Should Convicted Felon Credit Suisse be granted a Department of Labor Waiver?

January 14th, 2015

5042453005_88181ee344_zNot that long ago, Credit Suisse AG (CSAG), the multinational financial services giant, pleaded guilty to felony criminal charges and paid fines of US$2.6 billion for aiding and assisting U.S. taxpayers “in filing false income tax returns and other documents with the Internal Revenue Service (IRS)”.

In other words, Credit Suisse helped Americans evade taxes and showed them how to take advantage of the international financial system’s inherent secrecy, even brining secret airports and elevators into the picture, according to a U.S. Senate report.

But now that they’ve admitted to criminal actions, it seems CSGA wants a waiver to avoid some of the very baggage that comes with being convicted of felony charges.

CSGA is considered a “qualified professional asset manager”, a status that allows it to administer pension funds worth billions of dollars. But Department of Labor (DOL) regulations could revoke its status as a QPAM, due to the felony convictions; unless, of course, the DOL issues them a special wavier.

If the past is any indication, these waivers are shockingly easy to come by. Since 1997, the DOL granted similar waivers to all 23 firms that applied for them. But as Heather Lowe of Global Financial Integrity points out, Credit Suisse has a checkered past when regulation and compliance are concerned.

From GFI:

“The felony conviction, to which Credit Suisse pled guilty this past year, is only the latest transgression in a long string of serious regulatory problems at the financial institution. Enough is enough: Credit Suisse needs to understand that there are serious repercussions for engaging in illegal activity that defrauds the U.S. Government and American taxpayers.”

So with a questionable history of compliance, along with a felony conviction that carried a price tag of $2.6 billion, why this is even being considered in the first place?

Fortunately, a few members of Congress agreed with this sentiment, and demanded that the DOL holds a public hearing on whether or not Credit Suisse should be granted a waiver. In a letter sent to Department of Labor Secretary Thomas Perez, Rep. George Miller, Rep. Stephen Lynch, and Rep. Maxine Waters question the very waiver process, and whether it is “sufficiently robust”.

From the letter:

Although we are pleased that the Department has indicated that it takes a case-by-case approach and ensures that any waiver it grants includes appropriate conditions, we are also concerned that the process is not sufficiently robust. Since 1997, the Department has reportedly granted waivers for all 23 firms seeking individual waivers. The beneficial status of qualified professional asset manager should be reserved for institutions that have shown a commitment to maintaining a high standard of integrity via compliance with the law. When the Department simply waives the disqualification provisions on a seemingly automatic basis, it undermines the firms’ incentives to obey the law.

This is particularly concerning in the case of large financial institutions such as Credit Suisse, where reflexively granting waivers may enshrine a policy of too big to bar.

Experts from two member organizations of the Financial Transparency Coalition, Global Financial Integrity and Tax Justice Network, will testify at the public hearing.

Hearing Details:

Time: 10:00am – 5:00pm EST (Lowe to testify at 1:15pm EST)
Date: Thursday, January 15, 2015
Room: C5320, Rm. 6 (5th Floor)
Venue: U.S. Department of Labor, 200 Constitution Ave NW, Washington, DC 20210

Image used under creative commons licensing / Flickr User Wally Gobetz

Written by Christian Freymeyer

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