THE WHISTLEBLOWERS ISSUE VOLUME 10, NUMBER 2

TAX JUSTICE FOCUS FEATURE Whistleblowing in the Private 1 Banking Sector The newsletter of the tax justice network Stéphanie Gibaud EDITORIAL Reporting a Crime is Not a Crime 3 Mary Alice Young

FEATURES Reflections on Whistleblowing 5 John Christensen WHISTLEBLOWING IN THE What is Whistleblowing? 7 William Byrnes Some Tips for Whistleblowers 10 PRIVATE BANKING SECTOR Kenneth Rijock Stéphanie Gibaud Speaking of Tax Justice 12 Naomi Fowler Whistleblowing by finance professionals has begun to make BOOK REVIEW significant inroads into the sector’s culture of secrecy and The Joy of Tax: How a Fair Tax System 14 collusion. Here Stéphanie Gibaud describes the costs to the Can Create a Better Society individual of doing the right thing. review by Richard Murphy

Photograph of Stéphanie Gibaud by Maradin Maurice RARELY ASKED QUESTIONS 15 Gavin McFadyean of the Centre rom a distance private banking looks like a in meetings to brief and debrief projects. for Investigative Journalism talks to the Focus. fairy tale. It is a world of luxury, where one They are dedicated to their superiors in the organization and their clients. Fmeets one’s social and intellectual peers, NEWS IN BRIEF 16 where the sheltered atmosphere of the bank offices somehow protects every client, banker The banks claim that they are in business Guest Editor: Mary Alice Young and top managers from the outside world. to manage the wealth of entrepreneurs, top Editor: Dan Hind managers, CEOs, old money and new money Contributing Editor: John Christensen Design and layout: www.tabd.co.uk Inside a private bank, as an executive devoted families. But this is at best a half-truth. At Whistles courtesy OUT NOW! Milestone pieces from ten to satisfying the clients’ needs, it can take its heart, private banking is about making of Sasha Taylor years in the campaign for tax justice. a while to understand what it is all about. offshore facilities available to those who wish Email: info(at)taxjustice.net Order a copy now and support the Tax Justice Everyone’s mission is to make sure that their to avoid paying tax and to hide their wealth. Published by the Tax Justice Network, November 2015 Network – http://commonwealth-publishing. jobs are done properly. People work hard, As well as senior managers in the private © Tax Justice Network 2015 com/shop/the-greatest-invention/ they spend countless hours at their desks, sector and the already wealthy, this includes a For free circulation, ISSN 1746-7691 THIRD QUARTER 2015. VOLUME 10 ISSUE 2 TAX JUSTICE FOCUS surprising number of politicians and influential Once you have blown the whistle in the “Blowing the whistle can feel like committing suicide: a quick figures in the media. This has created a kind of private banking sector, well-trained managers death or a long and painful one, but the end of a certain kind higher lawlessness. Public understanding and will do all they can to crush you like an insect. hence democratic oversight are systematically Their techniques will vary in intensity from of life, nonetheless.” frustrated by a class that includes those demotion and social isolation all the way among the rich who will stop at nothing to through to discrimination and harassment. colleagues through the use of bonuses sector whistleblowers. In France, the increase their wealth, politicians determined Your reputation will suddenly be ruined and promotions and a carefully crafted legislature passed a law permitting “mass to convert elected office into private gains, throughout the financial sector. Insurance communications strategy. If the case is public, surveillance” in the Spring of 2001. But and an enabling apparatus of bankers and tame companies and business partners but also it is easy for the bank to play the card of these same politicians are dragging their intellectuals. the clients of the private banks will all hear discrediting the whistleblower: the message feet on measures to establish whistleblower about your supposed failings. One must keep delivered by the whistleblower is not attacked protections. How come there are only five However, when one understands that there in mind that this is a small world. The core at all, but the messenger is. Easy for the Deputies and Senators in France interested is something wrong with private banking – in business focuses on the top managers of industry to do so as they advertise in all the in this subject even though we know that effect, offshore banking – blowing the whistle large companies, owners of small and middle- media on a global scale. the country is missing a trillion euros? internally or externally can feel like committing size companies and the very rich. This group How come there aren’t prison sentences suicide: a quick death or a long and painful includes influential people in show business Most of the whistleblowers in the private for top managers who are responsible for one, but the end of a certain kind of life, and professional sport, many senior politicians banking sector also face the terrible challenge developing strategies that are clearly illegal? nonetheless. and the heads of supervisory authorities. of prison sentences, namely in countries where banking secrecy is a big business and When whistleblowers from the private Let’s remember that private banking is Blowing the whistle in the private banking thus where the law is structured to make it banking sector decide to stand up, they are dedicated to wealthy clients. The clients are sector means never being hired again. It hazardous to speak out. standing up against corruption and politico- the ones who have the financial, business, means being blacklisted. And if one has no financial scandals. Fighting the most criminal administrative, legal powers. They can pick up Several huge private banking cases have income, one cannot live long. Those who industry in the world means they have to the phone and call in favours from powerful hit the media headlines these past years. work in the sector are fully aware of this. The reckon on joblessness, disruption to their people. Their privilege is about more than They have helped people outside the gilded fate of whistleblowers is about more than personal life and threats to their physical a very comfortable lifestyle. It is about the world of offshore privilege to appreciate punishing the individual. It is about sending a and mental health. They are fighting an ultra- support of a network of professional friends the significance of the sector for both the message to others. organized and high-powered enemy who in the public and private sector. We can all developed and the developing world. Yet uses any tools and whatever it takes to win imagine what luxury is, we might even have had Private banks like to file complaints against though their actions have helped bring the because with them, it’s all about money. a taste of it. But most of us do not know what whistleblowers wherever possible. They pathologies of offshore into the daylight, they are just ordinary, middle class executives. it is to belong to this world, where politicians object to their targets’ writing books, giving Stéphanie Gibaud began working for UBS They do not claim to be heroes, nor do they and journalists as well as accountants and interviews, attending conferences, and France in 1999. In 2008 she refused to destroy want to be. They just did what they had to lawyers are eager to be of assistance. participating in debates. Being jobless, the documents and files in the Paris offices of the do. All of their cases are different but they whistleblowers will struggle to pay their bank and began to cooperate with the French Because this is all what it is about: the so-called are all being punished in democratic societies lawyer’s fees. authorities. She was finally sacked in January privileged elite is extremely well organized because they refused to support illegal and 2012. In March 2015 a French labour tribunal and is united when it comes to defending their Everything is stacked against the illicit operations. ruled that she had been bullied by the bank. own interests. Private banking is one part, an whistleblowers and their reputation. When She is the author of La femme qui en savait important part, of this organization in defence they are executives of a bank, it is easy Most of our democracies have not passed vraiment trop (2014). of privilege. for managers to isolate them from their laws that adequately protect finance

