Telling Swiss Secrets: 222 Billionaires

Telling Swiss secrets: 222 billionaires http://www.globalpost.com/print/5573209

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By Michael Bronner Created August 5, 2010 06:42 Subhead: Part 2: Feeding the UBS obsession with North American wealth. Byline: Michael Bronner

[1] Caption: (Photo illustration from photograph by Gasper Tringale)

NEW YORK — Bradley Birkenfeld exuded the conﬁdence that comes with privilege. He was Boston born and bred, a gregarious, well-educated brain surgeon's son. In his role as a high-ﬂying, cross-border banker with UBS, he moved easily among the worldʼs wealthiest men and women. And they were precisely who he was targeting as potential clients for UBS.

“Anyone residing in America — that was our market segmentation,” Birkenfeld explained in a rare, long-ranging interview with GlobalPost. “Didnʼt have to be a U.S. citizen — it could be a German living in New York, it could be an Italian living in LA.”

Birkenfeld and his fellow crossborder bankers in UBSʼ global wealth management division sought to sign on anyone with the obligation, if not necessarily the inclination, to pay U.S. taxes. “People understood what the advantages were,” he said, coyly enough, of the secrecy they sold.

Exclusive circles were nothing For ﬁve years as a Geneva-based UBS bank director, new. Birkenfeld did his early 45-year-old Bostonian Bradley Birkenfeld lived the well-heeled life of an insider in the secret world of Swiss banking. That is, schooling at Thayer Academy, an before he set out to break the bank. In an exclusive series of expensive college prep school in interviews with Birkenfeld, GlobalPost reveals how he blew the Braintree, Massachussetts, then

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whistle on Swiss bankingʼs rareﬁed world of secrecy and Norwich University in Vermont, the subterfuge, a scandal that is still reverberating around the globe. countryʼs oldest private military Birkenfeld believes heʼs a hero for exposing world-class tax academy. The latter school would evasion, but the judge in his case didnʼt see it that way. And now seem an odd choice; one of Birkenfeld is speaking out. Birkenfeldʼs closest college buddies described him as "the kind of guy who — I donʼt want to Part 1: A banker's betrayal say heʼd 'buck authority' — but [2] heʼd stand up to 'illegitimate authority.' " Part 3: The golden goose [3] Rather than following most of his Part 4: A triple-double cross [4] classmates into the military after graduation, a traditional track at Part 5: A reversal of fortune [5] Norwich, Birkenfeld went back to Boston and worked brieﬂy as a bond trader. Then, after a couple of years, he decamped to Switzerland and stayed. He earned an MBA at the American Graduate School of Business, a picturesque little campus nestled between Montreux and Vevey in the Swiss Riviera.

After early stints at Credit Suisse and Barclays Geneva ofﬁce, Birkenfeld joined UBS in 2001. By then, he had experience enough to know his division was steeped in skirting the law, if not in Switzerland itself, then certainly in the U.S. “Swiss bank secrecy is analogous with criminal conspiracy. Thatʼs how I see it,” he told me.

Numbered bank accounts are illegal in the United States and most other banking jurisdictions, but itʼs okay for U.S. residents to hold numbered accounts in the few countries that allow them — Switzerland is the biggest — provided they, and the banks, declare income-generating accounts to the IRS and the account holder pays tax on the income.

The reporting rules for Swiss banks are spelled out in tax treaties between the Swiss and U.S. governments. U.S. taxpayers are required to check a box on their tax returns — a simple “yes” or “no” —as to whether they hold a foreign account. Birkenfeld and his fellow cross-border bankers were essentially selling a way around all that: a way to dodge taxes through undeclared accounts often linked to sham shell companies and trusts.

The UBS bankers were frequent ﬂyers in their high-net-worth client quest, making quarterly prospecting trips to the U.S. where the bank sponsored millionaire magnet events like the UBS Trophy yacht race in Bradley Birkenfeld Newport, Rhode Island; Art Basel (the contemporary and (Gasper Tringale/GlobalPost) modern art fair in Miami); tennis tournaments; classic car shows; concerts; and other elite gatherings conducive to meeting prospective “new money” clients.

