WASHINGTON - The Senate Permanent Subcommittee on Investigations, which I chair, has spent several years examining the ways offshore banks have aided and encouraged U.S. taxpayers in evading their responsibility to pay what they owe. By using secret bank accounts, these taxpayers conceal their income and therefore avoid paying taxes.
We recently issued our latest report, examining how one Swiss bank, Credit Suisse, attracted thousands of U.S. customers seeking to avoid U.S. taxes, and how our own Justice Department hasn't done enough to collect back taxes from tax dodgers at Credit Suisse and other offshore banks.
Our report followed up on a hearing we held in 2008, where we showed that UBS, the largest bank in Switzerland, at one time had 52,000 U.S. customers with Swiss accounts holding $18 billion in hidden assets.
Sen. Carl Levin
UBS acknowledged its misdeeds and, to avoid prosecution, turned over the names of more than 4,700 U.S. taxpayers with previously undisclosed accounts. Those revelations led to a broader voluntary disclosure program in which 43,000 taxpayers have paid back taxes, interest and penalties totaling $6 billion to date, with more expected.
Our latest investigation chronicles the uneven and halting progress in identifying U.S. taxpayers who cheated Uncle Sam by using hidden offshore accounts. Along with Sen. John McCain of Arizona, I released a bipartisan report showing that at its peak, Credit Suisse had more than 22,000 U.S. customers with accounts containing up to $12 billion.
One client described an experience right out of a James Bond movie when the client visited the bank's main offices in Zurich. The client was ushered into a remotely controlled elevator with no floor buttons, and escorted to a bare room with white walls. The client always signed a form ordering that the Credit Suisse account statements be immediately shredded.
One Swiss banker met with a U.S. client over breakfast at a U.S. luxury hotel and slipped the client bank account statements in-between the pages of a Sports Illustrated magazine. Some Swiss bankers also advised U.S. clients on how to structure cash transactions to avoid filing reports of transactions over $10,000 that are required by U.S. law.
Once UBS' misconduct was exposed, Credit Suisse started closing U.S. client accounts in Switzerland. In the end, the bank kept accounts for only about 3,500 out of the 22,000 U.S. clients, after verifying them as compliant with U.S. tax law, meaning they were disclosed to the IRS. The bank closed accounts for the other 18,900 U.S. customers. The vast majority - up to 95 percent - were undeclared, meaning hidden from Uncle Sam.
We need to know how many of those accounts belonged to people dodging U.S. taxes, and we need to collect back taxes from those tax evaders. The key to answering those questions is getting the names of U.S. account-holders. But so far, Credit Suisse has handed over identification for just 238 accounts of U.S. clients. To me, getting 238 in five years out of a universe of 22,000 - less than one percent - is beyond embarrassing.
During our hearing, Credit Suisse executives told us they will not hand over names of its U.S. clients because doing so would violate Swiss law. That's outrageous. When a bank comes to the United States to do business, it should comply with U.S. law, including laws that protect us from tax evasion.
But enforcement action against Credit Suisse has stalled, even though the bank has been under criminal investigation since 2011. While seven of its bankers were indicted by U.S. prosecutors in 2011, none has stood trial. Instead, they are residing openly in Switzerland. None has been the subject of a U.S. extradition request.
Unfortunately, U.S. law enforcement hasn't been as tough as it should be. Rather than use proven U.S. tools that could be enforced in U.S. courts, the Justice Department bowed to the wishes of the Swiss government and voluntarily limited its requests for Swiss documents, including names of tax evaders.
Individuals who use bank secrecy to hide income and evade taxes are cheating not just the government but also the honest Americans who pay what they owe. Michigan's working families are required to report their income to the IRS; wealthy individuals with Swiss bank accounts should have to do the same. Hopefully our investigation, report and hearing will mark the beginning of a renewed push by the Department of Justice to act against tax evaders and tax haven banks.
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Carl Levin is the senior U.S. senator from Michigan.