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evade taxes; again an operation aided by the REPORTING A CRIME existence of strict financial secrecy laws in offshore financial centres. editorial Laws that assist criminals in tax dodging Mary Alice Young IS NOT A CRIME and money laundering also deter employees and others from reporting such activity. For example, under the terms of the 2009 According to the Tax Justice Network, revision of Section 5 of the Cayman Islands’ financial secrecy legislation is a driver and Finance in general and offshore centres in particular thrive by Confidential Relationships (Preservation) enabler of financial crime; meaning that maintaining a tight control of information. In recent years they have Law an individual found to be breaching financial secrecy laws create criminogenic been rocked by a series of large-scale data breaches made possible secrecy laws faces an eight year prison environments. From this edition of the sentence. Focus, we can see that not only are by employees in the sector. But those who speak out still face significant financial secrecy laws conducive to crime, risks. If the interests of the general population are to prevail over those If secrecy laws act as a deterrent against but they are hostile to those people who whistleblowing they are in effect operating believe in a fair, just and equitable system of a small minority of banking insiders we will have to change our as a universal gagging order that prevents of democratic banking in the twenty-first employees from reporting unlawful or attitudes towards whistleblowers. century. There are certain protections immoral activity to the relevant regulatory afforded for whistleblowers under UK law. authority. These laws also lend official The UK Government states that, “[a]s a sanction to the idea that whistleblowers ffshore jurisdictions are in the Financial secrecy laws matter when it comes whistleblower you’re protected by law – you are enemies of both state and society. business of making life difficult to those who commit financial crimes and shouldn’t be treated unfairly or lose your They amplify a natural tendency to react for whistleblowers through frauds. In 2004, Jerome Schneider, arguably O angrily or fearfully when presented with job because you ‘blow the whistle’.” This formal legislation and through the informal the United States’ most prolific facilitator challenges to the narratives preferred by sits uneasily with the existence of draconian enforcement of social codes; the unwritten of tax evasion schemes, was sentenced dominant groups. Indeed, a quick glance laws protecting financial secrecy in rules of conduct and the herd mentality to six months in prison by a federal judge at the thesaurus unearths a huge array of territories over which the UK government that affect those who work in the financial in San Francisco for peddling tax evasion degrading and negative nouns associated claims sovereignty. sector. To borrow from hackers’ slang, schemes during the 1970s and 1980s; an with what is actually a noble act, including; hostility to whistleblowers is a feature, operation which was only possible because traitor, turncoat, weasel, snitch and sneak. This edition of Focus gives a platform to not a bug; it is an attractive part of the of the strict financial secrecy offered by Anything other than a servile desire to those people who believe it is possible to financial secrecy package which offshore offshore banks. At the beginning of February please the employer is treated as double- exist in a world with just, fair and reasonable jurisdictions peddle to clients. Cases such 2015, an international collaboration of crossing and defecting. banking practices – and not all of them have as Rudolf Elmer’s, one of Swiss banking’s news outlets and investigative journalists earliest whistleblowers, illustrate how exposed the Hong Kong and Shanghai offshore financial centres create hostile Banking Corporation as a bank which assists “Laws that assist criminals in tax dodging and money environments for whistleblowers through transnational organised criminals in hiding laundering also deter employees and others from reporting the availability of financial secrecy laws. their money and helps the wealthy elite such activity.”

3 THIRD QUARTER 2015. VOLUME 10 ISSUE 2 TAX JUSTICE FOCUS “A quick glance at the thesaurus unearths a Mary Alice Young is a Senior Lecturer in Law and Researcher of Transnational Organised Crime huge array of degrading and negative nouns and Financial Crime in Offshore Financial Centres at the Faculty of Business and Law (FBL) at associated with what is actually a noble act .” the University of the West of England. She is a leading expert in the criminal misuse of offshore financial centres. received the guarantees put forth by the UK lawyers he begins by recommending first Government. John Christensen reflects on finding a lawyer you can trust. his experiences when he decided to speak out about malpractice in the highly secretive Professor William Byrnes introduces us to jurisdiction of Jersey. He does not try to three of the most important whistleblowers gloss over the stresses that whistleblowing from the financial sector. He goes on placed on him and his family. But his sincerity to explore the relationship between and clarity of mind show that doing the right whistleblowing and tax compliance and thing can be part of a more fulfilled life. highlights the much anticipated legislation of several offshore jurisdictions who are looking In the same vein, Stephanie Gibaud reflects to introduce statutory laws to protect on her experience in private banking and whistleblowers who report tax crimes. explores the reality of what happens once someone decides to speak out about Life isn’t easy for whistleblowers anywhere. unethical or illegal activity. Whistleblowing In the offshore world tailored legislation can means social exile and career suicide and make things even more hazardous. People Gibaud stresses the lengths to which the who speak out risk their careers, their place banking industry will go to ensure that the in society, their health, and sometimes their whistleblower is isolated, degraded and lives. This is the price people currently pay denounced. She goes on to ask a number of for acting honestly and honourably. But the searching questions about the silence that world needs many more whistleblowers surrounds elite criminality. They are questions if we are to combat the corruption that is that demand answers. endemic in the financial sector. It is time to alter the balance of risk and reward so Kenneth Rijock is now a financial crime those who dare to break social convention consultant and in his previous life he and speak out are better protected. In part laundered drug money. As both a lawyer and this is about changes in legislation. But in convicted criminal he knows a thing or two part it is a matter of learning to distrust our about legal jeopardy. Here he gives would- natural inclinations. A whistleblower is not be whistleblowers a brief introduction to a stool pigeon or a traitor. A whistleblower information security – the techniques that is someone who speaks up for the public we can use to avoid detection by crooked interest. We are fools if we do not honour employers and, ultimately, jail. Like all good them.

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job would have knock REFLECTIONS ON on effects. Small island tax havens don’t tolerate dissent; my wife and I feature would have to sell our John Christensen WHISTLEBLOWING home, say goodbye to friends and family on the John Christensen was working as advisor to the government of Jersey island, re-settle elsewhere walk to work to tip me off that the Attorney when a reporter for the Wall Street Journal contacted him about a (London, as it happens) General’s office was preparing a warrant to and start over. I was forty search my home. I sent a discreet message suspected fraud. His inquiries unearthed “serious procedural irregularities” then, with a son aged to the AG advising him that all the relevant at the heart of the government and he had to make a decision: keep three and another son documentation was held by the WSJ in quiet and stay safe or speak frankly and face the consequences. soon to be born. This was London. (The raid, in the end, didn’t happen.) not a decision taken on We left Jersey in July 1998 and found new ate one evening in January 1996 I whistle. I called the reporter 24 hours impulse, but I knew that I wouldn’t be able jobs in London. The UBS investigations took a call from a Wall Street Journal later, and agreed to cooperate. to live with myself if I chose to do nothing. ground on (UBS eventually pleaded ‘criminal reporter called Michael Sesit. This call L Sesit’s report, published on the front page of recklessness’) and a few journalists began changed my life. He was enquiring into the Many thoughts crowded into my head the WSJ Europe edition on 17th September to pay attention to my critical analysis of failure of my then employer, the government during the 24 hours between those fateful 1996 under the title ‘Offshore Hazard: Jersey’s tax haven activity, which in addition of Jersey, a small British-linked tax haven, phone calls. First, a degree of disbelief Isle of Jersey Proves Less than a Haven to to being weakly regulated and policed was to investigate accusations by US based (surely senior government officials and Currency Investors’ stirred up a storm in also rapidly crowding out other sectors of investors that the Jersey-based subsidiary politicians wouldn’t conspire to block Saint Helier. But the Jersey media somehow the island’s economy as Jersey succumbed to of Swiss banking giant UBS had violated investigations into corruption?), followed managed to spin the story into one about the Finance Curse.1 Jersey’s politicians and US federal racketeering laws by conspiring a single rogue currency trader, without senior bankers reacted in time honoured with a British currency trader in a variety of “I knew beyond any shadow disclosing that top politicians and senior fashion, by attacking me personally rather crimes including fraud, executing fictitious of doubt that by cooperating officials were also implicated in a succession than addressing the issues I had raised. currency trades, churning accounts, theft and of regulatory failures. deceit. My office was not directly implicated with Sesit I was effectively I first heard of Jersey’s counter-attack in the story, but I was in a position to resigning my post.” In practice it took over 18 months to move from a BBC radio journalist, who had been confirm whether or not proper procedures from Jersey to London, during which time contacted by a public relations agency, had been followed by relevant government I stayed in post as economic adviser (I had retained by the Jersey finance industry, by anger (yes, they had). Second, I knew departments in licensing the trader at the tenure, and was almost unsackable.) It was claiming I wasn’t a reliable interviewee beyond any shadow of doubt that by heart of this multi-million dollar scandal. a period of poisonous relations with senior since – in their words – I was “personally cooperating with Sesit I was effectively When I discovered a web of procedural politicians and civil service colleagues, who motivated.” resigning my post; the States of Jersey is irregularities that reached the very top of were enraged that I had broken Jersey’s not an organisation that tolerates any form 1 the government, I knew that I had to decide offshore omertà. On one occasion, a John Christensen and Nicholas Shaxson, The of whistleblower, especially involving a Finance Curse: How Oversized Financial Sectors between keeping my secure, well-salaried sympathetic colleague stopped me on my senior economic adviser. But resigning my Attack Democracty and Corrupt Economics (Margate: job or acting on principle and blowing the Commonwealth, 2014).

