A guest blog by Heather Lowe of Global Financial Integrity, with thanks:
As many of you know, Credit Suisse AG (CSAG) was convicted in November of U.S. felony charges relating to assisting (and soliciting) tax evasion by U.S. taxpayers. A consequence of this felony conviction is that, according to Department of Labor (DOL) regulations, CSAG and its affiliates lose their privileged status as ‘qualified professional asset managers’ (QPAMs). Essentially, this means that CSAG and its affiliates would no longer be able to engage in higher-risk transactions with the pension fund money that they manage.
As noted, this is an automatic sanction that comes into force when any QPAM (or its affiliate) is convicted of one of a specific set of felony offenses in the U.S. Credit Suisse is not the first to get tripped up by this regulation, but since 1997, the DOL has reportedly granted waivers allowing the continuation as a QPAM for all 23 firms finding themselves similarly disqualified and who sought individual waivers of the regulatory disqualification.
This time, however, Reps. Waters, Lynch and Miller, along with Public Citizen, demanded that the Department of Labor hold a public hearing regarding whether a waiver should be granted to Credit Suisse. As a result, there will be a public hearing as to whether Credit Suisse should continue to enjoy the privileged QPAM status or not, in light of the felony conviction.
At the public hearing on Thursday, Jan 15, 2015 from 10:00 – 5:00, Global Financial Integrity, TJN and Public Citizen [all members of the FACT coalition], among others will testify in opposition to the waiver being granted, and CSAG and their affiliates and associates, including Evercore Trust Company and Groom Law Group, will testify in favor of the waiver being granted.
FACT members will largely focus on CSAG as:
- a financial institution with over a decade of significant regulatory infractions and violations leading to citations, fines and deferred prosecution agreements, demonstrating low integrity in activities in different jurisdictions;
- as an institution with a corporate culture which “apparently rewards systematically taking risks with the rule of law” insofar that their CEO and most of senior management has remained the same for more than a decade, despite the above-mentioned issues; and
- that not granting a waiver to CSAG will not be costly to their current ERISA-plan holders, but rather beneficial. According to Public Citizen (click for letter to DOL in pdf), the liquidation of CSAG’s ERISA-investments would be at a minimal cost of about $450,000.
Credit Suisse Group is a large, complex institution with operations in more than 50 countries, $980 billion in assets and 46,000 employees. More than 52,000 Americans held Credit Suisse accounts for the purposes of evading US income tax liability.
We would welcome any and all blogs, op-eds, tweets, etc. on the issue to raise public awareness.
The list of submissions, including those of TJN, GFI and others, is here. [TJN’s submission has been made by James Henry, a Senior Adviser to TJN. Conoisseurs of Credit Suisse and Swiss banking will find a few interesting tidbits here.]
- Credit Suisse Group AG – Principal Legal Entities Overview https://www.credit-suisse.com/media/cc/docs/investors/simplified-legal-entity-overview.pdf
- Bloomberg article referencing the Employees Retirement System of Texas that has ceased relations with Credit Suisse http://www.bloomberg.com/news/2014-06-02/credit-suisse-needs-u-s-nod-on-pension-work-after-charge.html
- Article referencing 23 similar waivers by DOL http://www.ibtimes.com/labor-department-proposes-waive-sanctions-against-credit-suisse-too-big-punish-1683028
- List of DOL exemptions which includes specific QPAM type transactions (also listed below) http://www.dol.gov/ebsa/regs/masterindex.html#QPAM
- DOJ announcement of guilty plea and links to court documents http://www.justice.gov/opa/pr/credit-suisse-pleads-guilty-conspiracy-aid-and-assist-us-taxpayers-filing-false-returns
- WashPo Article http://www.washingtonpost.com/blogs/wonkblog/wp/2014/10/10/the-case-that-could-make-or-break-tom-perez/