Billions of dollars in US taxes are going unpaid because Americans are exploiting Swiss bank accounts, and the US Government has failed to aggressively pursue Switzerland's second-largest bank, a Senate investigation has found.
The bank, Credit Suisse, has provided accounts in Switzerland for more than 22,000 US clients totalling US$10 billion to US$12 billion, according to a report this week from the Senate Permanent Subcommittee on Investigations.
The US Government has received only 238 names of US citizens with secret accounts at Credit Suisse, or just 1 per cent of the estimated total, the investigation concluded.
Credit Suisse recruited US clients to open Swiss accounts from 2001 through 2008, helped them conceal the accounts from the Internal Revenue Service and enabled misconduct by bank employees, the subcommittee asserted.
For five years, the Senate panel has been examining Swiss banks' use of secrecy laws to enable tax evasion by Americans. The main focus of its latest report was Credit Suisse.
Responding to the report in a statement, the Justice Department said it is investigating up to 14 Swiss financial institutions, "and we won't hesitate to indict if and when circumstances merit". It did not name the banks.
The Senate subcommittee asserted that the Swiss Government, with its famous banking secrecy, has continued to obstruct US authorities' ability to learn the names of US bank customers and former customers.
The report detailed cloak-and-dagger tactics used by Credit Suisse bankers who were said to travel to the United States to secretly service accounts and recruit customers - including at golf tournaments in Florida and the annual "Swiss Ball" in New York.
Over breakfast at a hotel, one banker handed a US customer bank statements hidden in a Sports Illustrated magazine, the report said. The bank filed visa applications for employees that falsely portrayed them as tourists and maintained a New York office with lists of middlemen who set up offshore shell companies for some US customers, the committee asserted.
Credit Suisse "aided and abetted US tax evasion, not only from behind a veil of secrecy in Switzerland, but also on US soil by sending Swiss bankers here to open hidden accounts", Senator Carl Levin of Michigan, the subcommittee's chairman, said at a news conference this week.
Levin said the Justice Department had failed to use legal tools with Credit Suisse that were used earlier to pry the names of US account holders from No1 Swiss bank UBS. The Justice Department had instead used treaty requests for the names, relying on Swiss courts and getting stymied, he said.
The spotlight on Americans' use of Swiss accounts comes amid a debate in Washington over whether and how to raise revenue to help reduce the budget deficit.
Many Democrats say the Government is missing out on billions because companies are stashing profits abroad to avoid taxes. Republicans want to cut the corporate tax rate and ease the tax burden on money US companies make abroad to encourage companies to invest at home.
UBS entered a deferred prosecution agreement with the Justice Department in 2009. It agreed to pay US$780 million in fines and turn over 4400 names of customers suspected of evading US taxes.
Some of those individuals have been prosecuted. Others have paid penalties and back taxes under an IRS voluntary disclosure programme that lets those who come forward pay less than they owe. The programme has resulted in 43,000 taxpayers paying US$6 billion, according to the Government.
But Justice has failed to pursue most of the UBS account holders and hasn't actively pursued Credit Suisse, said Levin and Senator John McCain of Arizona, the panel's senior Republican. AP