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The allegation was that I criticised Jersey “The rich and powerful are at their most thuggish acquaintances: most will keep their heads simply because I hadn’t been appointed low, and few will understand why anyone Chief Adviser. Other journalists who when their backs are up against the wall.” would put civic duty and matters of cited me got similar visits from the same principle ahead of personal advancement PR agency. As recently as Spring 2015, suffered from these attacks, and personal that that rare moment of public support and a secure income. seventeen years after leaving Jersey, a relations have inevitably been strained. One justified the many years of exile from my journalist was told by several senior island close relative who works in a Jersey trust island, but I do take some comfort from the My experiences, painful though they were officials that I was not to be trusted because company has refused to speak with me for fact that TJN has won so many of the crucial at the time, have been relatively benign I have “baggage”, the implication being that I fifteen years, which makes family reunions arguments and public opinion outside of compared to the treatment meted out to still bear a grudge about not being appointed unbearably awkward. Jersey has swung firmly behind us. Jersey is other whistleblowers such as Ruedi Elmer2 Chief Adviser. To be clear, I blew the whistle a state captured by offshore finance: public and Antoine Deltour.3 Ruedi was imprisoned in 1996 and the Chief Adviser announced Like many small island communities Jersey opinion there will take a long time to shift. and has faced constant harassment; Antoine his retirement in 1997. Why a senior civil has various mechanisms for repressing faces criminal proceedings with the servant seeking promotion would preface dissent – best captured in the expression Judging from my experience, any would-be threat of a custodial sentence. The HSBC his job application by whistleblowing to the “if you don’t like it here, there’s a boat in tax haven whistleblower should expect the whistleblower Hervé Falciani has faced WSJ, they don’t explain. Though the grudge the morning”. Most islanders know that following: legal threats, extradition proceedings and argument never stacked up, it is still wheeled the best way of adapting to these social death threats.4 Whistleblowers need strong • Little or no support from colleagues out. The strategy of continuously slinging pressures is to keep their heads low support networks to resist the repressive and senior management, they might well muck inevitably creates doubts in some and internalise their opinions. The small tactics of the tax haven world. All three sympathise with your principles but they minds. minority who dare put their heads above deserve recognition as potential prisoners won’t put their jobs on the line; the parapet can expect a torrent of personal of conscience. Almost two decades after that phone call, abuse. If looks could kill, I’d be dead many • Savage retribution from employers what were the outcomes of my decision times over from the distilled hatred I’ve seen whose business models are based on John Christensen is the former economic adviser to cooperate with Sesit’s investigation? on the faces of some bankers, lawyers and secrecy; they will do whatever it takes to the British Crown Dependency of Jersey, a Leaving my job was relatively easy, though senior politicians, and more than once I’ve to punish you as a deterrent to others. pre-eminent British tax haven. Having originally few of the skills I learned in Jersey have been called a “fucking traitor” to my face. The rich and powerful are at their most trained as a forensic fraud investigator, and as been useful outside the world of offshore thuggish when their backs are up against an economist, he is now the director of the Tax But that’s not the full story. In 2009 I visited finance. Selling our family home and leaving the wall; Justice Network. Jersey was far harder since we had strong Jersey with a BBC television documentary emotional and social ties to the island, which crew. Within minutes of starting to film • Little or no support from police or have inevitably worn thin with the passing in Saint Helier, a man approached front judicial authorities in most tax havens, of time. There’s also no doubt that whistle- of camera to say that Jersey was ruled by they largely toe the line; blowing cost us a huge amount of lost bankers and captured politicians and only 2 http://www.taxjustice.net/2015/07/01/guest- • Harassment from local media, most income, and we’ve had to learn to live with one senior official had ever had the courage blog-how-switzerland-corrupted-its-courts-to- of which is captive and depends on nail-rudolf-elmer/ financial insecurity. I’ve also learned how to confront them. Speaking to camera, he advertising revenue from banks and 3 to live with the personal attacks, though said that without my (and by extension http://www.taxjustice.net/2015/01/16/will- other tax haven players; antoine-deltour-become-prisoner-conscience/ privately I feel contempt for people who TJN’s) efforts, nothing would ever be done 4 play the man rather than the ball. Sadly, to tackle the corruption inflicted on Jersey http://www.bloomberg.com/bw/ • A widening gap between you and the articles/2013-08-09/hero-or-villain-the-strange- some friends and family in Jersey have since it became a tax haven. I can’t say vast majority of your former friends and case-of-hsbc-whistleblower-herv-falciani

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WHAT IS WHISTLEBLOWING? feature Whistleblowing is becoming an increasingly important element in efforts to make both state and private power accountable to the public. But confusion surrounds the concept. William Byrnes helps with some definitions. William Byrnes

