[Senate Hearing 113-397, Volume 2]
[From the U.S. Government Publishing Office]
S. Hrg. 113-397
OFFSHORE TAX EVASION: THE EFFORT TO
COLLECT UNPAID TAXES ON BILLIONS IN
HIDDEN OFFSHORE ACCOUNTS
=======================================================================
HEARING
before the
PERMANENT SUBCOMMITTEE ON INVESTIGATIONS
of the
COMMITTEE ON
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
----------
VOLUME 2 OF 2
----------
FEBRUARY 26, 2014
----------
Available via the World Wide Web: http://www.fdsys.gov
Printed for the use of the
Committee on Homeland Security and Governmental Affairs
----------
U.S. GOVERNMENT PRINTING OFFICE
89-751 PDF WASHINGTON : 2013
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
Washington, DC 20402-0001
COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
THOMAS R. CARPER, Delaware Chairman
CARL LEVIN, Michigan TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri ROB PORTMAN, Ohio
JON TESTER, Montana RAND PAUL, Kentucky
MARK BEGICH, Alaska MICHAEL B. ENZI, Wyoming
TAMMY BALDWIN, Wisconsin KELLY AYOTTE, New Hampshire
HEIDI HEITKAMP, North Dakota
Richard J. Kessler, Staff Director
Keith B. Ashdown, Minority Staff Director
Laura W. Kilbride, Chief Clerk
Lauren M. Corcoran, Hearing Clerk
PERMANENT SUBCOMMITTEE ON INVESTIGATIONS
CARL LEVIN, Michigan Chairman
MARK L. PRYOR, Arkansas JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri ROB PORTMAN, Ohio
JON TESTER, Montana RAND PAUL, Kentucky
TAMMY BALDWIN, Wisconsin KELLY AYOTTE, New Hampshire
HEIDI HEITKAMP, North Dakota
Elise J. Bean, Staff Director and Chief Counsel
Robert L. Roach, Counsel and Chief Investigator
Allison F. Murphy, Counsel
Henry J. Kerner, Minority Staff Director and Chief Counsel
Michael Lueptow, Counsel to the Minority
Brad M. Patout, Senior Advisor to the Minority
Mary D. Robertson, Chief Clerk
C O N T E N T S
------
Opening statements:
Page
Senator Levin................................................ 1
Senator McCain............................................... 7
Senator Coburn............................................... 9
Senator Johnson.............................................. 26
WITNESSES
Wednesday, February 26, 2014
Brady W. Dougan, Chief Executive Officer, Credit Suisse Group AG,
Credit Suisse AG, New York, NY................................. 10
Romeo Cerutti, General Counsel, Credit Suisse Group AG, Credit
Suisse AG, Zurich, Switzerland................................. 10
Hans-Ulrich Meister, Co-Head, Swiss Private Banking and Wealth
Management, Chief Executive Officer-Region Switzerland, Credit
Suisse Group AG, Credit Suisse AG, Zurich, Switzerland......... 10
Robert S. Shafir, Co-Head, Swiss Private Banking and Wealth
Management, Chief Executive Officer Region Americas, Credit
Suisse Group AG, Credit Suisse AG, New York, NY................ 10
Hon. James M. Cole, Deputy Attorney General, Office of the
Attorney General............................................... 61
Hon. Kathryn M. Keneally, Assistant Attorney General, Tax
Division, U.S. Department of Justice........................... 61
Alphabetical List of Witnesses
Cerutti, Romeo:
Testimony.................................................... 10
Joint prepared statement..................................... 93
Cole, Hon. James M.:
Testimony.................................................... 61
Joint prepared statement..................................... 107
Dougan, Brady W.:
Testimony.................................................... 10
Joint prepared statement..................................... 93
Keneally, Hon. Kathryn M.:
Testimony.................................................... 61
Joint prepared statement..................................... 107
Meister, Hans-Ulrich:
Testimony.................................................... 10
Joint prepared statement..................................... 93
Shafir, Robert S.:
Testimony.................................................... 10
Joint prepared statement..................................... 93
APPENDIX
Report by the Permanent Subcommittee entitled ``Offshore Tax
Evasion: The Effort to Collect Unpaid Taxes on Billions in
Hidden Offshore Accounts,'' February 26, 2014.................. 115
EXHIBIT LIST
VOLUME 1
1. a. GCredit Suisse U.S. Customers with Swiss Accounts: Only 1%
Given by Swiss to United States, chart prepared by the
