DOJ’s Cole Promises Action as Senate Scolds Slow Probe

U.S. Deputy Attorney General James Cole will defend the Justice Department’s investigation into offshore tax evasion, promising lawmakers more action in the coming months after a Senate subcommittee reprimanded prosecutors for not being aggressive enough.

Cole is scheduled to deliver his testimony at a hearing today before the Senate Permanent Subcommittee on Investigations, which released a report yesterday faulting the Justice Department for not having wrapped up a three-year investigation of Credit Suisse Group AG’s role in helping Americans cheat the Internal Revenue Service.

“Just because we can’t disclose what we are doing, doesn’t mean we are not actively pursuing these cases,” Cole will say, according to excerpts of planned oral remarks provided to Bloomberg News by the department. "We fully expect additional public developments over the course of the coming months.’’

Cole won’t name any investigative targets or provide details of the probe, according to an excerpt from prepared testimony that isn’t part of written remarks submitted to lawmakers.

The Justice Department has failed to use all its legal tools in its criminal probe of whether Credit Suisse, the second-largest Swiss bank, helped U.S. clients evade taxes, according to the subcommittee’s report. Lax enforcement also allowed Credit Suisse to turn over the names of only 238 U.S. account holders to prosecutors, according to the report.

Widespread Evasion

The Justice Department told the bank in 2011 that it was a target of the probe. The bank has said it’s trying to resolve the case.

The report criticized the Zurich-based bank for failing to discipline any senior executives in the face of widespread tax evasion fostered by 1,800 Credit Suisse employees serving U.S. clients. The firm also misled investors about growth in its private banking unit, according to the report.

Prosecutors became bogged down in negotiations with the Swiss government over information it sought from banks and have “failed to utilize available U.S. legal means to obtain the names of tens of thousands” of Americans who owe billions of dollars in taxes and whose identities are still hidden by the Swiss, according to the 176-page report.

In a joint statement with Kathryn Keneally, head of the Justice Department’s tax division, Cole defended prosecutors’ handling of the case.

Discussions with the Swiss were aimed at “encouraging voluntary disclosure by account holders, prosecuting account holders who fail to come forward, and learning where else in Switzerland and the world U.S. taxpayers attempted to use secret accounts to engage in tax evasion,” according to a joint statement submitted to the subcommittee.

“We also sought to maintain the integrity of pending U.S. law enforcement matters and the ability to prosecute those persons who assisted U.S. taxpayers in evading the law,” according to the statement.

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