ccording to a study by the OECD to efforts to combat corruption, safeguard • adequate internal and external disclosure January 1, 2016 in Switzerland, a predicate on behalf of the G-20, there is no integrity, enhance accountability, and support channels offense for money laundering and thus, a common legal definition of what 2 reportable suspicious activity, tax crimes are A a clean business environment.” Regarding • opportunities for anonymous reporting constitutes whistleblowing. The OECD a reward system for whistleblowers, not specifically included in the definition of thus turned to the International Labour Transparency International, in its 2012 • agency to investigate disclosures and what whistleblower laws seek to prevent.6 Organization (ILO) definition which provides Recommended Draft Principles for complaints Yet, even as predicate offenses, “the reporting by employees or former Whistleblowers states that, “depending on • transparent / accountable enforcement whistleblowing of tax crimes should be employees of illegal, irregular, dangerous or the local context, it shall be considered of laws unethical practices by employers.”1 The OECD whether to include further mechanisms to protected by what is hopefully forthcoming then concluded that the key characteristics encourage disclosure, such as a rewards Moreover, the 2014 OECD study found legislation in several offshore financial common to whistleblowing include: system or a system based on qui tam which that most whistleblower laws for corporate • the disclosure of wrongdoings connected empowers the whistleblower to follow up employees lacked: 6 See Swiss Federal Act on the Implementation of the their allegations.”3 2012 Revised Recommendations of the Financial to the workplace; • confidentiality guarantee Action Task Force (FATF), passed by Federal Parliament December 12, 2014. Available at http:// • a public interest dimension, e.g. the In 2014, an OECD Project Manager of the • penalties for retaliators www.vsv-asg.ch/uploads/file/interessenvertretung/ reporting of criminal offences and International Whistleblower Project found vernehmlassungen/2015/erlaeuterungsbericht(1).pdf unethical practices. that a majority of whistleblower laws for Whistleblowing and Tax Crimes (last accessed September 21, 2015). government and corporate employees The primary objective of a whistleblower In its 2012 Report, the OECD stated that the lacked:4 law, according to the G20, is to protect “The primary objective of a “protection of both public and private sector from discriminatory and retaliatory actions whistleblowers from retaliation for reporting 2 Whistleblower Protection: Encouraging Reporting, OECD whistleblowers who report in good faith whistleblower law, according in good faith suspected acts of corruption (July 2012) at 3. suspected acts of corruption.5 Although to the G20, is to protect from 3 and other wrongdoing is therefore integral A qui tam writ is one in which the person bringing tax crimes are in most countries, and from the case does for the state’s sake as well as for their discriminatory and retaliatory own. 4 actions whistleblowers who 1 G20 Anti-Corruption Action Plan: Protection Of Mark Worth, Keeping Pace: Whistleblowing and the 5 G20 Anti-Corruption Action Plan: Protection Of Whistleblowers, Study On Whistleblower Protection Response of Government, International Whistleblower Whistleblowers, Study On Whistleblower Protection report in good faith suspected Frameworks, Compendium Of Best Practices (2011) Project: Re-visiting Whistleblower Protection, OECD (June Frameworks, Compendium Of Best Practices (2011) at 7. 17, 2014) at 7. at 2. acts of corruption.”

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“Voluntary Disclosure Programs… provide, and even the operational structure and procedures For example, Australia requires non- to facilitate the maximum effectiveness in compliant taxpayers to expose information require, clients an opportunity to become whistleblowers on the use of STRs. about the advisers or other intermediaries the enabling advisors of their tax evasion in exchange for in order to mitigate personal criminal The OECD found that the tax mitigation of criminal prosecution or potentially prosecution. The United States offshore administrations that have access to STRs voluntary disclosure program that has of penalties.” reported significant benefits from that access. netted approximately 60,000 non-compliant The main overarching benefits are an increase taxpayers to date since 2009, requires centre jurisdictions, such as The Cayman out against the restrictive nature of the in their ability to identify a range of serious each to agree to cooperate and provide, Islands and Bahamas. The Cayman Islands legislation, it was referred back by the crimes as well as being able to access an if requested, information about financial Protected Disclosures Bill of 2014, which is National Council for a re-visit by the Federal additional source of information that can be institutions, service providers and other floundering without a legislative vote, defines Council. used to ensure tax compliance. Conceptually, facilitators, to avoid criminal prosecution. “improper conduct” similar to the United STRs can be viewed as a whistleblowing Kingdom equivalent legislation, with eight In its September 18, 2015 report device for financial institutions, without being William Byrnes is a Professor and Associate types of conduct. The first type of conduct Improving Co-Operation Between Tax and prosecuted, to inform on their clients. Here Dean (Special Projects) at Texas A&M University is most relevant from a tax non-compliance Anti-Money Laundering Authorities: Access By are two examples of the impact STRs can Law School. He previously worked at Coopers have, according to the OECD. The Republic perspective: “… that a criminal offense Tax Administrations To Information Held By and Lybrand and he advises a number of of Korea reported in the first half of 2014 has been committed, is being committed Financial Intelligence Units For Criminal And Civil countries on both tax policy and distance 9 a record KRW 943 billion in tax assessed or is likely to be committed…”.7 The Purposes, the OECD recommended: education. (the equivalent to approximately USD 865 Bahamas’ Freedom of Information Act, most Given the role of tax administrations in million), as a result of extending STR and recently proposed May 18, 2015 but not yet identifying and reporting serious crimes, Cash Transaction Reports (CTRs) use to acted upon, provides examples of “wrong such as tax evasion, bribery, corruption, civil assessments. In 2012 STRs in Austria doing” as “the commission of a criminal money laundering and terrorism financing facilitated 61 criminal tax prosecutions and offence” and “failure to comply with a legal under the whole of government approach, 4,483 civil action referrals. obligation”.8 in order to maximise the effective use of Suspicious Transaction Reports (STRs): Voluntary Disclosure Programs (VDPs), in Switzerland on the other hand was set vogue among OECD members and many to take a giant leap backwards in 2015 in • subject to the necessary safeguards, tax administrations should have the fullest other countries since the 2008 Financial protection of whistleblowers, with legislation possible access to the STRs received by Crisis, provide, and even require, clients an making it more difficult for an employee the Financial Intellignce Unit (FIU) in their opportunity to become whistleblowers on to make a disclosure beyond the employer. jurisdiction; and the enabling advisors of their tax evasion But after a number of multinationals spoke SEE OVER FOR THE • to achieve this, jurisdictions should in exchange for mitigation of criminal 10 TOP THREE TAX 7 Available at http://www.lawreformcommission. look to not only provide the legislative prosecution or potentially of penalties. gov.ky/pls/portal/docs/PAGE/LRCHOME/ framework to allow tax administration WHISTLEBLOWERS THAT PROJECTS/PROTECTED-DISCLOSURES-BILL/ access to STRs but also look to ensure CHANGED THE GAME WHISTLEBLOWER-DISCUSSION-PAPER- 10 Update on Voluntary Disclosure Programmes: A APPENDIX-A-DRAFT-BILL.PDF (last accessed at pathway to tax compliance, OECD, (August 2015). September 21, 2015). 9 http://www.oecd.org/tax/crime/improving- Available at http://www.oecd.org/ctp/exchange-of- cooperation-between-tax-and-anti-money- tax-information/update-on-voluntary-disclosure- 8 > Available at http://www.bahamaseducation.com/PDF/ laundering-authorities.htm programmes-a-pathwaypto-tax-compliance.htm Downloads/Bill/FREEDOM-OF-INFORMATION- (last accessed September 21, 2015). (last accessed September 22, 2015). BILL,2015.PDF (last accessed September 21, 2015).