Permanent Subcommittee on Investigations....................... 329
b. GEffect of Credit Suisse Reallocation of Client 5 Assets
in 3Q2012, chart prepared by the Permanent Subcommittee on
Investigations................................................. 330
U.S. Account Disclosure:
2. GCredit Suisse email, dated March 2010, re: Account
Instructions (It will certainly be a pleasure to welcome you as
a client, should you opt to knock on our door again in future
times.). [CS-SEN-00025083-084]................................. 331
3. GCredit Suisse email, dated October 2008, re: Numbered
Accounts (He needs not to disclose anything to anyone. He has
the choice of disclosing it to the US authorities or not. It is
his choice! Whatever he does is of no concern to us.). [CS-SEN-
00345395-396].................................................. 333
Documents Related to Travel:
4. a. GCredit Suisse Business Trips 2006 (Swiss Ball). [CS-SEN-
00080267-269].................................................. 335
b. GCredit Suisse Business Trips SALN and SALN1 2007 (Key
Client Visits). [CS-SEN-00080270].............................. 338
c. GCredit Suisse Business Trips SALN and SALN1 2008 (Key
Client Visits). [CS-SEN-00080271-273].......................... 339
5. a. GCredit Suisse Travel Report Summary, February 2006,
Destination: New York (Clients covered - 20 - CHF 80,000,000 .
. . Invitation to the Swiss Ball in New York, regular RO [Rep
Office] New York visit, Key Clients visited, successful
meetings overall, Retention, new Referrals). [CS-SEN-00081860]. 340
b. GCredit Suisse Travel Report Summary, May 2006,
Destination: New York, Philadelphia, Chicago (Clients covered -
42 - CHF 80'000'000 . . . Will have follow-up business, in
pipeline NNA CHF 3'000'000). [CS-SEN-00081868-869]............. 343
c. GCredit Suisse Travel Report Summary, May 2006,
Destination: Miami, New York, Houston (Clients covered - 40 -
CHF 160'000'000). [CS-SEN-00081872-873]........................ 345
d. GCredit Suisse Travel Report Summary, July 2006,
Destination: Miami, New York, Toronto, Montreal (Clients
covered - 34 - CHF 54'000'000 ... Client sends me a list of
shares that we need to give our recommendations!). [CS-SEN-
00081874-875].................................................. 347
e. GCredit Suisse Travel Report Summary, February 2006,
Destination: Houston, Los Angeles, Reno (Clients covered - 28 -
CHF 65,000,000 ... Knows some very wealthy people for future
referrals.). [CS-SEN-00081879-880]............................. 349
f. GCredit Suisse Travel Report Summary, February 2007,
Destination: New York (Invitation to the Swiss Ball in New
York, regular RO [Rep Office] New York visit . . . new
Referrals). [CS-SEN-00081883].................................. 351
g. GCredit Suisse Travel Report Summary, March 2008,
Destination: San Francisco, Los Angeles, New York, Toronto,
Montreal (Clients covered - 49 - CHF 230,000,000 ... [Credit
Suisse redacted] for dinner in Beverly Hills . . .). [CS-SEN-
00081901-906].................................................. 352
Documents Related to Credit Suisse New York Representative
Office:
6. GCredit Suisse Important phone numbers (Doerig Josef, Doerig
Partner, external Trust expert; Singenberger Beda, Sinco AG,
external Trust expert) [CS-SEN-00011615-616]................... 357
7. GCredit Suisse Weekly Report - Rep. Office New York (Client
Activities - Assisting client of Niccole (wire instructions to
send additional funds) . . . Contact with prospective client
from Chicago (US$3-5 Mio). [CS-SEN-00096325-328]............... 359
8. GCredit Suisse email, dated July 2008 (We do not have any
educational or promotional material we could provide to a US
person regarding accounts in Switzerland. We are not allowed to
actively solicit or promote offshore accounts from or into the
United States. However, if your clients wants to call me to
learn more about what services can be offered out of
Switzerland - he can do that anytime. Please let me know if I
can assist you in this regard.) [CS-SEN-00095655-656].......... 363
9. GCredit Suisse PB Americas--Representative Office New York,
CSG Internal Audit, Executive Summary, dated February 7, 2008
(Audit Results . . . The overall control environment was found
to be operating effectively.) [CS-SEN-00226719-724]............ 365
Documents Related to SALN:
