Two Ex-Credit Suisse Bankers Avoid Jail Time in Tax-Evasion Case -- Update

By Joel Schectman 

WASHINGTON--Two former Credit Suisse AG bankers who pleaded guilty to helping wealthy Americans evade taxes received no jail time after cooperating in the U.S. case against the Swiss bank.

The sentence of five years' probation and a fine, handed down on Friday, reflected the men's cooperation, which helped the Justice Department secure its first guilty plea against a financial institution in more than a decade, according to people familiar with the matter. The deal shows the steps authorities are willing to take to help make cases against big companies at a time when the Justice Department has been accused of failing to hold Wall Street accountable.

Last May, Credit Suisse agreed to pay $2.6 billion and pleaded guilty to "knowingly and willfully" helping thousands of U.S. clients open accounts and conceal their income from the IRS.

A spokesman for Credit Suisse declined to comment.

A federal judge in District Court in Alexandria, Va. sentenced Josef Dörig and Andreas Bachmann each to five years of unsupervised probation for their roles in helping U.S. customers hide earnings from American tax authorities through a web of secret Swiss accounts and shell companies. Mr. Dörig also was fined $125,000 and Mr. Bachmann, $100,000.

Messrs. Bachmann and Dörig are two of eight former Credit Suisse employees who have faced tax-evasion charges since 2011. The Justice Department considers the others fugitives, an official said.

The two men, both Swiss residents, flew to the U.S. for the sentencing and were preparing to return immediately after, their attorneys said.

The apparently lenient sentences--the men could have faced as much as five years in prison--came with the blessing of the prosecutor, Assistant U.S. Attorney Mark D. Lytle. Authorities secured cooperation deals from the men last year, around the time that the U.S. Justice Department faced criticism that huge banks were "too big to jail."

Martin Lack, an executive at Swiss bank UBS AG, in May 2014 also received five years' probation after pleading guilty to helping U.S. account holders evade taxes.

Mr. Dörig had admitted to helping U.S. account holders funnel money through shell companies, secret accounts and foundations to keep it hidden from U.S. tax authorities.

Speaking haltingly, with a hearing-assistance device plugged into his ears, Mr. Dörig apologized before the court. "I feel deeply sorry for what I did," he said. "It will not be repeated."

Judge Gerald Bruce Lee said Mr. Dörig could have faced a lengthier sentence, but noted the septuagenarian's age and long, successful career in finance as well as the fact that he isn't a U.S. citizen. "It is sufficient," Judge Lee said.

Mr. Dörig's attorney, Robert Henoch of Kobre & Kim LLP, said in an interview that Mr. Dörig had encouraged his U.S. clients to disclose their overseas assets year earlier, after the Internal Revenue Service offered those with hidden money a chance to come clean. Still, he said, Mr. Dörig "was put through a four-year ordeal."

"The system is clearly broken, stacked, and unfair to foreign bankers and trust-company officials," Mr. Henoch said.

A spokeswoman said offshore enforcement is one of the Justice Department's top priorities, noting that since 2009 that prosecutors have charged more than 100 account holders with having undeclared offshore accounts, along with dozens of facilitators and financial institutions. Earlier this month, an Atlanta federal court sentenced Internet entrepreneur Gregg Kaminsky to four months in prison and two months of home confinement for using a UBS bank account to hide income he earned in an online virtual world called "Second Life."

Write to Joel Schectman at [e-mail]

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