Credit Suisse unit draws US tax scrutiny

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For years, Credit Suisse used a secondary Swiss banking brand, Clariden Leu, to woo clients who wanted a smaller, more personalised experience. Now, its decision to keep that little-noticed unit separate has become an issue in the long-running United States tax evasion investigation.

Interviews and internal emails show that former Americas private bank head Anthony DeChellis resigned last year after disagreeing with colleagues over what he believed to be newly discovered documents relating to US-linked accounts, which he wanted to hand to the US Department of Justice.

Under investigation by the DoJ and the Senate permanent subcommittee on investigations, Credit Suisse and its chief executive Brady Dougan have blamed the violations on a small group of former bankers centred on SALN, a Swiss-based desk that was supposed to be the main hub for offshore US clients.

Emails reviewed by the Financial Times show that DeChellis had concerns about US-linked accounts that fell outside SALN.

These included accounts at Clariden Leu, which was formed in 2007 by the merger of five Credit Suisse-owned private banks in Switzerland.

Clariden Leu has attracted much less public attention than SALN but is also part of the US investigation, according to a Senate report from February.

Clariden Leu, with 240 relationship managers, had about 2,000 US-linked accounts with almost CHF1.8 billion ($2 billion) in assets in 2008, according to an August 2008 Credit Suisse report obtained by the Senate subcommittee. It was one of seven business units that handled US accounts, besides SALN.

Account review

Credit Suisse began reviewing its US accounts for tax compliance after US authorities revealed a tax evasion investigation of UBS in 2008. Clariden Leu initiated a similar review that was “lagging Credit Suisse efforts”, the Senate report found.

In July 2011, seven former Credit Suisse bankers were indicted on federal charges of conspiracy to defraud the US. At that time and up to now, the DoJ only described some of them as employees of a “wholly owned subsidiary”. But two had ties to Clariden Leu, including Andreas Bachmann, who pleaded guilty in March 2014, according to people with direct knowledge of the matter.

Bachmann worked until 2006 at Credit Suisse Fides, one of the banks folded into Clariden, these people said. The DoJ indictment said that the accused Clariden bankers “knew and should have known that they were aiding and abetting US customers in evading their US taxes”.

Bachmann said he was essentially told by a Credit Suisse Fides executive: “You know what we expect of you – don’t get caught,” according to his statement of facts in his guilty plea.

Independent brand

Clariden Leu was allowed to operate independently but a few Credit Suisse executives were on its board, including Hans-Ulrich Meister, Credit Suisse private bank co-head, and Romeo Cerutti, its general counsel.

“According to Credit Suisse, its operation of Clariden Leu was part of a common corporate ‘two brand’ strategy,” the Senate subcommittee reported. “While Credit Suisse was a big institution, Clariden Leu maintained the image of a small, independent Swiss brand.”

For a while, it was also treated differently in the bank’s response to tax probes. When Brazilian authorities launched a tax evasion investigation into Credit Suisse in 2006 that led to more than a dozen arrests in Brazil, the bank reacted with the “Cross-Border + Project” to review its regulatory structures in 80 countries.

As part of that effort, it initiated “Project W9” to identify Swiss accounts holding US securities opened by a US client. US citizens are required to file W-9 forms [tax forms] with their banks.

But Credit Suisse did not require Clariden Leu to participate in the project. According to a January 2007 document update on Project W9, “any legal adaptations will only be valid for CS, not for Clariden Leu,” and “Implementation has to be decided by Clariden Leu management”.

Credit Suisse said in November 2011 it was integrating Clariden to cut costs and boost private banking performance. As part of the integration, the subsidiary was supposed to pass its US accounts for compliance review to SALN, which had employees with compliance training and became the bank’s hub to assess US-linked clients.

Additional documents

In early 2013, Swiss executives led by Latin America private banking head Silvan Wyss told DeChellis they had discovered additional documents relating to US-linked accounts at Clariden Leu and other units outside SALN, according to people familiar with the matter. SALN reported to Wyss, who reported to DeChellis. The reporting lines reflected the siloed structure of units handling US offshore accounts, which were mainly in Switzerland and fell under Swiss compliance.

DeChellis, concerned the documents showed that the alleged tax evasion efforts spread beyond SALN, sought to notify senior officials including Robert Shafir, his boss as co-head of private banking. Shafir reports to Dougan.

In an email on January 29 2013 to Shafir, DeChellis said: “I’m also going to try to co-ordinate with you the next time we are in [Switzerland] together. There are some legacy Clariden issues (CB) [cross border] brewing that we need to brief you on.”

On a trip to Switzerland on February 27, DeChellis planned to bring the documents up at a private bank risk management committee meeting, according to an email to Shafir that said: “I have a major issue to surface today at the PB risk committee (not for email).”

That day, he also asked his assistant to set up a meeting with Pierre Gentin, global head of litigation, saying: “I’d like to discuss Valentina.” Project Valentina was the name of the internal investigation launched after the 2011 indictments to determine whether any activities violated company policies or laws.

Compliance issues

The same day, Meister and the head of private banking compliance, Ursula Lang, discussed the documents with DeChellis, who was told he did not have enough details about their nature to bring them before the risk committee, people with direct knowledge of the matter said.

Lang said she would look into the issue and get back to him, the people added.

The next day, February 28, she told DeChellis by email that Wyss’s team could offer additional resources to review the boxes of documents, and that any compliance issues found would be dealt with by the bank’s legal and compliance department. Meister was copied on the email, with the subject “SALN”.

The review found the documents he referred to contained no new US client accounts, Credit Suisse says.

But DeChellis did not see the offer of resources as adequate since he wanted to hand the documents to the justice department immediately, according to people with direct knowledge of the matter. On March 1, he forwarded the email from Lang to Shafir, saying: “I’ll update you.”

On March 4, DeChellis met Gentin, who then notified outside counsel of their meeting, according to people with direct knowledge of the matter. That same day, Shafir revealed in a previously scheduled meeting that the bank wanted to move DeChellis to a different position. The bank announced he was stepping down on March 5 2013, and now says he was moved for performance reasons. DeChellis resigned months later, but only after taking his concerns to the justice department.

Copyright The Financial Times Limited 2014