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THE TOP THREE TAX WHISTLEBLOWERS THAT CHANGED THE GAME

A lawsuit filed by Daniel Schlicksup, a lesser Mr. Schlicksup’s whistleblower lawsuit led to the April 1, public benefit from exposing HSBC’s widespread conspiracy to acclaimed whistleblower, may end up costing Caterpillar 2014 hearing of the Senate Permanent Subcommittee on commit or at least enable tax fraud.5 Mr. Falciani has stated that 3 2 billions of dollars and a criminal investigation because Investigations “Caterpillar’s Offshore Tax Strategy”. In its he did not become a whistle blower for reasons of potential of its alleged non tax compliant transfer pricing policy. February 17, 2015 10-K Annual Report, Caterpillar revealed compensation. He has established a foundation to promote the Mr. Schlicksup served as a global tax strategy manager for that it is now the subject of a subpoena of a grand jury protection of whistleblowers. Caterpillar from 2005 to 2008. During his time at Caterpillar, criminally investigating its transfer pricing practices, and an SEC Daniel Schlicksup helped Caterpillar establish its European tax investigation:3 The most famous tax whistleblower is department, managed the corporate human resources division, ultimately UBS’ Bradley Birkenfeld because and in March 2005, began working as a Global Tax Strategy On January 8, 2015, the Company received a grand jury 1 he blew the lid off of UBS’ policy to assist Manager. subpoena from the U.S. District Court for the Central District U.S. taxpayers to evade tax in order to take of Illinois. The subpoena requests documents and information Mr. Schlicksup grew concerned that the substance of from the Company relating to, among other things, financial advantage of the 2006 U.S. Whistleblower Law that allows Caterpillar’s operating structure did not coincide with information concerning U.S. and non-U.S. Caterpillar subsidiaries compensation of: Caterpillar’s reported structure for tax purposes. Mr. (including undistributed profits of non-U.S. subsidiaries and the Schlicksup informed several Caterpillar executives of his movement of cash among U.S. and non-U.S. subsidiaries). “at least 15 percent but not more than 30 percent of the concern, including its Director of Global Tax and Trade, collected proceeds (including penalties, interest, additions to tax, and thereafter its Chief Financial Officer and Caterpillar’s On September 12, 2014, the SEC notified the Company that it and additional amounts) resulting from the action (including General Counsel. Mr. Schlicksup even filed a complaint was conducting an informal investigation relating to Caterpillar any related actions) or from any settlement in response to such with Caterpillar’s Ethics Office, which closed the matter. Mr. SARL and related structures. action. The determination of the amount of such award by the Schlicksup’s received employee assessments that he considered Whistleblower Office shall depend upon the extent to which the 6 prejudiced by his attempts to call attention to the potential tax Hervé Falciani obtained super whistleblower individual substantially contributed to such action.” risk. status in 2008 while working at HSBC Switzerland’s Geneva branch. He downloaded Mr. Birkenfeld for a number of years willingly participated Eventually, in July of 2010 Mr. Schlicksup filed a whistleblower 2 substantial account details of 106,000 high net in the conspiracy of tax evasion with his clients, including retaliation suit under Illinois law against Caterpillar, which worth individuals with over $100 billion is assets most famously the California real estate billionaire Igor Caterpillar settled in 2012 for an undisclosed amount. from 203 countries, and then approached tax departments Olenicoff whom he brought into UBS from his previous The Illinois Whistleblower Act prohibits an employer from with an email that the Wall Street Journal states included the employer. Regardless, because his cooperation indisputably led retaliating against an employee “for refusing to participate in subject line: “Tax evasion: client list available”.4 The theft of to the prosecution of UBS for conspiring to hide $20 billion of an activity that would result in a violation of a State or federal the bank data, reported at over 100 Gigabytes, has led to Mr. assets of 20,000 US taxable persons, in 2012 upon his release law, rule, or regulation. . . .” 740 ILCS 174/20. Under the Illinois Falciani’s arrest in several countries, including Switzerland, from prison (for his guilty plea to one count of tax evasion), the Whistleblower Act, an action can be retaliatory “if the act France and Spain. But he has been spared extradition to IRS awarded $104 million in whistleblower compensation to or omission would be materially adverse to a reasonable Switzerland because of the French and Spanish courts found a Mr. Birkenfeld. employee and is because of the employee disclosing or

attempting to disclose public corruption or wrongdoing.” 2 1 Available at http://www.hsgac.senate.gov/subcommittees/investigations/ 740 ILCS 174/20.1. hearings/caterpillars-offshore-tax-strategy (last accessed September 19, 5 Martha Hamilton, Whistleblower? Thief? Hero? Introducing the Source 2015). of the Data that Shook HSBC, International Consortium of Investiga- 3 Caterpillar 10-K (Feb 17, 2015) at 22. Available at http://www.caterpillar. tive Journalists (February 8, 2015). The HSBC client data is available for 1 Schlicksup v. Caterpillar, Inc. Case No. 09-CV-1208. (U.S. C.D. Illinois, July com/en/investors/sec-filings.html (last assessed on September 19, 2015). search at http://www.icij.org/project/swiss-leaks/explore-swiss-leaks-data 13, 2010). See the Illinois Whistleblower Act available at http://www.ilga. (last accessed September 19, 2015). gov/legislation/ilcs/ilcs3.asp?ActID=2495&ChapterID=57 (last accessed 4 ‘Mass Leak of Client Data Rattles Swiss Banking’, Wall Street Journal (July September 19, 2015). 8, 2010). 6 U.S. IRC § 7623

9 THIRD QUARTER 2015. VOLUME 10 ISSUE 2 TAX JUSTICE FOCUS

for some of what you are planning could cross the line into either an illegal act, or be SOME TIPS FOR grounds for a civil suit. Understand the risks feature before you jump into your project. WHISTLEBLOWERS Kenneth Rijock Secondly, you must assume that all your means of electronic communication are Kenneth Rijock was a successful money launderer before testimony from some under surveillance. This includes telephone Since all emails, even when deleted by the of his clients landed him in jail. Here he offers some suggestions for those who calls from your landline or mobile sender or recipient, remain available to telephones, and your known email addresses. prying eyes, prepare drafts only; the recipient want to stay out of trouble once they decide to investigate wrongdoing. You need to adopt what is in essence the himself or herself deletes the draft when tradecraft of espionage if you want to avoid read. Both parties regularly monitor the interception of your communications with single account, looking for messages from media, or your sub-sources. the other. Drafts are not saved anywhere, y primary field is the identification as the result of your actions, (2) keep your because they technically are never sent or and detection of financial crime in information secure, and (3) protect the This means never using your present email received. This technique ensures that your Mgeneral, with an emphasis on money identities of your sub-sources. addresses; some whistleblowers utilize messages cannot be read by others, unless laundering. But I often find myself working obscure email providers, from faraway they know what you are doing, and look for with whistleblowers, when reporting on Before you do anything at all, you must jurisdictions, and use them only for short drafts, but they need to have your address white-collar crime in progress, where the protect yourself from civil suits, and also periods. Any sources you have must do the and password, and know what to look for. information is received from a confidential from possible criminal prosecution. The same. Both parties should use Internet cafes, source. I also have had considerable information contained in this article is libraries, public wifi resources and avoid any The third measure I recommend is to experience in conducting operations under not intended to be legal advice, and you pattern. Some people use Hushmail (www. never identify your sources by name in the radar, when I was involved in activities are strongly advised to consult with a hushmail.com) a free, encrypted email writing; designate an alias, or code word, that I wanted to remain confidential. I offer competent attorney, who is familiar with service, changing their address & password so that their identity is always protected in these suggestions for whistleblowers who not just libel and slander issues, but also frequently, to avoid detection. your notes and documents, and under no also wish to quietly collect material without with trade secrets, classified information circumstances put their telephone number attracting unwanted attention from the target laws, and the corporate culture of the Both sender and recipient have the address down anywhere near that code name.; keep of their inquiries. They are what we refer to type of entity that you plan to publicly AND password, for there is only a need for the telephone number and the email address as operational security. expose, or report to government or law one account. Here’s why: in a totally different file, hard copy only, so enforcement. Given the propensity of many whistleblowers’ targets, especially when You may not be aware of all the legal they are large entities, to maintain agents to ramifications of your activities, and you investigate unhappy employees, as potential should fully understand the potential “Before you do anything at all, you must protect whistle-blowers, it is prudent to take a legal risks, both now, and in the future, so yourself from civil suits, and also from possible number of measures that will: (1) prevent you be sure to consult a good lawyer before from being a civil, or even criminal, defendant engaging in your whistle-blowing campaign, criminal prosecution.”

