Credit Suisse Faces Tax Probe

When Credit Suisse AG pleaded guilty in 2014 to helping Americans cheat on their taxes, it promised to help the US root out suspicious accounts. Now, US investigators want to know why the Swiss bank neglected to tell them about $200 million in undeclared assets owned by an American client, according to people familiar with the matter.

The client, Dan Horsky, a citizen of the US and UK, pleaded guilty Nov. 4 to conspiring to defraud the Internal Revenue Service. He has been cooperating for more than a year with investigators examining whether the bank helped clients with ties to Israel evade US taxes, said five people who weren’t authorized to discuss the case publicly, Bloomberg reported.

The Horsky accounts were considered “toxic” because they were hidden from the IRS using methods like those that led to Credit Suisse’s guilty plea, the people said. The US learned about Horsky’s accounts independent of Credit Suisse and after the bank had entered its guilty plea, they said. Credit Suisse could face a new civil or criminal case based on the Horsky probe, the people said.

“If they didn’t provide information about this account when they had it in their files, there was either gross negligence or more likely some kind of conspiracy at the bank to avoid disclosing this account,” said Larry Campagna, a Houston tax attorney, when told by Bloomberg News about the new Credit Suisse inquiry.

Anna Sexton, a spokeswoman for Credit Suisse Group AG, the parent of the unit that pleaded guilty, declined to comment when asked about the US investigation into the bank’s handling of Horsky’s accounts. The bank has set aside more than two billion Swiss francs ($2 billion) in general litigation reserves. Horsky’s lawyers declined to comment.

Prosecutors, the US Securities and Exchange Commission and the IRS are probing whether the bank’s failure to reveal Horsky’s accounts—before its guilty plea—was a lapse in internal controls or a crime involving bankers who acted with approval of managers, the people said. The bank, which wasn’t identified in Horsky’s guilty plea, is Credit Suisse, the people said.

In February 2014, a US Senate committee found that Credit Suisse helped American customers hide as much as $10 billion in assets from the IRS. At the time, Credit Suisse executives told skeptical lawmakers that only a small group of bankers helped US clients cheat on their taxes.

Credit Suisse AG pleaded guilty that May, saying hundreds of employees handled American accounts, both declared and undeclared to the IRS. Its $2.6 billion fine was a record among 85 Swiss banks that admitted helping Americans evade taxes. In its plea agreement, Credit Suisse pledged to help flush out US accounts not declared to the IRS.

Credit Suisse is separately in settlement talks with the Justice Department and US states over abuses in residential mortgage-backed securities. The bank is also under the scrutiny of a monitor appointed by the New York Department of Financial Services after the 2014 tax plea. The monitor, Neil Barofsky, declined to comment on the new investigation.