Credit Suisse’s top lawyer begged for mercy before federal regulators handed down their criminal prosecution and $US2.6 billion fine against the bank — the first against a major bank in ten years. Credit Suisse pleaded guilty.
Jessica Silver-Greenberg and Ben Protess of the New York Times have the full, sad blow-by-blow of how the Justice Department cornered the proud Swiss bank for helping clients evade U.S. taxes.
If this doesn’t sound withering, we’re not sure what does:
Romeo Cerutti, a Swiss and Italian citizen who once practiced law at a corporate firm in California, arrived just weeks after prosecutors warned that Credit Suisse would need to plead guilty for helping American account holders hide their wealth and evade taxes. In a fourth-floor Justice Department conference room overlooking the National Museum of Natural History, Mr. Cerutti mounted a defence, assuring a group of high-ranking prosecutors that the wrongdoing was contained to a few low-level bankers.
With a quiver in his voice, the lawyer urged prosecutors to settle for a so-called deferred prosecution agreement that would spare the bank criminal charges in exchange for various concessions, according to people briefed on the meeting. Criminal charges, he warned, could have serious consequences for Credit Suisse, and for the broader financial system.
“Please don’t do this,” Mr. Cerutti asked the prosecutors, the people briefed on the meeting said. “Please give us a D.P.A.”
Whether or not you think the NYT is being a bit romantic with its language, there’s no denying that this is classic Wall Street. It’s basically written in the playbook. You go to the feds, you tell them it was some junior guys — a few bad apples — then (and this is key) you bring on the Apocalypse.
What the Apocalypse looks like, we don’t know for sure. What we do know is that it starts with prosecuting a bank criminally. After that the lion lays with the lamb and the four horsemen get in the saddle.
Smaller firms, like Drexel Burnham Lambert back in 1989, crumbled under the weight of criminal prosecution, but that’s not the best indicator of what could happen to a firm Credit Suisse’s size. There isn’t much modern president for that, actually.
So the idea was that the law of unintended consequences would bite regulators back if they prosecuted a bank criminally. Now that it’s been tested, reports indicate that they will move on to other banks, like France’s BNP Paribas.
And then, who knows what will happen.
All this said, those who criticise the government for its lax treatment of Wall Street still quibble with this settlement. Credit Suisse did not have to turn over the names of their tax evading clients, and no individual bankers will be punished for this either.
Senator Chuck Grassley (R, Iowa) for one was upset about this:
“…it might turn heads on Main Street that this is characterised as a sharp rebuke when the bar has been so low for Wall Street for years,” he said. “Maybe we’ll see some top individuals held criminally liable at some point but not today.”
That said, if this works out, who knows what could happen tomorrow.
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