Fourth Circuit Okays Dismissal of Credit Suisse Whistleblower’s Suit

The 4th U.S. Circuit Court of Appeals found that a Credit Suisse whistleblower was not entitled to a hearing before the dismissal of his qui tam suit alleging the bank was continuing to conspire with its customers to conceal their assets from the IRS. (U.S. ex re. Doe v. Credit Suisse, (CA4, 8/29/2024) 134 AFTR 2d ¶2024-5131)

The case is the latest in actions against Credit Suisse after allegations surfaced over a decade ago that the bank was helping its customers shield their offshore assets. Credit Suisse pleaded guilty to helping customers file false income tax returns and entered a plea agreement with the U.S. in 2014. That plea agreement required the bank to pay approximately $1.3 billion in criminal fines and work with the government to prevent further wrongdoing by its customers.

In 2021, however, a John Doe whistleblower contended that Credit Suisse was continuing to help its customers conceal their assets and that it failed to disclose this to the U.S. despite its plea agreement obligations. Doe filed suit under the False Claims Act’s “reverse false claims” provision, alleging that Credit Suisse had used or made false records or statements material to its obligations under the plea agreement.

Doe was not alone — the Senate Finance Committee conducted a two-year investigation and found in 2023 that Credit Suisse violated the plea deal by continuing to help ultra-wealthy Americans evade taxes. And Finance Committee Chairman Ron Wyden (D-OR) has pushed for further investigation into Credit Suisse accounts since that 2023 report was released and after the bank’s recent acquisition by UBS AG.

Nevertheless, the U.S. moved to dismiss Doe’s action, and the U.S. District Court for the Eastern District of Virginia — after receiving written submissions from the parties — granted the government’s request.

Doe, however, argued that under 31 U.S.C. § 3730(c)(2)(A), for a False Claims Act action to be dismissed at the government’s motion, a court must provide the whistleblower with “an opportunity for a hearing on the motion.” The district court, said Doe, dismissed the case based on written submissions and without such a hearing.

The case was held until the U.S. Supreme Court decided another qui tam case, United States ex rel. Polansky v. Executive Health Resources (599 U.S. 419 (2023)), involving the question of whether the government may move to dismiss a False Claims Act action if it declines to intervene and if so, what standard applies. But the Supreme Court in Polansky did not reach the question of what satisfies § 3730(c)(2)(A)’s “hearing” requirement.

The 4th Circuit noted that the 2nd Circuit and several district courts have found written submissions to be sufficient to satisfy the hearing requirement. In addition, it noted that the word “hearing” in another section of the False Claims Act “encompasses civil proceedings involving written papers — not just live, formal hearings.” Therefore, the circuit court concluded, the hearing requirement “can be satisfied with procedures short of a formal evidentiary hearing in a courtroom.”

And turning to the Supreme Court’s decision in Polansky, the 4th Circuit noted that the government is owed “substantial deference” in its decision to move to dismiss a False Claims Act action. Deference to the government should be “even greater,” concluded the circuit court, when the government seeks dismissal very early — such as at the “pre-answer stage” in Doe’s case.

In addition, the 4th Circuit found that the government’s reasoning for not taking up the case “alone” was enough to grant its motion to dismiss. The U.S. had contended that the litigation “would infringe on privileged information” related to the plea negotiations, that it would interfere with “ongoing discussions” between the U.S. and Credit Suisse under the plea agreement, and that it would waste government resources.

Doe’s attorney, Jeffrey A. Neiman, of Marcus Neiman Rashbaum & Pineiro LLP, said Doe’s action “was a novel and creative way to hold Credit Suisse accountable for violating its plea agreement and to push DOJ to act faster.” He was “disappointed” with the decision but is “hopeful that the IRS and DOJ will heed Senator Wyden’s call to hold Credit Suisse accountable for helping Americans conceal assets long after it swore under oath to have stopped.” He added that he is “optimistic that Justice Department (DOJ) will soon hold Credit Suisse (now UBS) accountable for criminally violating its plea agreement.”

Renée Brooker, a whistleblower attorney at Tycko & Zavareei, explained that while “the law is now settled that the government has broad discretion to dismiss qui tam cases,” the 4th Circuit’s discussion surrounding Polansky and government deference “may have missed the mark.”

Brooker said Doe’s case presents a “common scenario” where “companies that have been caught for wrongdoing find themselves in a plea agreement, and then violate the terms but are given a get-out-of-jail-free card.” While the government “routinely lacks either the desire or interest to pursue recidivists for violations of their settlement terms,” she explained, in Doe’s case, “the Senate Finance Committee apparently corroborated at least part of Doe’s allegations.” But the DOJ contended that Doe’s qui tam case “has interfered with the plea agreement instead of choosing to pursue the allegations.”

According to Brooker, “more scrutiny should be paid to how the DOJ is exercising its prosecutorial discretion in the qui tam context, rather than whether discretion is properly vested in the DOJ.”