Credit Suisse in Five-Nation Tax Probe - Bloomberg

Credit Suisse in Five-Nation Tax Probe

Just when he thought the worst was behind him, Tidjane Thiam is facing another potential blow to a two-year-old turnaround that is just beginning to bear fruit.

On Friday, Thiam’s Credit Suisse Group AG found itself embroiled in a tax-evasion and money-laundering investigation spanning five countries that could involve thousands of account holders. It’s the latest headache for a CEO who may have to ask shareholders for a third capital increase in five years as the firm tries to recover from the cost of settling legal bills and surprise trading losses.

Thiam is considering selling shares or pursuing a partial initial public offering of the firm’s Swiss unit as he tries to free up capital to expand wealth management in Asia while shrinking the investment bank. The CEO, who said in February that Credit Suisse’s $5.3 billion settlement with the U.S. over sales of toxic mortgage debt was a “game changer,” now faces the possibility of renewed uncertainty about the bank’s legacy issues.

“The problem for Credit Suisse is that they seem to be in the dark and have no idea what will result from this,” said Piers Brown, an analyst with Macquarie Group Ltd. who has an underperform rating on the stock. “The two things that people are fearing is a big fine and that this prompts another wave of outflows from their European business as clients get fed up with the franchise.”

Offices Contacted

The bank said its offices in London, Paris and Amsterdam were “contacted” on Thursday by authorities in connection with client tax matters, and that it’s cooperating. The move was so secret that not even Switzerland’s authorities knew about it. Investigators in the Netherlands arrested two people -- seizing a gold bar, paintings and jewelry -- and are probing dozens more suspected of hiding millions of euros in Swiss accounts, the Fiscal Information and Investigation Service said Friday.

Iqbal Khan, head of the unit that houses the wealth management operations whose offices were examined, said it’s too early to assess the impact on clients and the bank’s strategy won’t change.

“This whole action is something that does surprise me in terms of timing,” Khan said in a telephone interview Friday, pointing out that the inquiries were made public a day before the bank implements an automatic exchange of information with European authorities. “We’ve taken a proactive stance and zero tolerance when it comes to tax” evasion in Europe.

The bank repeated its “zero tolerance” approach in full-page advertisements taken out in U.K. newspapers on Sunday, giving a seven-bullet-point response to the probe. The bank added that it previously terminated relationships with clients who didn’t prove they paid their taxes, leading to “very significant asset outflows.”

Longstanding Plan

The raids come as the bank is considering asking shareholders for more than 3 billion Swiss francs ($3 billion) as an alternative to its longstanding plan to raise capital by listing part of its local unit, people familiar with the matter have said.

“It’s tight, but I believe they could do without” the IPO, David Herro, chief investment officer of Harris Associates, one of Credit Suisse’s top three shareholders, said early on Friday. “Raising capital must be something that’s done after a lot of careful thought.”

Herro, speaking to newspaper NZZ am Sonntag, said he’ll support proposals by the board of directors at the bank’s annual general meeting scheduled for later this month.

Credit Suisse fell 1.3 percent to 14.71 francs at 10:41 a.m. Monday in Zurich, while the Bloomberg Europe Banks Index was down 0.6 percent. The bank’s shares have climbed 0.7 percent this year.

Dutch Tax

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The tip that triggered the investigation came from one or more informers to a team in the FIOD, the criminal investigation service of the Dutch Tax and Customs Administration, said spokeswoman Wietske Visser. The five countries coordinated their actions through the European Union’s Judicial Cooperation Unit, which said in a statement that the investigation started in 2016 and that further actions are likely in the next few weeks.

The raids are not “good news but my gut feeling is that this is not a major case,” said Thomas Braun, a portfolio manager at BWM AG, which holds about 3.7 million shares in Credit Suisse. “The main question is whether these are current accounts or accounts of clients with which Credit Suisse canceled its relationship.”

It’s a question Khan said he couldn’t answer at this time. To his knowledge, the probes target individuals outside the bank, he said. No assets held at Credit Suisse were confiscated. If it turns out individuals inside the bank violated policies, there would be disciplinary action, though that’s too early to determine, he said.

Credit Suisse has reported more than 40 billion francs in outflows since 2011 from clients that moved to become tax compliant, Khan said. In Europe, those outflows are done, he said, though the unit expects about 5 billion francs from other regions this year.