There was a lot of wink and nod, as Birkenfeld described it: a quiet solicitation on the sidelines, a dinner later, a discreet product presentation called up on an encrypted

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company laptop. “These were very sophisticated marketing VIP events,” Birkenfeld said (his favorite was a $10,000-a-seat evening with Elton John at the Waldorf Astoria in April 2005). They were also illegal insofar as the cross-border bankers were involved. The Security Exchange and Investment Advisors Acts of 1934 and 1940 bar unregistered international banker-brokers from doing business with private clients on U.S. soil, whether in person or remotely via phone, mail, Fax, email, FedEx.

Documents Birkenfeld later delivered to the Justice Department show UBS to be obsessed with North American wealth. A PowerPoint presentation marked “Strictly Private and Conﬁdential” by UBS (and later “Exhibit 14” by the Justice Department) leads off noting that "31 percent of Worldʼs UHNWIs [ultra-high-net-worth individuals] are in North America," followed by a graph highlighting the bankersʼ target group: “Key Clients” worth greater than $30 million.

Another lip-licking slide, titled “North American Billionaires,” notes that there are 222 in the US and 14 in Canada, with a combined net worth of $706 billion.

Where best to snare them? A later slide ranks the top-25 housing locations: Montecito, CA; Aspen; Los Altos Hills, CA; Sea Island, GA; Palm Beach; and Snowmass Village, to name a few.

Birkenfeld preferred his hunting even further aﬁeld. With an expense account and ticket to ride, business was pleasure when he hit on prospective clients.

"Iʼd say, 'Do you want to go to Wimbledon, have lunch and see the match? Do you want to come to Oktoberfest and drink some beer and look at hot girls? Whatever you want to do.' I would go to the Cannes Film Festival, the Venice Film Festival, the Bangkok Film Festival.”

He cultivated contacts among event organizers so he could swing VIP treatment for himself and his clients. "I just generally spent money the way I saw ﬁt," he said. "I wouldnʼt go out and buy somebody a Rolex, but I mean, if I spent $500 for a lunch I could justify it."

Birkenfeld got paid, too: A starting salary of 180,000 Swiss francs (just over $170,000) plus an American-style bonus, which in his best year, he said, put him at one million Swiss francs in total compensation (about $946,000). When home from the road, Birkenfeld drove a BMW M5 and split time between a plush apartment in Geneva and a chalet in the shadow of the Matterhorn in the Swiss Alps.

Life was arguably sweeter for Birkenfeld than for his fellow cross-border bankers at UBS. Most serviced between 200 and 300 accounts, each account averaging about one million Swiss francs, Birkenfeld said, whereas he got by with a fraction of that — about 20 U.S. clients and 20 more in other countries.

He was able to carry a lighter load because he had a golden goose: a single client with accounts totaling $200 million who more than made up the slack. A billionaire Orange County, Calif., real estate mogul named Igor Olenicoff would be Birkenfeldʼs biggest client, and later his nemesis.

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Part 3: Meet Bradley Birkenfeld's biggest client, and nemesis, U.S. billionaire Igor Olenicoff. [3]

Michael Bronner, a New York-based investigative journalist, previously worked for the weekday edition of CBS News/60 Minutes. He has been a freelance contributor to Vanity Fair since 2005. A screenwriter, producer and director, he was also a co-producer on the Universal Pictures/Working Title feature ﬁlm “Green Zone” about Iraq and an associate producer on the Oscar-nominated “United 93.”

Source URL (retrieved on August 5, 2010 10:58 ): http://www.globalpost.com/dispatch/europe/100724/swiss- banking-secrecy-billionaires

Links: [1] http://www.globalpost.com/dispatch/europe/100724/swiss-banking-secrecy-billionaires [2] http://www.globalpost.com/dispatch/europe/100724/swiss-banking-secrecy [3] http://www.globalpost.com/dispatch/europe/100724/globalpost-investigation-telling-swiss-secrets-part-3 [4] http://www.globalpost.com/dispatch/europe/100724/globalpost-investigation-telling-swiss-secrets-part-4 [5] http://www.globalpost.com/dispatch/europe/100724/globalpost-investigation-telling-swiss-secrets-part-5

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