Credit Suisse Pressure Increases With Enabler’s PleaDavid Voreacos
The founder of a Swiss trust pleaded guilty to helping Americans evade taxes and said Credit Suisse Group AG was involved in the scheme, adding to pressure on the bank as it tries to resolve a U.S. criminal probe.
Josef Dorig, 72, said in federal court in Alexandria, Virginia, that he helped the bank’s U.S. clients cheat the Internal Revenue Service by hiding the owners of accounts through phony trusts and foundations. He was indicted in 2011 with seven Credit Suisse bankers on a charge of conspiring to hide $4 billion from the IRS. The U.S. told Credit Suisse then that it was a target of the probe.
Dorig is cooperating with prosecutors probing Zurich-based Credit Suisse, the largest of 14 Swiss banks under U.S. criminal investigation amid a crackdown on offshore tax evasion. The bank has said it’s trying to negotiate a resolution with the U.S. Former Credit Suisse banker Andreas Bachmann, who pleaded guilty on March 12, also is cooperating in the probe.
“Today’s plea further pulls back the curtain on efforts by Swiss banks to help U.S. taxpayers evade taxes through the use of sham trusts and foundations,” Deputy Attorney General James Cole said in a statement.
Dorig, who worked at Credit Suisse or its units from 1961 to 1997, helped set up structures like foundations, trusts and companies. They supposedly owned accounts which were actually controlled by U.S. clients, he said.
In 1997, the subsidiary where he worked spun off the structures linked to undeclared accounts to a new trust company controlled by Dorig. Credit Suisse bankers then referred U.S. clients seeking to avoid domestic taxes to Dorig Partner AG. Despite the obfuscation, Credit Suisse recorded the real owners of accounts, Dorig said.
“It was Dorig’s role to create a paper trail that made it appear the structure operated independently and the U.S. person who owned the assets in the undeclared account linked to the structure had no control over the assets,” according to a 17-page statement of facts. “In truth, Dorig regularly acted at the direction of the U.S. person who owned the assets.”
Dorig implicated several bankers under indictment, including Markus Walder, former head of North American offshore banking; Susanne Ruegg-Meier, a former member of senior management in cross-border banking; and Roger Schaerer, who worked in the bank’s New York office and was a senior manager. They have not responded to the 2011 indictment.
Dorig, a citizen of Switzerland and Italy, said he went to Miami, Beverly Hills, California, and other U.S. cities with Credit Suisse bankers to help U.S. clients set up the structures. After he set up the structures, clients visited Credit Suisse bankers in Zurich for cash. Between 2004 and 2008, one client took out $30,000 in cash on one trip, $11,000 on another, $50,000 on a third, and then $55,000, Dorig said.
Walder and Ruegg-Meier signed a contract in 2005 that required Dorig to pay a referral fee to Credit Suisse for clients. The bank terminated the deal in 2008, when Walder told him the bank would no longer maintain undeclared accounts. At that point, the U.S. was stepping up its offshore crackdown.
Dorig said he arranged with a Swiss financial services firm to transfer the undeclared accounts at Credit Suisse, a subsidiary, and another bank to a Gibraltar bank. The Swiss firm had a master account and numbered sub-accounts at the Gibraltar bank. Dorig said he transferred 55 undeclared accounts with $130 million in assets in 2008 and 2009. He also told those clients to voluntarily disclose their undeclared assets to the IRS and avoid prosecution, according to the statement of facts.
The Gibraltar bank, which put Dorig on its board, didn’t know the accounts were undeclared, he said. When it first asked in March 2011 about the ownership of the sub-accounts, Dorig said he told the bank that people who owned them were trying to enter an IRS program that offered immunity from prosecution in exchange for repayment of back taxes, fines, penalties and information on what offshore banks helped them. About 43,000 U.S. taxpayers took advantage of the program.
Since 2009, the U.S. charged more than 70 U.S. taxpayers and about three dozen offshore bankers, lawyers and advisers with using undeclared accounts to cheat the IRS. A handful of offshore enablers have come to the U.S. to plead guilty. The rest are wanted.
Bachmann admitted his guilt after the Senate Permanent Subcommittee on Investigations said in a report that 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 companies with money deposited at Credit Suisse in the names of the entities rather than the clients. Such conduct was egregious, Dougan said.
Credit Suisse said April 3 that it increased reserves to 720 million francs ($818 million) to resolve the U.S. case. The bank also agreed Feb. 21 to pay $197 million to the U.S. Securities and Exchange Commission for providing cross-border securities services to thousands of Americans without registering to conduct the business.
In pleading guilty, Bachmann admitted he conspired with Dorig to help U.S. customers open secret accounts. Credit Suisse said in 1997 it was “too risky” for Dorig to form such entities within the bank. Instead, the bank “announced that the formation and management of nominee tax havens should be done from outside,” Bachmann said.
Before his arrest yesterday, Dorig hadn’t appeared in Alexandria to respond to the charges. He is free on $150,000 bail. U.S. District Judge Gerald Lee set sentencing for Aug. 8.
The case is U.S. v. Walder, 11-cr-00095, U.S. District Court, Eastern District of Virginia (Alexandria).