10. a. GSALN: Organizational Chart as of 01.04.2008, with Swiss
codes [CS-SEN-00080287]........................................ 371
b. GSALN: Organizational Chart as of 01.04.2008 [CS-SEN-
00011631-632].................................................. 372
11. a. GCredit Suisse PB Americas--North America Offshore, Latin
America and Bahamas, CSG Internal Audit, August 2006 draft
(Employees of SWLN making visits or holding meetings in the
United States should not provide investment advice or solicit
business, given existing regulations . . . the level of travel
activities (in 2005 approximately 500 clients were met in the
United States and Canada) may entail regulatory risk. [CS-SEN-
00408714-730].................................................. 374
b. GCredit Suisse PB Americas--North America Offshore, Latin
America and Bahamas CSG Internal Audit, dated August 31, 2006
(final) (The overall control environment was generally found to
be operating adequately.) [CS-SEN-00418830-839]................ 391
12. GCredit Suisse PB Americas--North America International, CSG
Internal Audit, dated December 9, 2009 (Significant
Reputational Risk Issues: None . . . The overall control
environment was generally found to be operating adequately and
we noted no deficiencies with regard to Policy P-00025.) [CS-
SEN-00417862-870].............................................. 401
Documents Related to Project W9:
13. GCredit Suisse, Project W9 Kick-Off Meeting, dated September
29, 2006 (Chart at CS-SEN-00426144--Swiss Booked W9 Clients:
Affected Units, 998 CIFs.). [CS-SEN-00426138-158].............. 410
14. GCredit Suisse, Project W9 6th Core Team Meeting, dated
January 26, 2007. [CS-SEN-00173686-704]........................ 431
Documents Related to Credit Suisse Accounts Numbers/Exit
Projects:
15. GCredit Suisse email, dated March 2007, re: Risk Country:
Yearly Review 2006 (US--Market purity is still insufficient
with regard to the business risk involved.). [CS-SEN-00409535-
555]........................................................... 450
16. GCredit Suisse, US Project - STC #1, dated August 19, 2008
(Chart at CS-SEN-00426306--US Intl. business activities spread-
out across whole organization). [CS-SEN-00426290-307].......... 471
17. GCredit Suisse, Project Tom - STC #5, dated December 19, 2008
(Chart at CS-SEN-00455231--Quick Win Non W-9 (transfer SIOA 5
to SALN). [CS-SEN-00455224-234]................................ 489
18. GCredit Suisse, Update on Development of AuM and Accounts of
U.S. Clients to the Senate Permanent Subcommittee on
Investigations, dated April 20, 2012. [CS-SEN-00189151-157].... 500
19. GLetter from Credit Suisse legal counsel to the Permanent
Subcommittee on Investigations, dated August 13, 2013 re:
Credit Suisse's exit projects. [PSI-CreditSuisse-37-000001-051] 507
20. GLetter from Credit Suisse legal counsel to the Permanent
Subcommittee on Investigations, dated December 20, 2013 re:
questions regarding Credit Suisse's internal investigation
covering its U.S. cross-border business (In early 2012, the
Bank formed a special task force to follow up on potential
breaches of its internal policies . . . [and] imposed
disciplinary action against a total of 10 Swiss based employees
(6 in 2012 and 4 in 2013) . . . None of the employees were
terminated). [PSI-CreditSuisse-54-000001-048].................. 558
Document Related to Net New Assets (NNA):
21. GCredit Suisse email, dated February 2012, re: Important -
NNA, PBMC (. . . we will again discuss our NNA results which
have been very disappointing up until now. As our capability to
attract clients and new assets is of utmost importance - also
externally - we need to take all possible measures in order to
change this into a positive story within the next weeks.). [CS-
SEN-00463981-984].............................................. 606
22. GCredit Suisse email, dated March 2012, re: Major flows last
week (. . . none of these assets are currently categorized as
AUM and I would caution against it before speaking with me as I
am very knowledgeable about the plans for the assets.). [CS-
SEN-00441333-335].............................................. 610
23. GCredit Suisse email, dated March 2012, re: Project
[Redacted] (There is no agreement at this time. . . . There
have been suggestions that we count as much as 5B CHF . . .