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“You must assume that all your means of electronic communication are under surveillance.” that it appears to be that of another contact, All this can seem quite daunting. But if client, vendor, or other innocent party. you take steps to protect yourself then I encourage you to dig, probe and poke You will obviously need to compose around any issue, where you believe that memoranda, type up your handwritten there are facts that must be extracted, and notes, and the progress of your investigation. to take any damaging information that you Do not use any of the computers or devices find to the appropriate regulator, or agency, that are connected to the Internet, for this or media, where it will get the attention it purpose. Obtain an inexpensive laptop, deserves. new, and use it exclusively for your whistle- blower project. It is to have its wifi capability Good luck. completely and permanently disabled, and no USB or hard-wired connection to the World Kenneth Rijock now works as a Financial Wide Web. This is known as a stand-alone Crime Consultant. He graduated from the computer; it is never to be networked with University of Miami School of Law. He served any other system. This ensures that it cannot two years in prison for money laundering be accessed remotely, and that it will never offences. He recounts his criminal career in be the target of an intrusion, worm, or hack. The Laundry Man (2012).

If you must install programs, such as MS Word, or Excel, do so from a CD, never install anything from the Internet, not even from one of your other computers, for that may already been compromised. Do not ever leave this computer out where it can be seen; store it in a very unlikely place, so that anyone who breaks in will not find it. If you follow these suggestions, then it is highly unlikely that any company investigator will learn the identity of your sources

11 THIRD QUARTER 2015. VOLUME 10 ISSUE 2 TAX JUSTICE FOCUS

feature SPEAKING OF TAX JUSTICE Naomi Fowler

Since 2012 Naomi Fowler has produced and presented a monthly podcast for the Tax Justice they’d been “persuasive” in their reform Network which has listeners in 130 countries. She also coordinates the new Spanish language agenda. TJN podcast, Justicia Impositiva. Here she describes some of the highlights of the Taxcast so far. Many great and powerful movers and shakers have been interviewed on the Taxcast, including the authors of The Spirit Before 2012 tax avoidance wasn’t something To no avail I tried to explain I had much The very first Taxcast visited Occupy Level, Kate Pickett and Richard Wilkinson, you tended to hear much about in the bigger corruption stories from the City of protesters in their camp on the doorstep the Director of Ukraine’s Anti-Corruption mainstream media. The Vodafone tax scandal London, of staggering global significance. of London’s financial sector outside St Action Centre, film maker and director where the UK’s revenue authority agreed to In the summer of 2011 Occupy protests Paul’s Cathedral. At last, there was a of The Emperor’s New Clothes, Michael ‘reduce’ its tax bill substantially had broken in around the aftermath of the financial crisis real, eyeball to eyeball confrontation. Winterbottom, tax justice campaigners 2010 but the wider story of the “corruption were in full swing across the world. That was Occupy’s tent city was splashed across the and politicians from Africa, the Philippines, services” industry at the heart of the global when I contacted the Tax Justice Network world’s media for weeks. They were often Pakistan, India, the Bahamas, Jersey, North was largely absent from radio and and asked them if they’d see the benefits of misrepresented of course. But they were Switzerland, the US, Ukraine, Canada, television. Having supplied broadcasters with a monthly podcast. Suddenly, I’d moved from talked about. The media default description asset recovery specialists, whistleblowers, stories and features for a decade, I never journalism to advocacy journalism. was ‘the anti-capitalist protesters’. Some accountants, tax inspectors and human once persuaded a commissioning editor that of them certainly were. But the Occupy rights activists. this would be of interest to their audiences. When the first Taxcast came out in January Economics Working Group members I 2012 the big tax avoidance scandal that met were reformists with clear demands. Here are three excerpts from the Taxcast, I read tax justice research paper after captured the attention of the world’s media They were the cause of much concern in starting with an interview with journalist research paper, and scoured Richard Murphy was still months from breaking: Starbucks the British cabinet. The Bank of England’s Ben Judah from the March 2014 Taxcast and the Tax Justice Network’s blogs in was happily going about its business buying Andrew Haldane later admitted the on Russia, Ukraine, Londongrad and the frustration. There was, and there still is an coffee beans for the UK through a Swiss Occupy movement’s analysis of the causes offshore threat to global security. This is a urgent need to raise awareness about the subsidiary and roasting them in Amsterdam, of the financial crisis was right and that good example of how the Taxcast explores principles of transparency in finance, tax unaware of the storm about to be havens, offshore subsidiaries, anonymous unleashed over its tax affairs. Amazon, Apple, shell companies and trade mis-pricing. As a Facebook’s Irish and Bermudan shenanigans journalist and citizen I thought these issues and other scandals were soon to follow. “Radio stations wanted mafia stories from Sicily or bribery were dynamite, something to be shouted Questions began to rage about why multi- stories from Latin America, where I was sometimes based. from the rooftops, that everyone should national companies were able to display such To no avail I tried to explain I had much bigger corruption know about. But radio stations wanted mafia blatant contempt towards the countries in stories from Sicily or bribery stories from which they were operating. stories from the City of London, of staggering global Latin America, where I was sometimes based. significance.”

12 THIRD QUARTER 2015. VOLUME 10 ISSUE 2 TAX JUSTICE FOCUS unfolding events from a perspective that the “We face the risk of the Ukrainian and the Russian already have appreciated, you know, you can mainstream media often misses: go on to become Minister of Trade in the opposition coming to see Britain in particular as Cameron government! Under the first Bush I’m speaking to you right now from Kiev responsible for the plunder of their countries.” Administration from 1988-1992 we had and Kiev has been the site of a dramatic the savings and loans crisis. It was about revolution that’s taken place over the past one 70th the size of the global financial few months and has now turned into a had paid less in corporation tax in the lose its licence as we looked at the fall crisis in 2008 but during that period the Russian invasion of Crimea and when I’ve UK than it had received in government out from HSBC Leaks, or the lack of it. first Bush administration actually had a been speaking over the past few days to grants. Here’s an excerpt from Dr Kevin Economist, attorney, asset recovery specialist tough Department of Justice and they went opposition activists and speaking to bloggers Farnsworth of York University whose study and investigative journalist Jim Henry after the bank fraud with a vengeance, they and Ukrainian opposition liberal democratic estimates that ‘direct corporate welfare’ discussed his database of financial crimes sent 880 bankers to jail during that period. politicians whose greatest aspiration is for is costing British taxpayers £85 billion a from 1998 to 2014 and the settlements and What’s changed is the political influence of the Ukraine to join the European Union, year. On the Taxcast he talked about the fines paid in 35 countries. His conclusions the banking lobby and the enormous role what do you think they say? In fact what implications of his research for public policy: raise serious questions for those who insist of money in our political system that has they say is that over the past few years it’s escalated dramatically. And also with the big There’s the question of the particular that post-crisis regulation has placed undue become clear to them – and they’ve been banks whereas in the 1990s the top four decision-making processes that go into burdens on business: shocked by it – that the money being sent institutions had a 15% market share they deciding how much help and assistance Our regulatory system is basically not from their countries is going into European now have a 50% market share, they are to provide to a corporation and why some preventive, it isn’t effective, partly because tax havens and this is increasingly making playing in virtually every financial market, corporations get it and some wouldn’t, and we’re not sending people to jail, so the worst them think that Western European elites investment banking as well as commercial then more transparency would enable us thing that can happen to you as a CEO of that are profiting from these tax havens and banking so I think there’s a political case to to engage in a discussion about whether HSBC is to retire and move on and have Western European bankers and lawyers and be made for reducing their influence and it makes sense to provide assistance to a to face the press 5 years down the road management consultants that are helping breaking them up, they’re too big to regulate. company like Amazon that then may well if you’re caught. You just don’t have any these Ukrainian elites make the transfers I don’t see any substitute for having an undermine the interest of booksellers on incidents you can point to when any of these of wealth into these tax havens – that’s organised tax justice bank reform movement. the high street and then assiduously avoids people running these criminal enterprises led them to be disappointed with the West, paying tax, it’s those issues we need to look have had to go to jail, or experience any feel the West is hypocritical and become Naomi Fowler is a radio journalist and at in more detail in order to understand fines themselves personally or even claw somewhat anti-western. In the long run if this podcaster who has produced for ABC, the BBC, the complexities of corporate welfare. We back some of their executive compensation. I continues, we face the risk of the Ukrainian Deutsche Welle, Radio Netherlands Worldwide, constantly have this debate - social welfare think what they learned from this experience and the Russian opposition coming to see Pacifica Radio, National Public Radio and many claimants shouldn’t be given benefits unless is not only that at any given year the Britain in particular as responsible for the others. You can listen to all of the Taxcasts – they have responsibilities. Well, may be we penalties are small as a fraction of the cash plunder of their countries. the Tax Justice Network monthly podcasts – on need to look at the other side of the coin, flow or book earnings or any measure of www.tackletaxhavens.com/taxcast or may be we need to say the same thing about profitability, but that even more important In October 2014 the Taxcast asked how www.taxjustice.net/taxcast or via our Tax Justice corporate welfare that corporate welfare it takes such a long time under the current much corporate welfare is costing us and TV youtube channel https://www.youtube. claimants shouldn’t be given assistance regulatory system to catch these kinds looked at groundbreaking research and com/user/TackleTaxHavens. The Taxcast is also unless they behave responsibly. of crimes and prosecute them effectively. campaigning in this area in the US and in available on iTunes. the UK. Part of the background of the You know, the fines are going to come at And finally, in February 2015 the Taxcast programme was the allegation that Amazon some distant point in the future, your exec asked just what a bank has to do to actually might not be around, your stock options will

