Credit Suisse Pleads Guilty in Tax Evasion Case

Credit Suisse is about to do what no other huge bank has done in over two decades: plead guilty to criminal wrongdoing.

In a sign that global banking giants are no longer immune from criminal charges - despite public concerns that financial institutions have grown so large and interconnected that they are 'too big to jail' - federal prosecutors demanded that Credit Suisse's parent company plead guilty to helping thousands of American account holders hide their wealth and evade taxes.

The Justice Department filed a criminal information in Federal District Court in Alexandria, Va., outlining the case against the bank. Credit Suisse is scheduled to plead guilty at a court hearing later on Monday.

As part of a deal that the Justice Department is expected to announce, the Swiss bank agreed to plead to one count of conspiring to aid tax evasion. Credit Suisse, which has a giant investment bank in New York and whose chief executive is an American, will also pay about $2.6 billion in penalties and hire an independent monitor for up to two years.

The severe rebuke from federal prosecutors - as well as from the Federal Reserve and New York State's banking regulator, Benjamin M. Lawsky, who agreed to punish the bank without shutting it down - stems in part from Credit Suisse's failure to fully cooperate with the United States government.

The resulting plea deal will strike a blow at overseas tax dodging and the shadowy world of Swiss bank secrecy, which had become a hallmark of the country's financial system and the scorn of American policy makers. The deal also signals a shift in prosecutors' policy, representing the first time since Drexel Burnham Lambert pleaded guilty in 1989 that a giant bank has entered a guilty plea in the United States.

It took months of careful planning. Recognizing that criminal charges could prompt regulators to revoke a bank's license to operate, the corporate equivalent of the death penalty, prosecutors met with the Fed and Mr. Lawsky to discuss punishing Credit Suisse without putting it out of business and imperiling the economy, according to interviews with people briefed on the matter who were not authorized to speak publicly.

The Credit Suisse plea won't be the last. The case, which comes some three years after federal prosecutors in Virginia indicted eight Credit Suisse bankers, will provide a template for prosecuting other financial misdeeds - both present and future. BNP Paribas, France's largest bank, is next in line to plead guilty in the coming weeks, the people briefed on the matter said. The bank, which is suspected of doing business with countries like Sudan and Iran that the United States has blacklisted, will also pay more than $5 billion in fines, the people briefed on the matter said, and Mr. Lawsky is planning to penalize a dozen or so bank employees.

The BNP and Credit Suisse cases may also lay the groundwork for criminal actions against American banks. The new strategy applies to American banks like JPMorgan Chase and Citigroup, which are both the subject of criminal investigations, but those inquiries are at an earlier stage and it is unclear whether they would warrant charges.

Prosecutors were not always so aggressive. In the wake of the 2008 financial crisis, the Justice Department did not file any criminal cases against a Wall Street bank or its top leaders. And as fears of a financial panic grew, the British bank HSBC escaped money laundering charges in 2012, stoking an outcry that Wall Street banks have grown so important to the economy that they cannot be charged.

Against that backdrop, prosecutors homed in on the Credit Suisse case as a turning point in their pursuit of big banks. Credit Suisse's lawyers proposed a more modest guilty plea from a subsidiary rather than the parent company, the people briefed on the matter said, but prosecutors rebuffed the overtures. This case, the prosecutors decided, would finally demonstrate that no bank is 'too big to jail.'

For Attorney General Eric Holder Jr., blamed for enabling the idea that banks are 'too big to jail,' the new strategy offers a last opportunity to rewrite his legacy. In a recent video message posted on the Justice Department's website, Mr. Holder remarked that 'there is no such thing as 'too big to jail,'' adding that his prosecutors continue 'to pursue several important investigations' that he is 'personally monitoring.'