CSFB Fined £4m for Japan Cover-up

The financial services authority yesterday slapped a record £4m fine on Swiss-owned investment bank Credit Suisse First Boston for trying to mislead tax and regulatory authorities in Japan by hiding some documents and buying a shredder to destroy others.

The City regulator's investigation into the catalogue of errors between 1995 and 1998 is continuing and focusing on the actions of a number of former CSFB employees, who face fines and bans from working in the City if they are found to have breached the FSA's rules. Any disciplinary action against individuals may take another year to be decided.

The FSA made it clear that the size of the penalty - twice the previous City record of £2m, levied on Morgan Grenfell - was a message to other financial firms that it would not tolerate breaches of rules that require firms to cooperate with regulators and keep proper records.

The regulatory action was taken against the group's derivatives arm, Credit Suisse First Boston International, which was better known as the Credit Suisse Financial Products (CSFP) operation that expanded under Allen Wheat, the former head of the entire investment bank, who left in July 2001.

Carol Sergeant, FSA managing director responsible for enforcement, said: "The unprecedented size of the fine makes it clear that we consider any attempt to mislead regulators and other authorities, whether in the UK or other countries, to be an extremely serious issue."

The FSA's action related to activities at CSFP between 1995 and 1998 when the firm feared it might be breaching the terms of its regulatory licence in Japan, so tried to hide the size and nature of its activity. This also helped to avoid tax.

As an illustration of the reasons for the fine, the FSA said that between 1996 and 1997, when the firm thought there was a risk it might have to pay tax in Japan, it removed documents and bought a shredder although there no evidence that it was used to destroy incriminating evidence.

Since these events, CSFB has undergone a series of changes under new head John Mack, who has also reduced costs by cutting 16% of the workforce. The FSA said it had taken into account personnel changes and "extensive changes" to improve the bank's ethical standards.

CSFB said the actions by former employees were "an aberration and contrary to the high standards expected of them".

Previously

James Archer was one of the CSFB trading team, the"Flaming Ferraris", banned from the City

Two executives fined by a US regulator over allegations they charged clients excessive fees for new stock offerings

Accused of helping Enron set up off-balance sheet vehicles