Inside the Cartel: Bradley Bradley Birkenfeld

World Policy Journal, Volume 27, Number 1, Spring 2010, pp. 10-12 (Article)

Published by Duke University Press

For additional information about this article https://muse.jhu.edu/article/379988

[ This content has been declared free to read by the pubisher during the COVID-19 pandemic. ] IBRNADLESY BIIRKDENFEELD THE CA RTEL

In October 2001, Bradley Birkenfeld began working European currency as unnecessary. It is world at UBS , in Geneva, as a private banker for high-net- renowned for gourmet cuisine, luxury watches, worth clients primarily in the . After pristine ski resorts , and, most notably, bank learning that UBS ’s secret dealings with American secrecy. customers violated an agreement the bank had reached Swiss bank secrecy was implemented into with the Internal Revenue Service ( IRS ), he attempted law under Article 47 of the Swiss Banking Act to solve matters with UBS internally for approximately of 1934. This was done in direct response to a year and a half. After these efforts failed, he re - thwart the dubious measures taken by the Ger - signed and provided the IRS with information about man Third Reich to execute any German who 19,000 alleged tax cheats with accounts worth more transferred any monies outside the country. In than $19 billion—the largest whistleblower case of the years immediately following World War II, its type ever exposed. international business expanded rapidly, foreign However, the Justice Department did not view governments imposed taxes, illegal enterprises Birkenfeld as being forthcoming about his largest evolved globally , and the attraction of Swiss client, a Russian émigré and California real-estate bank secrecy began to quietly thrive worldwide. developer, who was convicted of having hidden some With the expansion of criminal conduct in $200 million. Though Birkenfeld voluntarily dis - the world (including , but not limited to: intelli - closed information about this client to other govern - gence agencies, corrupt dictators, drug cartels, ment agencies (which issued him a subpoena that pro - arms dealers, corporate malfeasance, individual tected him from prosecution for violating Swiss bank tax dodgers, etc.) Switzerland was the ideal off - secrecy laws ), the Department of Justice refused to shore jurisdiction to deposit, shield , and invest issue Birkenfeld such a protective subpoena, even after illegal assets, due primarily to strict bank secre - repeated requests. Arrested on a single , he cy laws, an ingrained culture of deniability , and pleaded guilty and was sentenced to 40 months in the lack of any accountability or trans- a federal penitentiary, a stiffer sentence than the parency. Today, in Geneva, there are over 120 30 months demanded by prosecutors. On January 8, licensed Swiss private banks for a population he entered a federal penitentiary, where he wrote this of approximately 200,000 residents, which note for World Policy Journal. equates to one bank per 1,666 residents. The Swiss government, private banks , and MINERSVILLE, PA —Switzerland has been businesses have all benefited directly from this revered as the epitome of safety, luxury , and pri - massive illegal enterprise. If the Swiss govern - vacy for centuries. This is a small mountainous ment was truly serious about prosecuting senior country, nestled in the center of Europe, com - executives at UBS for their extensive illegal con - posed of 7.6 million inhabitants with four offi - duct, that would mean investigating itself, an cial languages. Switzerland has vigorously de - inherent conflict of interest and something that fended its independence from its inception in has proven to be a total farce. In essence, bank 1291 and has never been successfully invaded. secrecy is analogous to criminal racketeering — More recently, Switzerland has refused admis - and the Swiss government, along with every sion into the European Union as well as the Swiss private banker, is a co-conspirator.

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In 2007, I voluntarily approached the U.S. has plunged over 75 percent , the bank is under Department of Justice ( DOJ ), the Securities and investigation by foreign governments , and it Exchange Commission ( SEC ), the IRS , and the faces countless and costly class-action lawsuits. Senate Permanent Subcommittee on Investiga - I helped transform the way in which centuries tions with everything I knew about the Swiss of Swiss private banking will be conducted in banking industry. I became the very first Swiss the future, but I ’m paying a huge price for be - private banker in history to reveal to the outside ing the only person to have the courage to come world the inside secrets behind these illegal forward. practices. I outlined in great detail how the ille - Though the Swiss government struck a gal UBS enterprise was operated, who was direct - deal with the United States to turn over ap- ing the enterprise , and how they tried to conceal proximately 4,500 names of these tax dodgers, what they were doing for so long from U.S. law the Swiss are now effectively backing out under enforcement authorities. In the summer of the guise of a domestic court ruling, which 2007, I voluntarily provided virtually every es - branded this deal illegal. The U.S. government sential and material fact contained within the can still try to salvage this deal, however, and now-famous “John Doe ” summons to UBS . I re - can also utilize the extensive and unprecedented vealed tax evasion on a massive and unprece - information I provided them —without help dented scale. For readers who may wonder if from the Swiss government. , on the there might be some puffery in the importance other hand, is doing whatever it can to get the of my role, look no further than the Department names of its tax cheats and is even paying sub - of Justice’s own statements to the federal judge stantial amounts of money for these names. in Florida stating plain and clear that “but for” For the United States, it has been a huge step my actions of blowing the whistle there would backward —by taking legal action against me, not have a been a case against UBS . the whistleblower, Washington has discouraged The early stages of the investigation have, other whistleblowers from ever coming forward. so far, yielded over $1 billion in fines and penal - The American taxpayers are not the only ties paid to the U.S. government, to the benefit ones disadvantaged as a result of this illegal of the American people. I knew that blowing scheme. This corruption and secrecy takes mon - the whistle would risk my career in Switzerland, ey from many government endeavors that are but I did not expect that I would be risking my used to fund humanitarian projects and aid de - very freedom in my home country. veloping countries. Without tax monies from Blowing the whistle on the firm’s offshore these accounts going to governments, such well- tax evasion business has been credited with shat - intended projects will fail and, ultimately, the tering centuries of Swiss bank secrecy and crip - poor and helpless suffer. pling UBS (the largest bank in the world prior to However difficult my personal situation has my whistleblowing). The bank underwent dam - become, it is small compared to the cost in - aging U.S. Senate hearings, terminated their en - curred by the law-abiding American taxpayer— tire executive management , and had over $200 and the cost goes far beyond the billions of dol - billion in client assets depart. UBS ’s stock price lars lost in the mishandling of the UBS case by

Inside the Cartel 11 the DOJ . The fact that I am the only person be - whistleblower. We need to encourage more hind bars as a result of the international bank - whistleblowers if we are going to be serious ing scandal sends a chilling message to future fi - about going after offshore accounts and bank nancial whistleblowers: if you come forward to secrecy. expose illegal banking practices, you could go to Whistleblowers already too often suffer re - jail. The previous administration did not take taliation from their employers that leaves them full advantage of the information I gave them, blacklisted and in bankruptcy. If whistleblowers but this information does not have to go to are afraid to bring information to the authorities waste. The Obama administration has the op - for fear of prosecution, they will stay silent, portunity to use the information I gave to the bank secrecy will continue , and illegal offshore DOJ , the SEC , the IRS , and the Senate to make tax havens will operate free of scrutiny, taking meaningful policy change and as a result, put money out of taxpayers’ pockets, and making money back in taxpayers’ pockets. Equally as the super-rich even wealthier. Future financial important, the new administration has the op - whistleblowers deserve infinitely better treat - portunity to send a clear message of encouraging ment than I received. They deserve to be praised and rewarding whistleblowers. It is important and protected, not prosecuted. And truth-tellers for readers to remember that secret banking has should not have to choose their conscience over been going on for decades and the only way the their career and especially over their very U.S. government has managed to put a real dent freedom. in it is because of my individual efforts as a •

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