As per a Reuters report, Credit Suisse Group AG (CS - Free Report) seems to be nearing a $1.6 billion worth settlement with the U.S. Department of Justice (DOJ) for aiding tax evasion. Though nothing has been confirmed officially, it is expected that the Switzerland based multinational will enter into a legal agreement in the following few weeks.
It was alleged that Credit Suisse, like many others, lured Americans to open overseas bank accounts, thereby helping them to dodge U.S. taxes. The unscrupulous practice enabled the Swiss banks to earn huge fees but on the other hand resulted in huge losses for the U.S Treasury.
Credit Suisse has already kept aside some amount as reserve to meet the settlement penalty. Apart from paying the fine, the regulators want the company to accept the wrong doings as well. The same was confirmed by internal sources to Reuters on grounds of anonymity.
Another Swiss global financial services company, UBS AG (UBS - Free Report) has already paid $780 million in 2009 to the regulators as compensation for similar faulty practices. Moreover, recently the Swiss units of big Wall Street players like The Goldman Sachs Group, Inc. (GS - Free Report) and Morgan Stanley (MS - Free Report) have consented to cooperate with the DOJ regarding the ongoing probe into their alleged involvement in the tax evasion practices.
Credit Suisse has been embroiled in legal hassles for quite sometime. Earlier in Feb 2014, the company reached a settlement with the Securities and Exchange Commission worth $196 million and accepted the charges associated with providing unregistered cross-border securities services to clients in the U.S.
The sluggish economic recovery in Europe continues to weigh on Credit Suisse’s top line growth. Though the company has effective cost control measures in place, a surge in legal expenses could worsen the scenario.
Credit Suisse currently carries a Zacks Rank #3 (Hold).