A labour court in Geneva has placed the blame for the help that Credit Suisse once gave to tax-evading HNW American clients squarely on the shoulders of the bank's top management. In the process it has largely exonerated a former relationship manager who has claimed that he was merely following orders. The judgment might open a new chapter in the story of the US Swiss Bank Programme.

The Tribunal des prud'hommes handed down its damning judgment on Mayday, brushing aside the assertion that Credit Suisse's CEO made in his testimony before the US Senate in 2014 to the effect that a few rogue relationship managers were to blame and the bank had acted with all due celerity and diligence.

The three sitting judges of first instance largely agreed with a plaintiff who had issued a writ against his former employer for abusive dismissal and breach of duty of care. The bank has now been directed to pay the man SFr4 million without interest for lost wages, bonuses and pension payments. In addition, Switzerland’s second-largest bank must pay him all the costs that he might incur when defending himself in criminal trials in the US courts.

Der Kundenberater

Credit Suisse reportedly sacked the banker on 19 May 2014, the day on which it pled guilty in the US to helping American HNW clients avoid tax, accusing him of breaking its internal rules.

During the case, which appears to have gone on since February 2015, the judges pored over many documents relating to the bank's US offshore business in the 'noughties and 2010s and heard the testimony of 38 witnesses during a 100-hour trial. The Geneva court criticized in its judgment above all the management level of the big bank.

The 'client advisor' or kundenberater travelled from Switzerland to the USA many times throughout those decades, sometimes meeting the same customers several times a year. For these journeys he required the approval of very senior managers at the bank and sent them reports of his doings. The judges found that the compliance department, the legal department and the board had failed to apply internal rules consistently enough and that Credit Suisse had 'incited' its bankers to break its rules. They also said that they were "firmly convinced" that the top managers at Credit Suisse were "up-to-date" regarding the relationship managers' dubious activities.

According to Swissinfo, the judges said that the bank "first tolerated and even encouraged the plaintiff to break the rules in order to develop its clientèle and profits in the North American market."

The master dissembler?

The judges quoted copiously from the testimony of Brady Dougan, who at the time was Credit Suisse's embattled CEO, in front of the US Senate on 26 February 2014.

At the time he denied the senators' accusations that Credit Suisse was a willing accomplice in US tax evasion, preferring to blame a small group of private bankers in the bank's North American team. He added that the top managers at the bank were unaware that they were hiding American HNWs' income and assets. He was heard to say: "We deeply regret that — despite the industry-leading compliance measures we have put in place — before 2009, some Credit Suisse private bankers appear to have violated US law. The evidence showed that some Swiss-based private bankers went to great lengths to disguise their bad conduct from Credit Suisse executive management."

US authorities fined Credit Suisse more than $2.6 billion (SFr2.3 billion) in 2014, allowing it to settle criminal charges relating to the help that it gave to US tax-evaders. Brady Dougan left Credit Suisse in 2015, having spent eight years in the hot seat.

Compliance reconfigured

This February the bank appointed Lydie Hudson to the post of chief compliance officer and Lara Warner as group chief risk officer. At the time the CEO of the bank, Tidjane Thiam, added: “Given the growing importance of our relationship with regulators, our regulatory affairs function will be separated from the compliance organisation and be integrated in the CEO Office.”Credit Suisse is reportedly appealing against the labour court's decision. The bank declined to answer any queries on the telephone and did not reply to our 13 written questions by press time. Instead, it subsequently send the following terse message.

“We have taken notice of the judgement which we believe ignores the facts at hand and misses the merits of the case. Credit Suisse will appeal such judgement."