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Credit Suisse
Lynnley Browning of Newsweek reveals a potential blockbuster of a story in How Credit Suisse Got Off Easy. Browning presents evidence that not only did Credit Suisse avoid any criminal charges for its senior executives, but additionally inside sources reveal that they managed to avoid revealing, "the names of what a Senate subcommittee said were 22,000 tax-dodging Americans hiding up to $12 billion offshore through the bank."

While the $2.6 billion fine charged to Credit Suisse paid was hailed by the Justice Department as record breakiung,  Dougan even told investors that the $2.6 billion fine would have no material impact on the bank, and Robert Reich called it chump change for a financial empire this large. Now, Newsweek is making allegations of improper influence being exerted by Broderick Johnson, a lawyer and former lobbyist close to President Obama, who VCLib identifies as an adviser to Obama for America. Newsweek incorrectly identifies him as one of Obama's cabinet secretaries.  

In an ironic twist, which Newsweek learned about through two sources briefed on the matter, Credit Suisse was prepared to turn over some 7,500 American client names more than a year ago. But then the Swiss government told the bank some of its senior people would be looking at time in a Swiss prison if those names were revealed. ... Not only did Credit Suisse avoid ratting out its clients, but none of its executives were charged, even though the bank admitted to cloak-and-dagger tactics to derail the investigation, ranging from destroying account records to giving its tax-evading clients offshore credit cards and smuggling cash into the United States for them. The bank also avoided having its U.S. licenses covering banking and investment-adviser work revoked—which could have killed it.

This much is clear. What becomes less apparent is Newsweek's contention that Broderick Johnson intervened in a way that would be illegal or improper.

Newsweek has obtained emails of James Cole, who they describe as the number 2 person at the DOJ, asking one of the investigators on the Credit Suisse case for an update, and declaring “I got a call from Broderick Johnson who says the CEO wants to get this resolved.”

Newsweek sums up this part of the episode by saying "Johnson's intervention appears to have worked. 18 months later the corporation plead guilty to a single count of conspiring to commit tax evasion, and to pay the $2.6 billion fine for "having deceived the Justice Department, the Internal Revenue Service, the Federal Reserve and the Securities and Exchange Commission (SEC)."

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Newsweek declares this even more suspicious because the IRS and Department of Justice had built up a history of demanding Swiss banks reveal the names of Americans it had helped cheat on taxes. In 2009 UBS was forced to reveal 4,500 names, which required an emergency act of the Swiss government. In 2011 prosecutors had obtained subpoenas to "force Credit Suisse to turn over records, the names of American clients and their account details."

But the subpoenas were never enforced, in part because Bruce Swartz, head of Justice’s unit that liaises with the State Department, argued that doing so would ignite a disastrous series of events: The Swiss government would issue a blocking order preventing Credit Suisse from complying with the subpoenas, and a U.S. court would then find the bank in contempt and levy hefty daily fines that could ultimately bankrupt the bank. If the bank refused to pay the fines, federal authorities would then be pushed to seize Credit Suisse’s brick-and-mortar assets, like its corporate building on New York’s Madison Avenue. Credit Suisse’s stock price could plunge, sparking global financial jitters.

In late February, when the Senate Permanent Subcommittee on Investigations, headed by Senator Carl Levin, D-Michigan, bashed Cole for the protracted investigation of Credit Suisse, he cited those unenforced subpoenas. “This is the heart of the matter—names, names, names,” Levin said. “You’ve got to get names.”

Newsweek Feature Stories: Too Big to Jail?

But Cole complained in his testimony before Levin's hearings that Swiss banking secrecy was "hard and frustrating," and then Newsweek asserts he stunned Levin, Lawyers, and even many former Justice Department officials by claiming that "enforcement of subpoenas was not 'an effective method to get the records.”'

It is at this point that the Newsweek allegations of improper White House influence fail to gel for me. Yes, we can see this is lame testimony, and we know Cole received the email from Broderiic Johnson suggesting that the Credit Suisse CEO wanted to settle, however, Newsweek itself make a compelling case for an alternative hypothesis that Cole and a whole bunch of other administration officials were nearly terrified that the global banking system was about to collapse.

Newsweek presents several paragraphs of ironclad documentation leaving little doubt that Cole was fearful that enforcing the subpoenas would bring down an international bank with $2.2 trillion of assets. Newsweek presents this as evidence the DOJ could have easily negotiated a deal for the names, which seems valid. Cole would not be the first, or only executive to have failed to make the best call on a multi-trillion dollar issue of global panic.

It seems irresponsible for Newsweek to leap from this point to a headline alleging improper White House influence and scandal, rather than just another case of poor judgement and protecting wealth financial powers under the banner of "too big to fail."

Browning cites Jonathan Macey, a professor of corporate, finance and securities law at Yale University,  who sum things up by saying, “no one is taking these settlements seriously anymore.”

This article makes an excellent case that Credit Suisse got off way too easy, and that the IRS and DOJ should have insisted on receiving the names of 12,000 Americans it helped evade U.S. taxes with off-shore accounts What seems less compelling for me is documentation for their allegation that the intervention via Broderick Johnson to Cole was indicative of improper White House influence of a scandal level their headline implies.

This evidence is suggestive and should be investigated. However, based on what we read here, caution seems warranted before anyone jumps to a conclusion that this evidence is indicative of a case of improper White House influence rather than just a poorly thought out strategy by government officials intimidated by the "too big to fail" ideology which we already know was sadly pervasive within the administration at that time.

Fri Jun 20, 2014 at 11:15 PM PT: Thanks to VCLib for catching Newsweek's  incorrect identification, who VCLib tells us was Adviser to Obama for America.

Fri Jun 20, 2014 at 11:38 PM PT: The way to stop corporate lawbreaking is to prosecute the people who break the law says Robert Reich

 photo RobertReich_zpsb586adbc.jpg



Robert Reich, Professor of Public Policy, at the University of California at Berkeley, calls for holding more corporate executive lawbreakers criminally liable for corporate crimes in The Way to Stop Corporate Lawbreaking Is to Prosecute the People Who Break the Law

After reviewing allegations that GM, Credit Suisse, and Arthur Anderson broke the laws, receiving relatively trivial fines, which they consider part of the cost of doing business, Robert Reich notes that no executives have been charged with any crimes and suggests that until we start putting senior corporate executives in jail, we will see no diminution of corporate wrong doing.



Extended (Optional)

Originally posted to HoundDog on Fri Jun 20, 2014 at 10:16 PM PDT.

Also republished by PostHuffPost: Connection-Conversation-Community and And Now for Something Completely Different .

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