Khan said he has no reason to change that guidance at this point.

Tax Obligations

Credit Suisse was fined $2.6 billion in 2014 after admitting it helped Americans cheat on their tax obligations and conducting what then-U.S. Attorney General Eric Holder called a “shamefully inadequate internal inquiry” into the wrongdoing.

In Europe, the bank agreed in October to pay about 109.5 million euros ($117 million) to Italian authorities to resolve a probe into the bank’s use of insurance policies allegedly designed to help clients evade taxes, five years after paying 150 million euros to settle a tax-evasion dispute with the German government.

“This leaves them in a difficult position” in case of a settlement, said Macquarie analyst Brown. “They’ve had a huge one in the U.S., and France is chasing UBS for a big sum, so the timing is poor,” especially given the discussions about a capital increase.

Lithuania says Russia has ability to launch Baltic attack in 24 hours - Reuters

Lithuania says Russia has ability to launch Baltic attack in 24 hours

By Andrius Sytas | VILNIUS

Russia has developed the capability to launch an attack on the Baltic states with as little as 24 hours' notice, limiting NATO's options to respond other than to have military forces already deployed in the region, Lithuania's intelligence service said on Monday.

Lithuania, Latvia and Estonia, annexed by the Soviet Union in the 1940s but now part of both NATO and the European Union, have been increasingly nervous since the Russian takeover of Crimea in 2014.

The Lithuanian intelligence service said in its annual threat assessment that Russia had upgraded its military in the Kaliningrad region last year, reducing lead times for any attack and potentially preventing NATO reinforcements.

The Russian upgrade included Su-30 fighter aircraft and missile systems allowing ships to be targeted almost anywhere in the Baltic Sea.

"This is a signal to NATO to improve its decision speed," Lithuanian Defence Minister Raimundas Karoblis told reporters on the sidelines of the presentation of the report. "NATO's reaction time is not as fast as we would like it to be."

Kremlin spokesman Dmitry Peskov dismissed the concerns as a display of anti-Russian sentiment.

"There is total Russophobia, hysterical Russophobia going on," he said at a daily conference call with reporters.

"Moscow has always supported good relations with the Baltic states," he said.

This year NATO is deploying a force of about 1,000 soldiers in each of the Baltic states and Poland, in addition to smaller contingents of U.S. troops already in the region.

"The force is adequate in the short-term, but in the medium-term perspective we would like more capability, and not only land troops but also air defenses and capabilities to counter any blockade," Karoblis said.

Russia is monitoring and suppressing radio frequencies used by NATO pilots over the Baltic Sea and is using commercial and scientific ships for surveillance, the report said.

The intelligence service said there was also the risk of "deliberate or accidental incidents" involving Russian and Belarusian troops who are taking part in military exercises planned for March.

The Baltic states have previously said they would press the United States and NATO to take additional security measures in the region ahead of the exercises.

Intelligence officers said disinformation aimed at discrediting NATO soldiers stationed in Lithuania, such as a recent false report of a rape by German soldiers, was likely to persist.

"Provocations against NATO units in Lithuania will continue and will get bigger," Remigijus Baltrenas, head of Lithuanian military counterintelligence, told reporters.

(Additional reporting by Maria Tsvetkova in Moscow; Editing by Niklas Pollard and Andrew Bolton)

White House social media director abused position by attacking Republican congressman - Washington Post

White House social media director abused position by attacking Republican congressman

A tweet by White House social media director Dan Scavino Jr. urging supporters of President Trump to challenge a GOP lawmaker may have violated a federal law that prohibits officials from using their positions for political activity, ethics experts said.

On Saturday, Scavino went after Rep. Justin Amash of Michigan, calling him “a big liability” in a tweet from his personal account. “#TrumpTrain, defeat him in primary,” he added.

Amash is a member of the House Freedom Caucus, which Trump blames for derailing legislation that would have repealed parts of the 2010 Affordable Care Act.

Even though Scavino was tweeting from his personal account, the page at the time listed his official White House position and featured a photo of him inside the Oval Office, noted Richard Painter, who served as the chief White House ethics lawyer in the George W. Bush administration.

“You can't just load up your personal Twitter page with a lot of official stuff,” Painter said. “This is way over the top. It’s not a personal page. It's chock full of official stuff.”

