Credit Suisse Banker Wants Spotlight on DOJ Motive in Fraud Case

A banker-turned-anonymous-whistleblower will ask the Fourth Circuit on Wednesday to reinstate his False Claims Act suit alleging that Credit Suisse AG deprived the US government of over $1 billion by concealing information in a 2014 tax conspiracy plea agreement.

John Doe’s suit alleges that Credit Suisse knowingly failed to disclose information to federal officials in order secure better plea terms for the company. The agreement covered allegations that Credit Suisse helped US taxpayers conceal offshore assets and income from the IRS.

The FCA—under which billions of dollars are returned to the US Treasury each year—allows the government to dismiss a suit over a whistleblower’s objection as long as the whistleblower has an “opportunity” for a hearing on the motion. The DOJ here said in part that Doe’s suit would interfere with law enforcement activities, leading a Virginia federal district court to grant the government’s motion for dismissal without an in-person hearing.

But the FCA’s hearing requirement must “have teeth,” Doe told the US Court of Appeals for the Fourth Circuit in his opening brief.

The government should have to explain its decision in open court considering its “enormous power” to end a whistleblower suit, said Lance Gould, who represents whistleblowers with Beasley Allen in Montgomery, Ala.

And written submissions aren’t enough, he said. They don’t allow whistleblowers to tailor their arguments in real time to issues that appear to be crucial to the court, Gould said.

Doe’s challenge here, however, is that the FCA’s text doesn’t require an evidentiary hearing, said Victor Walton Jr., who represnts defendants in FCA suits for Vorys, Sater, Seymour & Pease LLP in Cincinnati.

The DOJ “has to guard its internal deliberative process,” and the FCA shouldn’t be interpreted in a way that would “blow that up. Whistleblowers should not be permitted to hijack the government’s interests in this way,” he said.

‘Prosecutorial Negligence’

Doe said DOJ’s true motive for ending his case was to conceal “executive misconduct and prosecutorial negligence.” This theory isn’t just specultaive, he said: The US Senate concluded in 2023 that DOJ had a “lapse in oversight” that let Credit Suisse continue to participate in a conspiracy after it pleaded guilty.

A hearing would ensure that the government isn’t dropping the case for illegitimate reasons, Doe said.

Allowing a whistleblower to respond to the government “ensures public accountability and acknowledges the whistleblower’s interest in the action,” Gould said.

But this dispute seems like a poor case to advocate for in-person evidentiary hearings, according to Walton. The district court appears to have found that Doe’s allegations—that Credit Suisse would’ve had to pay more in penalties if it had disclosed the additional illegal accounts—insufficient, so the court wasn’t merely deferring to DOJ, Walton said.

Doe is “facing some strong headwinds” from the both the FCA’s text as well as recent case law, said Mary Inman of Whistleblower Partners LLP in San Francisco. She noted that “hearing is a broad term encompassing both live, formal proceedings as well as proceedings solely on the parties’ written submissions.”

Several courts, including the Fourth Circuit, have interpreted hearing as simply requiring consideration of parties’ written briefs, Inman said.

But Gould noted Doe’s reference to a Fifth Circuit opinion issued in 2021, in which it said “some type of actual hearing is required,” although it declined to “decide the precise bounds” of the government’s discretion to end whistleblower suits.

Conspiracy

Credit Suisse in May 2014 pleaded guilty to one count of conspiracy to assist US taxpayers in filing false income tax returns and other documents with the Internal Revenue Service.

It agreed to pay $2.6 billion to the US Treasury, the Federal Reserve, and New York. A federal district judge later ordered Credit Suisse to pay a $1.3 billion criminal fine.

Doe sued in February 2021 saying the company was required to disclose during plea negotiations a complete and accurate list of every account held by US citizens to justify the terms it received from the government in the agreement.

Credit Suisse knowingly failed to make those disclosures, resulting in lower penalties, Doe said. He alleged it was therefore liable under the FCA for a reverse false claim—when fraudulent conduct causes the government to be denied a payment that a defendant is obligated to pay.

The government moved to dismiss in November 2021, arguing that the suit was burdensome to government resources and would interfere with law enforcement activities.

The US District Court for the Eastern District of Virginia dismissed the suit in December 2021, stating in part that Doe’s case would “threaten” DOJ’s ability to continue working with Credit Suisse to identify offshore accounts concealed from the IRS.

The government’s appellate brief asserted that the Fourth Circuit must affirm dismissal under the US Supreme Court’s decision in United States ex rel. Polansky v. Executive Health Resources Inc., which held that a court must grant the government’s motion to dismiss an FCA whistleblower suit unless dismissal would violate the Constitution. Doe failed to do so, it said.

Credit Suisse backed this argument in its brief, adding that Doe didn’t demonstrate a valid reverse false claim because the bank wasn’t obligated to pay a hypothetical, unimposed criminal fine.

Another whistleblower, Brutus Trading LLC, raised an argument similar to Doe’s in its bid to revive an FCA case against Standard Chartered Bank. That case, too, was dismissed on a DOJ motion without an evidentiary hearing at which it could challenge testimony from DOJ witnesses and present testimony of its own.

The Second Circuit affirmed dismissal, and the Supreme Court denied Brutus Trading’s petition for review Feb. 26.

Marcus Neiman Rashbaum & Pineiro LLP represents Doe. Kirkland & Ellis LLP represents Credit Suisse.

The case is United States ex rel. Doe v. Credit Suisse AG, 4th Cir., No. 22-1054, oral argument 5/8/24.