Levin and McCain to DOJ: Extradite Swiss bankers

Somewhere in Switzerland, more than 50 indicted bankers and financial advisers who helped wealthy Americans hide billions of dollars from U.S. tax collectors are ... chilling.

They have faced charges in the United States for more than three years. Federal prosecutors know where they live. Yet the Justice Department has not asked the Swiss government to extradite any of them to stand trial.

And Sens. Carl Levin (D-Mich.) and John McCain (R-Ariz.) want to know why.

On Tuesday, the heads of the Senate Permanent Subcommittee on Investigations sent a letter to Deputy Attorney General  James M. Cole pressing him to work with the Swiss to bring the indicted execs to justice.

"We urge DOJ to at least attempt to use the authorities laid out in [the extradition] treaty" between the U.S. and Switzerland, the senators wrote. "Even if a request is unsuccessful, it will inform both Switzerland and its citizens that the United States is ready to make full use of available legal tools to stop facilitation of U.S. tax evasion and hold alleged wrongdoers accountable."

Officials at Justice say the department has made progress in going after the bankers, pointing to two recent cases. In November, Justice picked up former UBS banker Raoul Weil, when the Swiss citizen went on vacation with his wife in Italy. Last month, a former Credit Suisse employee, Andreas Bachmann, pleaded guilty to his role in helping wealthy Americans squirrel away money in secret Swiss accounts.

The letter stems from an exchange the senators had with Cole last month, when he testified before the subcommittee during a hearing on Credit Suisse's aiding of American tax cheats.

Cole testified that DOJ has charged 35 bankers and 25 financial advisers with misconduct related to facilitating U.S. tax evasion. Six of them have been convicted or pleaded guilty, while most of the rest are living in Switzerland.

At the hearing, the following exchange took place:

SEN. LEVIN: Most of those [bankers] would require extradition, is that correct?

MR. COLE: That's correct.

SEN. LEVIN: And have you sought extradition?

MR. COLE: We have not filed an extradition request because we have been -- through our experience in our office of international affairs the Swiss will not extradite their citizens so we've been focusing our efforts on things we thought would be more productive.

SEN. LEVIN: But there's no prohibition on our requesting extradition?

MR. COLE: There is not.

The U.S. extradition treaty with Switzerland gives the Swiss government the discretion to deny requests tied to tax offenses, but that discretion ends when criminal conduct such as fraud is involved. At least some of the charges laid out in the indictments seem to meet that standard, according to Levin and McCain.

If the Swiss were willing to prosecute the bankers and advisers, they could waive extradition. But tax evasion is not a crime in Switzerland, so that exemption is meaningless in this case, the senators said. In other words, there is no legitimate reason for the Swiss to deny a request for extradition.

But that doesn't mean that Switzerland will relent. The country has a less than stellar record of cooperating with the U.S. on tax evasion issues. The Swiss government has prevented financial institutions from handing over information after its largest bank, UBS, turned over 4,700 accounts of tax-evading Americans in 2009.

The Justice Department is tasked with trying to hold Swiss nationals accountable for breaking U.S. laws, without further damaging an already strained relationship with Switzerland.

There has been a long-running dispute between the U.S. and Switzerland, whose centuries-old culture of banking secrecy has made the country a sanctuary for the world’s rich.

The two countries struck a deal in August to allow some Swiss banks to pay fines to avoid or defer prosecution over tax evasion by wealthy American customers. The deal has attracted 106 Swiss banks, which have agreed to give up some information about U.S. customers. It does not cover the 14 Swiss banks, including Credit Suisse, that are being investigated by Justice.

The trouble with the agreement is that it does not force banks to give up the names of their American customers, the information most useful to prosecutors in finding tax evaders.

It's been a hard road, but the United States has made progress in combating tax abuses. More than 43,000 taxpayers have voluntarily told the IRS about their hidden offshore accounts and paid the government more than $6 billion in back taxes, interest and penalties.

Credit Suisse was at the center of the 178-page report issued by the subcommittee last month, alleging that from 2001 to 2008 Switzerland’s second-largest bank helped customers disguise Swiss accounts by opening them in the name of offshore shell entities. 

Lawmakers accused the bank of helping wealthy Americans avoid paying taxes on as much as $12 billion in assets held at the institution.

Danielle Douglas-Gabriel covers the banking industry for The Washington Post.
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