Painter said he thinks Scavino's tweet violated the Hatch Act, which prohibits the use of one's office for political purposes.

“We would have fired him” in the Bush White House, he said. “This is use of official position for a partisan election. You can’t avoid it.”

A White House official said the tweet did not violate the Hatch Act “as it clearly comes from his personal account and not his official White House account.”

“He created an official account upon entering the White House to ensure compliance with the Hatch Act, and he has taken the necessary steps to ensure there is a clear distinction between both Twitter accounts,” the official said.

By Sunday morning, Scavino had changed the biography on his personal Twitter page, removing the reference to his current post at the White House and noting solely that he was director of social media for Trump's campaign. He also altered the photo at the top of his personal and official pages, removing images of Trump supporters at a rally holding signs.

dan-scavino-02.jpg

Scavino's missdirected Twitter bio

However, the profile photo on his personal account is still an image of Scavino inside the Oval Office. And in his apparent haste, he typed the wrong handle for the president, using @realDonaldTump instead of @realDonaldTrump. After the Washington Post noted the typo, Scavino removed the reference to Trump's handle.

Later Sunday, Scavino rejected the suggestion that he had done anything wrong when asked by a reporter on Twitter if he had a response to the ethics lawyers who say he violated the Hatch Act.

The controversial orders Donald Trump has already issued

8.

“What 'ethics lawyers?' The ones from the Obama Admin who want to take Trump down, or the Bush Admin who were #NeverTrump? No thanks!” he wrote.

The Washington Post

Spain ‘surprised’ at UK commentary over Gibraltar - Financial Times

Spain ‘surprised’ at UK commentary over Gibraltar

Spanish foreign minister plays down tensions generated by Brexit guidelines

https://www.ft.com/content/fe4b7478-184f-11e7-a53d-df09f373be87

Spanish foreign minister Alfonso Dastis has said his government is “surprised” at the tone of commentary in the UK over Gibraltar, after a weekend in which former Tory leader Michael Howard suggested Britain could go to war to defend the territory.

“I think that someone in the UK is losing their temper and there’s no reason for that,” said Mr Dastis, as he sought to play down the tensions generated by a condition in the European Council’s draft negotiating guidelines on Brexit.

The condition in effect gives Spain a veto on any future UK-EU trade deal that affects Gibraltar, which has been in British hands for 300 years.

“We are a little surprised at the tone this has generated in the UK, a country characterised historically for its composure,” Mr Dastis said at the opening ceremony of an economic forum in Madrid. “In this case, the traditional British composure has been notable for its absence.”

On Sunday, Gibraltar chief minister Fabian Picardo told the Financial Times that Spain’s use of the territory as a bargaining chip was “scandalous” and noted that 12,000 workers, mostly Spanish, cross the border every day. “This is why it is in everyone’s interest that there should be a sensible, orderly and well managed Brexit between Spain and Gibraltar,” he said.

Mr Dastis seemed to make a nod towards these workers in his comments on Monday. “We are not in favour of raising tariffs or making the relationship more difficult with the UK and the citizens of Gibraltar,” he said, adding that Spain’s goal was to defend the interests of its citizens who live near, and work in, the territory.

The foreign minister also repeated the Spanish view, made explicit over the weekend, that Spain did not want to see Scotland secede from the UK but would not necessarily veto a Scottish application for EU membership if it did pursue independence.

UK stranded between the Rock and a hard place

Flare up over Gibraltar represents early skirmish in unprecedented talks with EU

“Our position is clear. When the UK leaves the EU, it leaves in its entirety. Our desire is that outside of the EU it remains whole. Spain does not defend fragmentation or secession,” Mr Dastis said. “More than that, I won’t speculate about possibilities.”

In an interview published by Spain’s El País newspaper on Sunday, Mr Dastis said he did “not foresee that we would block” a Scottish membership application.

Some Scottish opponents of independence have long suggested that Spain would veto EU membership for Scotland, worried about setting a precedent for Catalonia, the Spanish region with a sizeable constituency in favour of independence.

But Mr Dastis said the case was “not comparable” with Catalonia, citing constitutional differences between the UK and Spain.

Referring to the comments, Scottish Nationalist party MP Stephen Gethins said: “We can now be absolutely clear: there is no intention of a Spanish veto over Scotland’s EU membership.”

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