this is not a number I want to risk having to reverse, so let's
be sure we are VERY confident in what we count.). [CS-SEN-
00443178-181].................................................. 613
24. GCredit Suisse email, dated April 2012, re: PB NNA ([C]an you
also check the disclosure issue re NNA in Switzerland vs US PB?
As we know, investors are keeping a close eye on this and of
course it is key that finance be comfortable with how we
present this external[l]y.). [CS-SEN-00424575-577]............. 617
25. GCredit Suisse email, dated October 2012, re: NNA Q3 2012 (.
. . please find below . . . NNA for Q3 2012, as reported
internally for PB Americas (CHF 2.4bn) vs. the externally
released figure (CHF 0.2bn)). [CS-SEN-00443246]................ 620
26. GCredit Suisse email, dated December 2012, re: NNA 4Q12
Forecast (Based on reported November NNA and the result of the
first December week, our ambition to deliver WMC [Wealth
Management Clients] NNA of around CHF 6-7bn in 4Q12 is at risk.
With 3 weeks to go until the year comes to a close and QTD
[Quarter to Date] actuals of CHF 2.5bn, we still need CHF 3.5bn
to reach the lower end of this ambition. This requires
continued efforts on all levels and your support is very
important.). [CS-SEN-0000560923-924]........................... 621
27. GCredit Suisse email, dated December 2012, re: Confidential:
Global Client Segments metrics (Zurich is looking for more
potential NNA positions to support the global 2012 year-end
disclosure. As a consequence they are looking to transfer more
of [Redacted/Client 5] balance into AUM.). [CS-SEN-00425106-
107]........................................................... 623
28. GCredit Suisse email, dated January 2013, re: Americas
[Redacted] (Currently - for Q4 reporting - WMC [Wealth
Management Clients] runs for NNA substantially below
expectations. . . . [I]n order to support the PB division, a
further [Redacted/Client 5] portion of 0.9bn CHF - fully
reported internally and externally in the Americas region -
would be a great favour for our division. Hans-Ueli [Hans-
Ulrich Meister] would be extremely happy if you could support
this.). [CS-SEN-00425140-142].................................. 625
29. GCredit Suisse email, dated January 2013, re: WG: NNA (I am
convinced that with this enhanced story we will get approval
soon from Carlos. . . . Given the rather weak granularity, we
need to create a more powerful story in the sense of making
more around the existing weak figures in the sense of:
[redacted] consists of xx accounts, all held in the xx branch,
covered by 2 senior RMs xx and yy which do high interaction
level.......blabla. Might not be relevant but sounds rather
good.). [CS-SEN-00442608-613]................................. 628
30. GCredit Suisse email, dated June 2013, re: Feedback from new
RMs (We need some fresh blood and some nna.). [CS-SEN-00424732] 634
Documents Related to the Department of Justice and the Swiss:
31. a. GTax Convention with Swiss Confederation Message from the
President of the United States Transmitting Convention Between
the United States of America and the Swiss Confederation for
the Avoidance of Double Taxation with Respect to Taxes on
Income Signed at Washington, October 2, 1996, together with a
Protocol to the Convention..................................... 635
b. GProtocol Amending Tax Convention with Swiss
Confederation, January 2011.................................... 680
c. GTranslation of Swiss Parliamentary Resolution, dated
March 16, 2012, Federal Resolution Concerning a Supplement to
the Double Taxation Treaty between Switzerland and the United
States of America.............................................. 705
32.a./b. GCommunications from the Department of Justice to Swiss
representatives, unsigned and undated, outlining steps to be
taken by the Department of Justice and The Swiss Confederation
regarding Agreement between the Internal Revenue Service and
The Swiss Confederation. [Also see Exhibit 45 for related
communications.]............................................... 707-9
33. GDepartment of Justice letter, dated December 9, 2011, (. . .
in order to determine whether it will be fruitful for the
United States Department of Justice to discuss with your
institution the possibility of an agreement with us that could
avoid indictment, the Department of Justice must have complete
and accurate information and must have the information
quickly.)...................................................... 711
34. GTranslation of newspaper article, Tax Dispute with the US is
Escalating, SonntagsZeitung, September 4, 2011................. 714
35. a. GPress Release of the Swiss Federal Supreme Court, dated
July 5, 2013, Exchange of information in Tax Matters with the
United States--The Federal Supreme Court rejects a first
appeal......................................................... 717
b. GPress Release of the Swiss Federal Administrative Court,
dated January 8, 2014, Julius Baer: IRS request for
administrative assistance not sufficient for the disclosure of
client data.................................................... 719
36. a. GTranslation of the Swiss Federal Parliament Lex USA,
Measures to facilitate the resolution of the tax dispute
between the Swiss banks and the United States, dated May 29,
2013........................................................... 721
b. GSummarized Translation of the Swiss Federal Parliament
Dispatch explaining Lex USA, dated May 29, 2013................ 724
37. a. GJoint Statement between the U.S. Department of Justice
and the Swiss Federal Department of Finance, dated August 29,
2013........................................................... 731
b. GU.S. Department of Justice Program for Non-Prosecution
Agreements or Non-Target Letters for Swiss Banks, dated August
29, 2013....................................................... 733
38. GDeferred Prosecution Agreement, U.S. v. UBS AG, undated..... 743
39. a. GSettlement of the John Doe Summons, agreement between
the United States and the Swiss Confederation, August 19, 2009. 786
b. GSettlement of the John Doe Summons, agreement between the
United States, the U.S. Internal Revenue Service and UBS AG,
dated August 19, 2009.......................................... 796
40. GU.S. v. Walder et al., Case No. 1:11-CR-95 (E.D. Virginia)
Superseding Indictment (July 21, 2011)......................... 808
Additional Documents:
41. GCredit Suisse email, dated January 2013 (There was some
legacy Clariden issues (CB) brewing that we need to brief you
on.). [CS-SEN-00426110-111].................................... 855
42. a. GSwiss seek U.S. tax deal by year-end, but not at any
price, Reuters, August 3, 2012................................. 857
b. GSwitzerland to Allow Its Banks to Disclose Hidden Client
Accounts, The New York Times, May 29, 2013..................... 858
43. a. GIndictment, U.S. v. Wegelin & Co., et al., February 1,
2012........................................................... 863
b. GPlea, U.S. v. Wegelin & Company, January 3, 2013......... 922
44. GLetters between the Department of Justice and the Permanent
Subcommittee on Investigations, March and June 2014, regarding
extradition of Swiss nationals from Switzerland................ 949
45. GLetters between the Department of Justice, Internal Revenue
Service and the Swiss State Secretariat for International
Financial Matter, August, 2011, regarding Swiss-U.S.
discussions on tax issues...................................... 953
46. a. GResponses of Credit Suisse to supplemental questions for
the record from Senator Carl Levin............................. 960
b. GSEALED EXHIBIT: Question 4a and Credit Suisse's response. *
c. GMemorandum to File from the Permanent Subcommittee
Investigations Staff regarding Credit Suisse Classification of
Net New Assets................................................. 967
47. GResponses of Credit Suisse to supplemental questions for the
record from Senator Tom Coburn................................. 969
48. GResponses of the Department of Justice to supplemental
questions for the record from Senator Carl Levin............... 970
VOLUME 2
49. GDocument Locator List and documents cited in the footnotes
to Offshore Tax Evasion: The Effort to Collect Unpaid Taxes on
Billions in Hidden Offshore Accounts, the Report released in
conjunction with the Subcommittee hearing on February 26, 2014.
The Document Locator List provides the Bates numbers or a
description of the documents cited in the Report and the
hearing record page number where the document can be located.
Not included are widely available public documents and
documents related to Subcommittee interviews, which are not
available to the public........................................ 1002
* Retained in the files of the Subcommittee.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]