Credit Suisse to Pay $885M To Settle RMBS Fraud Lawsuit with FHFA, Continues to Face Allegations It Hid US Accounts from Internal Revenue Service
Credit Suisse (CS) will pay $885 million to resolve securities allegations related to the sale of approximately $16.6B in residential mortgage-backed securities that it made to Freddie Mac (FMCC) and Fannie Mae (FNMA) prior to the financial crisis. The RMBS settlement is with the Federal Housing Finance Agency, which oversees both government-controlled financing companies. It closes the books on two lawsuits.
The mortgage cases accused Credit Suisse of making misrepresentations when selling the RMBS to the two companies. Because the deal was reached prior to Credit Suisse submitting its financial results for 2013, the Swiss bank says it will take a related $312 million charge for last year, as well as post a loss for the most recent fourth quarter.
In other Credit Suisse news, one of the firm’s ex-bankers has pleaded guilty in federal court to assisting US clients so that they could avoid paying taxes to the IRS. Andreas Bachmann is one of seven employees at the firm indicted on a criminal charge that he helped Americans conceal assets of about $4 billion.
Since agreeing to work with prosecutors, Bachmann has implicated his superiors at Credit Suisse by saying that they allowed US law and a deal between the firm and the IRS (to withhold and pay taxes on the accounts of clients that are US citizens) to be violated. Bachmann claims that when he spoke about the practices internally, an executive told him to make sure he wasn’t caught. Also, in his statements of fact, Bachmann said that compliance workers at Credit Suisse did not act to make sure compliance was taking place per a prohibition made in a deal with the IRS that its bankers were prohibited from talking about investments in US securities.
Bachman said that of his 100 clients, at least 25 of them were based in the US. He contends that that the IRS wasn’t notified about many of the US accounts and sham structures were used to hide who actually owned them.
The ex-Credit Suisse banker’s plea comes after a Senate subcommittee issued a report finding that the firm helped 22,000 Americans conceal up to $10 billion from the IRS.
Ex-Credit Suisse Banker Bachmann Admits Guilt in Tax Case, Bloomberg, March 12, 2014
Credit Suisse Settles Mortgage Litigation for $885 Million, The Wall Street Journal, March 21, 2014
More Blog Posts:
Credit Suisse Admits Wrongdoing and Will Pay $196M to Settle SEC Charges That It Provided Unregistered Services to US Customers, Stockbroker Fraud Blog, February 22, 2014
JPMorgan Will Pay $614M to US Government Over Mortgage Fraud Lawsuit, Stockbroker Fraud Blog, February 8, 2014
Credit Suisse Officials Accused of Telling Staff to Ignore Due Diligence Standards, Accept Questionable Loans Involving, Institutional Investor Securities Blog, March 11, 2014