Gregory Korte

USA TODAY

Credit Suisse has identified only 238 of 22%2C000 U.S. taxpayers with Swiss bank accounts

Senate report alleges that Swiss banks including Credit Suisse %22aided and abetted%22 U.S. tax evasion

Credit Suisse CEO to testify at Senate hearing Wednesday

WASHINGTON — Two senators leading an investigation into offshore tax evasion detailed the cloak-and-dagger efforts of one Swiss bank to conceal the identities of its U.S. account holders in a report Tuesday.

Credit Suisse bankers would travel to the United States on tourist visas, then solicit clients at high-society New York parties and Florida golf outings. They met one-on-one with existing clients in hotels, with one client telling Senate investigators he received statements tucked into a Sports Illustrated magazine passed at breakfast at a five-star Manhattan hotel, say Sens. Carl Levin, D-Mich., and John McCain, R-Ariz.

It was understood that bank statements were always destroyed after the meetings so as not to leave a paper trail. For clients who needed additional help in concealing their assets, the bank maintained a list of intermediaries who could help set up offshore shell entities to hold the accounts, according to the Senate report.

Some of the tactics used by Credit Suisse, Switzerland's second-largest bank, "belong in a spy novel," McCain said.

Levin described the bank as a "James Bond environment."

In 2006, Credit Suisse had accounts for more than 22,000 U.S. citizens. At their peak, those accounts were worth as much as $12 billion.

"The key to piercing the cocoon of bank secrecy and collecting the taxes owed by tax evaders is getting the names on those accounts," said Levin, chairman of the Senate Permanent Subcommittee on Investigations, which has been looking into offshore tax evasion since 2008. "Yet after years of investigation, negotiation and jawboning, the United States has names for just 238 of those 22,000 Credit Suisse customers."

The subcommittee's bipartisan 181-page report condemns Credit Suisse for abetting tax evasion, the Swiss government for protecting it, and even the U.S. Justice Department for "dragging its feet" on going after the banks and their clients.

Neither Credit Suisse nor the Justice Department returned calls seeking comment. Credit Suisse CEO Brady Dougan and Deputy Attorney General James Cole are among the witnesses scheduled to testify at a Senate hearing Wednesday morning.

The senators say the Justice Department has tried to enforce the tax laws in Swiss courts under a treaty with Switzerland. It has not issued grand jury subpoenas or U.S. court orders. "It's a lack of determination to pursue these cases," Levin said. "Why? I don't know what their excuse is. We'll find out tomorrow."

Six years after the largest Swiss bank, UBS, first admitted wrongdoing, 14 Swiss banks are still under active investigation for facilitating tax evasion. More than 43,000 taxpayers have come forward under an IRS program to voluntarily disclose their Swiss accounts, paying about $6 billion in back taxes, interest and penalties, the IRS commissioner John Koskinen told Congress this month.

Last week, Credit Suisse agreed to a $196 million settlement with the Securities and Exchange Commission for providing financial advice without registering as a broker or investment adviser. But McCain said that settlement "pales in comparison to the severity of the full range of wrongdoing apparently perpetrated by the bank."

The Senate report also comes as the Treasury Department begins to implement the Foreign Account Tax Compliance Act, a 2010 law that attempts to make overseas accounts more transparent to U.S. tax authorities. Beginning July 1, U.S. financial institutions must withhold certain payments to foreign banks that do not agree to report U.S. account holders to the government.

But the senators say regulations finalized last week have "gaping loopholes" that allow banks to ignore account information stored on paper and to hold secret accounts by offshore shell entities owned by U.S. citizens.

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