UBS Has to Deal with Another Credit Suisse Scandal Amid Rescue Takeover
This rescue mission just got hairier.
UBS tapped its former CEO, Sergio Ermotti, to lead the emergency acquisition of perennially troubled rival Credit Suisse. In case taking what is essentially a public service job keeping the Swiss banking system from collapsing wasn’t challenging enough for Ermotti, another large skeleton has just waltzed out of CS’s cavernous closet. A new US Senate investigation revealed that Credit Suisse has allegedly been helping ultra-wealthy Americans avoid paying taxes for years. Better break out the Tylenol, Sergio.
“Swiss bank account” has long been practically code for dodgy money, and not just in Hollywood movies. Traditionally, Swiss banks have been financial institutions of choice for everyone from Azerbaijani strongmen to Japanese yakuza. Those days were supposed to have ended: Back in 2014, Credit Suisse pleaded guilty to aiding in tax evasion, paid a $2.5 billion fine to US authorities, and entered into a plea deal with the Department of Justice in which it promised to be “100 percent compliant” with its obligations under the Foreign Account Tax Compliance Act. Basically, the deal was “if an American account seems suspicious, you need to flag it and notify us right away.” But on Wednesday, the Senate Finance Committee found that for Credit Suisse, old habits die hard.
The bank allegedly helped super-rich American clients conceal more than $700 million from the US government. The biggest piece of the scandal came in 2017 when the DOJ arrested David Horsky, a former business professor, for hiding more than $220 million in offshore accounts. The Senate investigation found that Credit Suisse knowingly helped Horsky and only disclosed his account to authorities after whistleblowers blew their whistles:
- In another instance, Credit Suisse allegedly helped an unnamed Miami family with dual US-Latin American citizenships secretly close their accounts before transferring more than $100 million to various banks throughout Switzerland, Israel, and other nations.
- The Senate report also concluded that without the help of whistleblowers, more than $300 million in secret offshore accounts held at Credit Suisse and other financial institutions would likely have remained secret.
Credit Suisse officials denied any wrongdoing, but Finance Committee Chairman Sen. Ron Wyden had harsh words for the lender. “At the center of this investigation are greedy Swiss bankers and catnapping government regulators, and the result appears to be a massive, ongoing conspiracy to help ultra-wealthy U.S. citizens to evade taxes and rip off their fellow Americans,” he said in a statement to Reuters.
Sergio to the rescue: Many analysts see Ermotti as the right person for the job – he’s something of a Swiss Jamie Dimon, having successfully navigated UBS through the aftermath of the 2008 financial crisis and is rumored to harbor political aspirations. But a recent poll found that the majority of Swiss opposed the $3.3 billion merger altogether, and nearly half said they’d rather have the government temporarily take control of Credit Suisse.