A former banker at a Credit Suisse Group AG (CSGN) unit pleaded guilty to helping American clients evade taxes, implicating his superiors as the bank faces a probe of how it helped U.S. clients cheat the Internal Revenue Service.
Andreas Bachmann, 56, a Swiss citizen, pleaded today 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 and of a 2001 agreement that Credit Suisse reached with the IRS to withhold and pay taxes on U.S. client accounts. Bachmann said he once complained to the chief executive officer of his subsidiary about the accord’s restrictions on activities in the U.S.
The executive, who wasn’t identified, “instructed him with words to the following effect: ‘Mr. Bachmann: You know what we expect of you -- don’t get caught,’” according to a 13-page statement of facts that he admitted with his plea.
Calvin Mitchell, a Credit Suisse spokesman, said in an e-mail that Bachmann worked for Credit Suisse Fides until 2006.
Credit Suisse is the largest of 14 Swiss banks under U.S. criminal investigation in a crackdown on offshore tax evasion. Bachmann’s plea follows a report by the Senate Permanent Subcommittee on Investigations saying Credit Suisse helped 22,000 Americans hide as much as $10 billion from the IRS.
Chief Executive Officer Brady Dougan apologized to the panel at a Feb. 26 hearing, saying a small group of Swiss-based bankers appear to have broken U.S. law and fooled top managers.
He said bankers worked with outside intermediaries to help U.S. clients set up offshore shell entities with money deposited at Credit Suisse in the names of the entities rather than the clients. Such conduct, Dougan said, was egregious.
According to Bachmann’s statement of facts, Credit Suisse compliance workers “did nothing to assure compliance” with a prohibition under the IRS agreement that barred bankers from discussing investments in U.S. securities.
“No one was ultimately disciplined for continuing to discuss U.S. securities investments with U.S. customers,” according to the statement.
At the hearing today, U.S. District Judge Gerald Lee set sentencing for Aug. 8. Bachmann faces as long as 46 months in prison under the plea agreement. After the hearing, Bachmann’s attorney William Burck declined to comment.
In the statement of facts, Bachmann said he worked from 1994 through 2006 at the Credit Suisse unit, which had 90 employees. Bachmann had 100 clients, including 25 to 30 in the U.S. He admitted many U.S. accounts weren’t declared to the IRS and relied on sham structures to conceal the true ownership.
Bachmann admitted he conspired with Josef Dorig, who was indicted with him in 2011 and hasn’t responded in U.S. court. Dorig worked at the subsidiary to help U.S. customers of Credit Suisse open secret accounts and set up nominee accounts in tax havens, according to Bachmann’s statement of facts.
In 1997, Credit Suisse said it was “too risky” for Dorig to form such entities within the bank. Instead, Credit Suisse “announced that the formation and management of nominee tax havens should be done from outside,” Bachmann admitted.
Dorig then formed a Swiss trust company in Zurich, according to the indictment.
In serving U.S. clients, Bachmann carried cash to and from them on four trips, he admitted. In October 2001, he was stopped at a New York airport after receiving $50,000 from one customer that he intended to take to a client in South Florida.
When authorities found the cash in his luggage, he was briefly questioned by a police officer. Bachmann continued to travel. When he got to South Florida, he told the client about the airport incident.
The customer “refused to receive the money out of concern that Bachmann’s brief encounter with law enforcement might lead to the discovery of the client’s undeclared account,” according to the statement of facts. “As a result, Bachmann returned to Switzerland with the $50,000 in cash in his checked luggage.”
He visited U.S. clients in their homes or in hotels and restaurants, where he would review their account statements.
“Most U.S. customers had instructed Bachmann not to mail account statements to them,” according to the statement of facts. “If during a meeting a customer requested a copy of the account statement, Bachmann would inquire of the customer, ‘Do you really want to keep the statement?’”
Bachmann continued the scheme when he worked from 2006 until 2009 for a Zurich asset manager. He left “because the firm planned to cease servicing the accounts of U.S. customers,” and the bank holding assets stopped accepting U.S. customers, according to the statement of facts. In 2009, he left to form another asset management firm in Zurich.
The Credit Suisse probe is accelerating after appearing stalled since July 2011, when the Justice Department said it was a target of federal prosecutors.
UBS AG (UBSN), the largest Swiss bank, avoided prosecution in 2009 by admitting it fostered tax evasion, paying $780 million and handing over U.S. account data.
Since then more than 70 taxpayers and about three dozen offshore bankers, lawyers and advisers have been charged. More than 43,000 U.S. taxpayers avoided prosecution through an IRS amnesty program, and 106 Swiss banks are seeking non-prosecution agreements with the Justice Department.
“Today’s plea is just the latest step in our wide-ranging investigations into Swiss banking activities,” Deputy Attorney General James Cole said in a statement. “We fully expect additional developments over the course of the coming months.”
The case is U.S. v. Walder, 11-cr-00095, U.S. District Court, Eastern District of Virginia (Alexandria).
To contact the reporter on this story: David Voreacos in Newark at firstname.lastname@example.org