Testifying at a Senate hearing on offshore tax evasion, Dougan said the operation was chiefly limited to a small group of Swiss-based employees who hid their efforts from executives of the Zurich-based bank.
The acknowledgement and mea culpa followed a Senate subcommittee report that showed Credit Suisse bankers from at least 2001 to 2008 enabled as many as 22,000 Americans controlling an estimated $12 billion in secret offshore accounts to duck paying the IRS.
"Credit Suisse's management team regrets very deeply that despite the industry-leading compliance measures we put in place, we had some Swiss-based private bankers who appear to have violated U.S. law." said Dougan during his oral testimony for Wednesday's hearing by the Senate Permanent Subcommittee on Investigations.
"While I'm extremely dismayed by their conduct ... I also believe that leadership requires facing up to the past and taking responsibility for what our employees did," said Dougan.
The subcommittee report issued Tuesday showed that bankers from Credit Suisse, Switzerland's second-largest bank, secretly traveled to the U.S. on tourist visas to solicit wealthy American clients. They recruited customers at high-society New York parties and Florida golf outings. They met pre-existing U.S. clients in five-star hotels, in one case passing account statements tucked into the pages of a Sports Illustrated magazine, the report showed.
Questioned by Sen. Carl Levin, D-Mich., who chairs the subcommittee, Dougan said a continuing internal investigation by the bank had confirmed much of the subcommittee report, finding that:
A group of Credit Suisse bankers traveled secretly to the U.S. for meetings with American clients and helped them open secret offshore accounts. The meetings violated the bank's own procedures.The bankers i! n some cases helped U.S. clients structure transactions below $10,000 in an effort to avoid mandatory disclosure regulations that govern higher amounts.Some U.S. clients were referred to intermediaries who helped them set up accounts in the names of offshore shell companies. Credit Suisse then treated those accounts as international clients.
"I view that just as egregiously as you do," Dougan told Levin.
He said the bank has tightened its internal controls and is cooperating with a Department of Justice criminal investigation of offshore tax evasion involving Credit Suisse and 13 other Swiss banks.
But in response to subcommittee questioning, Credit Suisse executives said few if any of its bankers involved had been fired specifically for the activity revealed by the Senate report.
"By the time we found out about this behavior, most of the people were gone," Dougan testified.
EARLIER: Senate report says spy tactics used to aid tax evasion
READ MORE: The Senate report and exhibits for Wednesday's hearing
Subcommittee members peppered Dougan and three other Credit Suisse executives with criticism of the clandestine operation.
"Bank secrecy has been discredited and condemned, but it isn't gone," said Levin. "Billions in unpaid taxes remain uncollected, thanks to tax evaders' use of bank secrecy. And we have great concern that the battle to collect those unpaid taxes on hidden offshore assets seems stalled."
Sen. John McCain, R-Ariz., the subcommittee's ranking minority member, also criticized the Swiss government for invoking historic secrecy laws to bar Credit Suisse from complying with U.S. Department of Justice subpoenas issued in 2011. Those subpoenas sought names and account data for Credit Suisse's U.S. customers dating to 2000.
"Any idea that the Swiss government is cooperating with us is a joke," said McCain.
The Department of Justice ultimately put the subpoenas on hold, then sought the information through a U.S.-Switzerland treaty! process.! But after two years, information on only 238 U.S. accounts was turned over.
U.S. and Swiss officials negotiated a 2009 protocol that's expected to provide increased disclosure. However, the agreement has not yet won Senate ratification.
In the meantime, Dougan and other Credit Suisse executives said they faced potential prosecution under Swiss law if they complied with U.S. subpoenas.
"You face double jeopardy? Where would you like to spend time?" quipped Sen. Tom Coburn, R-Okla.
Levin, noting pointedly that profits of Credit Suisse and other Swiss banks are generated in part by their U.S.-based divisions, said, "You want to do business here, you've got to comply with our laws.
"Pony up the names," said Levin.
Subcommittee members also criticized what they characterized as weak Department of Justice efforts to force Swiss bank disclosure of the U.S. client names. They noted that since 2009, federal prosecutors reached final legal outcomes with just two Swiss banks suspected of aiding tax evasion.
UBS, Switzerland's largest bank, reached a 2009 deferred-prosecution agreement, paid $780 million in penalties and turned over information about 4,450 U.S. clients. Wegelin & Co. pleaded guilty to a 2012 conspiracy indictment and was ordered to pay $74 million in penalties and forfeiture.
"If you think that's progress, fine. I don't," said McCain.
Deputy Attorney General James Cole responded that prosecutors have concentrated on building additional criminal cases that will pressure banks in Switzerland and elsewhere to identify U.S. tax evaders.
A total of 106 Swiss banks filed notices of intent that they will seek non-prosecution agreements that will require them to pay steep penalties and provide financial data, if not actual U.S. client names, said Assistant Attorney General Kathryn Keneally, who heads the tax division.
Cole said the continuing federal effort against offshore tax evasion has prompted more than 40,000 Americans who held ! offshore ! accounts to come clean in IRS leniency programs and pay more than $6 billion in back taxes, interest and penalties.
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