13 THIRD QUARTER 2015. VOLUME 10 ISSUE 2 TAX JUSTICE FOCUS book review

The Joy of Tax from – and somehow unspeakable explain the role tax plays in the As a tax campaigner Murphy has in mainstream media and politics. really existing economy and seen his ideas make steady progress By Richard Murphy cheerfully butchers the arguments from his home office to the London, Bantam Press, 2015 Once the fact that money is agendas of the global institutions. 059307517X / 978-0593075173 of his long-time adversaries in the debt is established, the right- right-wing think tanks along the Country-by-country reporting by wing insistence on austerity way. Once he has cleared away the transnational companies, a proposal starts to look like a kind of artful fallacies and special pleading he sets he first made in 2003, has now incompetence. Conservatives out a comprehensive programme of been accepted by the G8 and G20 When the financial crisis hit in surprisingly, given his tireless work stagger about like stage drunkards reform. governments as a key element in 2007–8 the moderate left in the as a campaigner for tax justice, and whenever they trip on their efforts to reduce tax avoidance UK was faced with a choice. Option Murphy begins the book with a never-ending journey to a balanced The proposals come thick and fast world-wide. Some of the best A: develop and share an account lively defence of taxation as an budget they pull another lever – he is, in the best possible sense, a minds in the financial sector are of political economy that did not instrument for securing collectively that enriches the rich and strips very creative accountant – but they hard at work trying to frustrate take its bearings from the British agreed objectives. But he is careful everyone else of long-established add up to an integrated project the reforming potential of his ideas Bankers’ Association. Option to frame his discussion of tax in social protections. Every pratfall for tying both state power and the as they play out in the OECD and B: stick to the assumptions and a wider account of the state and gives them more of what they want. private sector to the pursuit of a elsewhere. This time he is aiming taboos of polite opinion, however its relationship with the economy squarely at national politics in democratically established agenda. deranged, and hope for the best. In broadly defined. We can either have state-created Britain. The initial response will be the 2010 and 2015 elections they money or bank-created money. Tax Justice Focus readers won’t all too familiar to him. Well-insulated chose Option B. Little good it did To do this Murphy sets outs an Either way we are going to have be surprised to hear that he critics from the Prime Minister them. Their grudging acceptance explanation of the origins and nature debt. If we won’t or can’t borrow down cannot ignore him so they wants to dismantle the offshore of the pre-crisis common sense of money. Money, whether created enough to keep ourselves employed make feeble jokes instead. system once and for all. But he proved no match for the right’s by government or by banks is debt. It then the state will have to step in also proposes major changes to enthusiastic insistence that the is lent into existence and destroyed and borrow on our behalf – from Through his writing and campaigning the onshore regime by replacing state had spent too much and through repayment. And, as bondholders or from itself. Far Murphy has done terrible damage national insurance with a land value sacrifices would now have to be quantitative easing showed, the state from shrinking, the state must to the cosy consensus that once tax and a financial transactions tax. made. can, if it wishes, lend money to itself extend the range of its activities to protected the offshore sector. In These would encourage a more without any of the dire inflationary make up for the shortcomings of The Joy of Tax he sets out to do the efficient use of land and discourage Murphy’s latest book, The Joy of consequences that the conventional the private sector. With disarming same to the onshore conventional Tax, is a frontal assault on this speculation. And he is also keen wisdom predicts. cheerfulness The Joy of Tax dismisses wisdom. It is one hell of a fight to orthodoxy and the dangerous fiscal austerity as a nonsense we to change the constitutional status pick. But he’s used to apparently policies it legitimises. It is nothing All this is both incontrovertibly can happily be without. of tax by replacing Her Majesty’s impossible odds. I wouldn’t want to less than an attempt to refound true – Murphy quotes the Bank of Revenue and Customs with an bet against his having the last laugh. social democracy in light of what England’s own slightly exasperated Having dismantled the case for agency directly accountable to Dan Hind we now know about banking. Not efforts to explain where money come austerity Murphy goes on to Parliament.

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6.) What do you think has been the effect of RARELY ASKED interview the big data breaches of the last few years – Gavin McFadyean of the Centre for Manning and Snowden, but also Luxleaks and other financial scandals – how much have they QUESTIONS Investigative Reporting talks to the Focus shifted the terms of political debate?

