This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Credit Suisse Accused of Illegal Tax Dodge, CEO Dougan Urged to Resign

NEW YORK (TheStreet) -- The code of silence that Swiss banks observe when protecting their clients from financial scrutiny is legendary. And Credit Suisse (CS - Get Report) CEO Brady Dougan may have hoped that he'd be similarly shielded once U.S. tax authorities started to close in with a rumored $1.6 billion penalty for helping the bank's U.S. clients dodge taxes. No such luck.

From Swiss political parties like the Social Democrats to individual shareholders at a recent company shareholders meeting, the knives are out for Dougan. He is first in line to take the fall for dragging the bank into a complex U.S. Department of Justice investigation that could see criminal charges being pressed.

What has made matters worse for Credit Suisse is that when Swiss rival UBS (UBS) was being charged for similar misconduct in 2009, Credit Suisse's top management was issuing statements ruling out similar problems at their bank. Since then, U.S. Attorney General Eric Holder has only intensified his scrutiny of big banks.

As recently as February of this year, in testimony in front of the U.S. Senate, Dougan sought to deflect the blame for tax dodging onto a small group of company executives. Bizarrely, the Senate proceedings descended into senators and Dougan sparring over how much taxable money Credit Suisse helped its clients hide.

Dougan steadfastly maintained that only $7 billion was hid from the Internal Revenue Service, while the Senate's estimate was $10 billion. Did a few billion really seem worth haggling over, given the grave charges involved?

Additionally, Dougan seems to have committed the cardinal sin of defying the Senate's expectation that he punish more than just 10 of the 1,800 Credit Suisse staff in the U.S. He might have felt that acceptance of large-scale culpability would have led to his own punishment as well. But he finds himself in the same position a couple of months later anyway.

Dougan might also lose his job because of poor performance in his central function -- to keep the bank's revenue and profits headed north. The bank has fallen short on its earnings estimates for three straight quarters now. JP Morgan downgraded the stock to underweight from neutral. Return on equity was just 8%, compared to a target of 15%.

While the bank had anticipated the penalty from the U.S. authorities, industry watchers say it is highly unlikely that the bank has set aside the rumored $1.6 billion that they may be penalized.

This will make a big hole in next quarter's numbers, and Dougan might find it impossible to dodge the double whammy of poor results and the investigation. Though he has not indicated any desire to let go of his job, on second thought he might appreciate any way to save face and escape the hot seat.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CS $14.51 -0.34%
AAPL $94.87 -0.33%
FB $117.30 -0.11%
GOOG $694.00 0.24%
TSLA $231.74 -0.25%


Chart of I:DJI
DOW 17,693.45 -57.46 -0.32%
S&P 500 2,052.60 -10.77 -0.52%
NASDAQ 4,739.23 -23.9940 -0.50%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs