Credit Suisse on Monday became the largest bank in 20 years to plead guilty to a U.S. criminal charge, and will pay a $2.5 billion fine to authorities for helping Americans evade taxes, Attorney General Eric Holder said.
But the Swiss bank escaped the worst for its business - its top management stayed in place, and the New York state bank regulator said it had decided not to revoke the bank's license in the state.
U.S. prosecutors said the bank helped clients deceive U.S. tax authorities by concealing assets in illegal, undeclared bank accounts, in a conspiracy that spanned decades, and in one case began more than a century ago.
"This case shows that no financial institution, no matter its size or global reach, is above the law," Holder said at a news conference in Washington.
The Justice Department has not frequently pursued such convictions of financial companies, especially large ones that could become destabilized following an indictment, but U.S. politicians have pushed for tougher punishment for big banks in response to the 2007-2009 financial crisis.
Credit Suisse will pay financial penalties to the U.S. Department of Justice, the Internal Revenue Service, the Federal Reserve and New York's banking regulator, the New York State Department of Financial Services, to settle the matter. It had already paid just under $200 million to the Securities and Exchange Commission.
"We deeply regret the past misconduct that led to this settlement," Credit Suisse Chief Executive Brady Dougan said in a statement. "We have seen no material impact on our business resulting from the heightened public attention on this issue in the past several weeks," he said.
The bank will take an after-tax charge of 1.6 billion Swiss francs ($1.79 billion) in the second quarter, it said, adding it will reduce assets, sell real estate and take other actions to keep its capital at strong levels.
Credit Suisse is the largest bank to plead guilty to a criminal charge in 20 years, Holder said.
Dougan, who has come under pressure from Swiss politicians to resign, and Chairman Urs Rohner would both stay in their jobs after the settlement, a person close to Credit Suisse said on Monday. Credit Suisse declined to comment.
The United States has been trying to wrest client data from Swiss banks in a long-standing spat with Switzerland and its strict bank secrecy laws. The standoff has already forced Wegelin & Co, the oldest Swiss private bank, to close shop after a guilty plea to charges of helping U.S. clients evade taxes.
Credit Suisse, which has a large business managing rich clients' money, helped them withdraw funds from their undeclared accounts by either providing hand-delivered cash to the United States or using Credit Suisse's correspondent bank accounts in the United States, the Justice Department said.
Prosecutors said Credit Suisse had around 22,000 U.S. client accounts worth around $10 billion, which included both declared and undeclared accounts.
The bank was forced to plead guilty not only because of its complicity in tax evasion, but also because of its poor cooperation in the investigation, prosecutors said. It did not begin an internal probe until early 2011, and did not preserve some evidence of the wrongdoing, documents showed.
New York's banking regulator said it would place a monitor of its choosing inside Credit Suisse, while the Fed said it was investigating whether other individuals should be subject to actions such as fines or bans. It did not name the individuals.
Lloyd Blankfein, who heads Goldman Sachs, has warned that guilty pleas from banks such as Credit Suisse would have an unpredictable effect on markets, the Financial Times reported last week, though he would try to keep trading with such banks.
Financial markets had been calm in the face of potentially stiff penalties against Credit Suisse. There had been no indications other banks have stopped doing business with the Swiss bank. It was still obtaining short-term funds in the repo and commercial paper markets, analysts said.
New York bank regulators expressed concern about management during the talks, and discussed replacing Dougan and others, a source familiar with the negotiations said. But in the end, the option was not made a condition of the deal.
CONCERNS ABOUT MANAGEMENT
Christoph Blocher, vice president of the right-wing Swiss People's Party (SVP), this weekend called for Dougan and Rohner to step down, joining similar appeals from Social Democrat and Conservative Democrat politicians.
Some on Credit Suisse's board were also unhappy with how Dougan had handled the case, another source familiar with the matter said last week, though it was not clear who the board members were, or what consequences, if any, this would have.
They were blaming Dougan for the fact that the bank's U.S. woes were dragging on for far longer than the case of rival bank UBS, this person said, which settled a similar probe in 2009 by paying a $780 million fine.
The last major international bank to plead guilty was France's Credit Lyonnais, which admitted in 2004 to lying to U.S. regulators about its role in the takeover of a failed California insurer. The bank was acquired in the year before the agreement by bigger rival Credit Agricole.
Mary Jo White, chair of the U.S. Securities and Exchange Commission, on Monday said no bank was immune from criminal charges, and Holder earlier this month expressed a similar view, saying prosecutors are working closely with other regulators to address potential consequences before taking action. Still, negotiations overall had not gone well for the bank, the second source familiar with the situation said.
Credit Suisse's legal team had initially tried to keep the fine below $600 million or $800 million, and was to be paid accordingly in an incentive scheme, but the numbers quickly outstripped that target, this source said.