There are now over 35 wikileaks 1.) From your time working with whistle-blowers, could dependably recommend. The Bureau 5.) Whistleblower protection has risen in variants and spin-offs that have had a what advice would you want to give anyone who of Investigative Journalism have a history of importance as an issue in recent years. Can you significant and growing effect on truth- is contemplating a move “outside of normal using effective security methods to protect outline what you would ideally want to propose, telling, whistleblowing and conscientious channels”? sources. in terms of legal protections and incentives for objection. A very large number of the main whistleblowers? Is there more that citizens can leaks were prompted by the example of First to get advice from an experienced 3.) Recent years have seen a huge amount do right now? WikiLeaks (including Snowden) and the use whistleblower, like Eileen Chubb, or of digital data find its way into the media via What is needed to reduce fear and bring of Tails. As a result of effective submission The Whistler or Compassion in Care whistleblowers like Manning and Snowden. Is this more truth tellers to the attention of the systems, like Tails, many more leaks are now organisations. part of the reason why governments are looking public is a two point approach: occurring. This has prompted new and some to secure new surveillance powers online? traditional outlets to pursue investigations Almost all the others are management 1) serious penalties for those who would they would not have previously initiated. oriented. (In a large number of cases, those The thinking is largely to create a reality victimise, and cause retribution against a Buzzfeed, Vice as well some NGOs are now who stick their head above the parapet, get based fear of disclosure; fearsome jail complainant or whistleblower; it shot off) The whistleblower is exposed, sentences, a uniformly hostile press in the using these methods and declaring they 2) a serious commitment in law that the unprotected against any number of fraudulent main countries (US, UK Canada, Australia, are open for stories, tips and evidence of cause of the public interest complaint be accusations and disciplinary procedures NZ) and a wilful refusal to publish the wrongdoing. Those news outlets that are openly dealt with by the authorities. including labour tribunals where the disclosures. Further that with the vast fundamentally hostile to whistleblowing, like the New York Times, the BBC and the complainant has virtually no rights. storage powers, it is safer from their point At present the cause of the whistleblowers’ great majority of the UK and US press of view to collect everything now, than wait grievance is often and even usually have almost no provision in their reporting 2.) If, having thought through the implications, or collect the material in a more relaxed ignored. The act of standing up is what is structure to protect their sources. a whistle-blower decides to reach out to the schedule. often punished, not the cause of the dispute. media, how should they go about finding the right journalist to work with? 4.) If you could have a searchable archive of In circumstances where major public safety Gavin MacFadyen has worked as a senior digital files from one institution - public or private issues are involved, those who do not report director on more than 50 investigative television Again, I would check with the organisations – which would you choose? them should be liable for contempt of public programmes for PBS’s Frontline, Granada mentioned above or check with the interest. If for example there are issues Television’s World in Action, the BBC’s Fine Cut, CIJ. There are not many journalists sadly Either the CIA or the FBI where most of with the safety of transport infrastructure Panorama, Channel 4’s Dispatches, among who have real experience protecting the largest military, security and corporate but personnel do not report them, those others. He is the director of the Centre for sources, particularly in serious cases where crimes are stored, organised and analyzed. individuals need to be held accountable. Investigative Journalism in London. The Centre the journalist is threatened with jail. There There are many uncertainties in the data as provides resources and advice for whistleblowers Individual citizens will sadly have little effect are only a handful of journalists at the much of it was excluded from the Snowden at http://www.tcij.org/whistleblowers on the changing of the law as that change Guardian, Private Eye, Mail on Sunday, who one or Assange revelations. requires a political force.

15 THIRD QUARTER 2015. VOLUME 10 ISSUE 2 TAX JUSTICE FOCUS news in brief…

the Netherlands in the ‘Code of Conduct “golden threads” that connect the two ends improvements since 2013, well deserves Group on Business Taxation’ to resist efforts of the new Silk Road. But while everyone its number one ranking for the third time to reform the EU tax system. Sven Giegold will pay higher electricity bills it is the City in succession.” remarks that “with unanimity required of London that will enjoy the fees and for any tax decisions in Council, they have commissions from China’s export of licit and essentially vetoed all progress to enable illicit capital. Falciani Trial Begins them to maintain the loopholes in EU law under which large corporations (like On November 3rd, a day after the IKEA, Google, Amazon, Starbucks, Fiat The Financial Secrecy Index publication of the Financial Secrecy Index, the and many others) were able to avoid International Consortium of Investigative their tax responsibility and deprive November 2nd marked publication of Journalists reported that the Swiss national exchequers of billions of Euro in the latest incarnation of the Tax Justice authorities had begun the trial of Hervé tax revenue.” Network’s Financial Secrecy Index. Once Falciani, the former HSBC Geneva employee again Switzerland comes out on top. Hong accused of stealing thousands of client files. Kong is second and the USA third. But if The information has since provided the basis China State Visit to the UK the UK and its dependencies and overseas for official investigations into tax evasion in territories are counted together Britannia France, Belgium and the United Kingdom. The Chinese President Xi Jinping visited still rules the waves of untaxed and the UK from October 20th to October 23rd. ill-gotten capital. During his visit he signed a deal to build Fifty Shades of Grey Areas nuclear power stations and heard the City The Index received widespread coverage of London’s Lord Mayor say that “we are in the international press. The Tax Justice Early October saw publication of a major delighted to offer Chinese investors long- Network notes that coverage tended to report coordinated by EURODAD, Fifty term, stable returns” from that deal and follow three themes: “first, there has been Shades of Tax Dodging: The EU’s Role in an others. In the climax of his speech the an improvement in the direction of greater Unjust Global Tax System. The report finds Lord Mayor celebrated the “many golden transparency in many secrecy jurisdictions, that the EU remains a space where national threads which connect our communities though some like Germany and the US stick and transnational interests can work and commerce.” out as laggards. Second, secrecy jurisdictions effectively to frustrate attempts to establish in the Middle East and Far East Asia are on tax justice globally. Meanwhile, London is positioning itself as the rise, partly because dirty business is the main centre for offshore trading in the being dislodged by the emerging standards One example of sectional lobbying emerged Chinese currency and debt. The guaranteed in Europe, but also because of the rise of on November 6th when Der Spiegel profits from infrastructure projects, paid for the mega-wealthy class in those regions. Hervé Falciani, 2012, by eldiario.es. Licensed reported the efforts of Luxembourg and by UK consumers, constitute one of those And, third, Switzerland, despite some under CC BY-SA 3.0 via Wikimedia Commons.

16 THIRD QUARTER 2015. VOLUME 10 ISSUE 2 TAX JUSTICE FOCUS news in brief…

In June HSBC agreed to pay a $41.7 million intended to reduce tax bills were rejected Activists and Journalists Unite to fine for “past organizational deficiencies”. by the British authorities. Support Whistleblowers

Falciani himself has declined to leave France A coalition of public-interest advocates and The Village That Went Offshore to attend the trial in person. investigative journalists met in Belgrade on 9–10 November to form the Southeast Independent traders in the Welsh village Europe Coalition on Whistleblower Greens in Europe Call for of Crickhowell have adopted the tactics of Protection. According to a statement Whistleblower Protection large transnational companies like Google issued by the Coalition, the aim is “to and Starbucks to reduce their tax bills. ensure that whistleblowers are treated The Green group in the European Filmed as part of a BBC documentary fairly and that their disclosures result in Parliament has unveiled a 10-point plan to series, “Britain’s Black Economy”, the positive change. It will also promote the promote tax justice in the EU. As the British shopkeepers and small businesses have benefits of whistleblowing toward improving MEP and Focus contributor Molly Scott devised an approach to tax avoidance that government and corporate accountability, Cato notes, “top of this list is the protection they say could be rolled out nationwide if and strive to enhance the public perceptions the loopholes enjoyed by big business of whistleblowers. Those who expose of whistleblowers.” aren’t closed. illegal or dodgy practices should be offered European protection; a guarantee that they This emphasis on the need to address public perceptions of whistleblowers cannot be prosecuted and a European fund, Romanian Prime Minister in Court financed by the money recovered thanks chimes with the Network’s own research and is particularly welcome given the to their leaks, to support them when they Victor Ponta, the outgoing Prime Minister urgent need for individuals in the tax reveal scandals in the public interest. of Romania appeared in court on Friday avoidance industry to break ranks and Beyond that they should be elevated to the November 6th, according to the Associated report criminal wrongdoing. status of hero.” Press. He is charged with tax evasion, money- laundering, conflict of interest and making false statements. He denies Another Own Goal the charges.

Britain’s professional footballers are once Earlier in the same week Ponta and his again making headlines for their off-pitch cabinet resigned after a nightclub fire antics. On November 8th the Sunday Times in which more than thirty people died reported that star players face a “£100 prompted popular demonstrations against million meltdown” after investment schemes the government.

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