destabilized following an indictment.

Much of the concern stems from the 2002 indictment and eventual demise of accounting firm Arthur Andersen, which led to the loss of about 25,000 jobs and greater consolidation in the industry.

But the Justice Department has recently taken a harder stance, in the wake of criticism about its record.


The Department on Monday posted a video in which Attorney General Eric Holder said close cooperation with regulators was paving the way for criminal actions against financial institutions, though he did not name them.

"I intend to reaffirm the principle that no individual or entity that does harm to our economy is ever above the law," Holder said. "There is no such thing as 'too big to jail.'"

The Justice Department came under particularly intense fire from the Senate Permanent Subcommittee on Investigations, which in February accused the agency of not aggressively pursuing Swiss banks that helped Americans dodge taxes, including Credit Suisse.

U.S. lawmakers and influential U.S. District Judge Jed Rakoff of Manhattan have more broadly accused the Justice Department of shying away from high-level financial prosecutions.

Credit Suisse in February agreed to pay $196 million to resolve a related case from the U.S. Securities and Exchange Commission (SEC), which accused the bank of providing services to U.S. clients without registering with the SEC.

In a sign of the delicate nature of the Justice Department negotiations, Switzerland's finance minister met with Holder in Washington on Friday to discuss the investigation of Swiss banks.

A Swiss ministry spokesman said the minister, Eveline Widmer-Schlumpf, was seeking "fair and equal treatment" of the Swiss banks involved in the probe.

That discussion followed a meeting U.S. Justice Department officials held with U.S. regulators last month to make sure a criminal plea would not cripple the bank's ability to do business in the United States, a person familiar with the matter said.

A Swiss government source said on Monday the most likely result from the recent negotiations is a guilty plea from Credit Suisse. "My impression is that it will go quickly and it could be in the coming weeks," the source said.

The source added that the Justice Department is being careful to minimize any unintended ripple effects of a guilty plea. "The DoJ has no intention of destabilizing Credit Suisse," the source said. ($1 = 0.8778 Swiss Francs) (Additional reporting by Josh Franklin and Ruppert Pretterklieber in Zurich; Editing by Cynthia Osterman and David Holmes)