DOL Urged to Deny Credit Suisse Exemption By Members of Congress and Commenters

A proposed individual prohibited transaction exemption that would allow Credit Suisse AG-affiliated qualified professional asset managers to continue to rely on a 1984 PTE despite violation of the conditions of the exemption by the bank has drawn sharp rebuke in a letter from three members of Congress as well as two public comment letters filed with the Department of Labor.

The three House Democrats, Rep. Maxine Waters (D-Calif.), Rep. Stephen F. Lynch (D.-Mass.) and Rep. George Miller (D.-Calif.), sent a letter to the DOL on Oct. 9 requesting that the agency hold a hearing on the application and expressing their concerns that the Zurich-based banking company wasn't being held sufficiently accountable for its May guilty plea on charges of criminal conspiracy to assist in tax evasion.

In addition to the congressional letter, two public comment letters have been filed objecting to the exemption and requesting a public hearing: Tim Blixseth, the former real estate investor who used a $375 million loan from Credit Suisse to fund a now-bankrupt real estate project in Montana filed his letter  on Sept. 13 and Public Citizen, a nonprofit public advocacy organization filed its letter  on Oct. 7.

When contacted by Bloomberg BNA for comment, DOL spokesman Mike Trupo could only confirm that the department had received the congressional letter and was reviewing it and that the Credit Suisse application remained pending.      

Representatives from Credit Suisse didn't reply to Bloomberg BNA requests for comment.   

Application for Exemption

The application for an exemption by Credit Suisse AG follows the bank's May 19 guilty plea in the U.S. District Court for the Eastern District of Virginia to one count of conspiracy to aid in the preparation and presentation of false income tax returns.

Two days after the plea was entered, the Employees Retirement System of Texas, which manages more than $25.4 billion in assets for state workers halted trading with Credit Suisse.

The pension system cited a policy against hiring firms convicted of felonies as the main reason for its trading suspension.

The Federal Reserve Bank of New York and the Securities and Exchange Commission have both allowed Credit Suisse to maintain its status as a primary dealer and investment adviser, respectively, after the plea was entered.

In September, Credit Suisse applied for a PTE that would allow it to continue to serve as a QPAM despite the condition in its original PTE, which specifically required that the QPAM or its affiliates not be convicted of certain types of criminal activity, including income tax evasion.

Excerpted from a story that ran in Pension & Benefits Daily (10/10/2014).