Brad Birkenfeld doesn’t mince his words. “The U.S. Justice Department is pathetic. If the Olympics were giving awards for corruption, it would win gold, silver and bronze. No joke!”
He should know. The former UBS banker-turned-whistleblower dealt a stinging blow to legendary Swiss bank secrecy after uncovering a huge tax fraud, and ultimately forced the re-writing of the country’s banking rules.
His job at UBS had been to attract wealthy customers in the U.S., who were then assisted in tax evasion using Swiss bank secrecy rules. But after growing uneasy about the practices, he went to the U.S. authorities. His insider information led to massive fines being imposed on several Swiss banks.
For Mr. Birkenfeld, there were benefits and costs. He spent two-and-a-half years in prison for abetment to tax evasion followed by three years on parole. But then came the reward: In 2012 the U.S. Internal Revenue Service paid him a record $104 million (€95.5 million) for blowing the whistle on dodgy bank practices.
Mr. Birkenfeld could have retired and enjoyed the high life. But the American evidently didn’t feel like spending his days on the golf course. Instead, he now plans to strike back at those he feels betrayed him. His mission? To protect other whistleblowers and spare them what he had to go through.
His job now is to advise governments on combating illegal offshore deals and support other whistleblowers with advice and money.
“Senior management not only knew about this, they encouraged us to do it.”
“The Indian government reached out to me. I am helping the French government with their UBS probe. I would also like to meet with German Finance Minister Wolfgang Schäuble or other representatives of the German government,” he said.
“Helping governments is critical, giving them the strategy and the ideas about how to put an end to this business is important but also bringing back much-needed revenue to local governments,” he added.
Mr. Birkenfeld spoke to Handelsblatt in the lobby of Munich’s luxury Mandarin Oriental hotel. He has been able to travel abroad again since his parole ended in late November. His first trip was to Europe to set up contacts. “I am a hammer looking for nails,” he said.
The former banker is clearly driven, even eight years after he boarded a plane in Geneva and flew to Washington. There he told authorities about the 19,000 U.S. UBS clients who were sheltering money from the taxman, and the many trips the Swiss bankers regularly made to woo wealthy clients. Most importantly, he also told them about how Switzerland’s biggest bank used Swiss bank secrecy rules to circumvent the tax authorities.
One intranet document in particular stirred him into action. In it the bank specified which business practices it regarded as illegal.
“That contradicted everything that we did. Senior management not only knew about this, they encouraged us to do it,” said Mr. Birkenfeld. He triggered an internal enquiry but it came to nothing. So he went to the U.S. authorities. He denies that he wanted to take revenge for not being paid a bonus.
UBS ended up having to pay a $780 million fine and was forced to reveal the bank details of 4,450 customers. The case caused an earthquake in the Swiss banking system. Credit Suisse paid a fine of $2.6 billion and, unlike UBS, had to declare an admission of guilt. Wegelin, Switzerland’s oldest private bank, even had to close.
There are estimates that tax amnesty programs led more than 50,000 Americans to reveal their hidden offshore accounts and pay fines. The whole case yielded some $10 billion for the tax authorities.
But Mr. Birkenfeld still isn’t satisfied. “Why weren’t all 19,000 names released?” he said. “Who chose the 4,450 names?”
Above all, he wants to know why he is the only employee of a Swiss bank who has had to serve time in a U.S. prison even though he was the one to raise the alarm.
Martin Liechti, the former head of UBS’ private client business in America, reached a settlement with the U.S. Department of Justice to avoid prosecution in return for his cooperation. His boss Raoul Weil, who ran the global wealth-management business, was acquitted in 2014 in a U.S. trial.
Even Mr. Birkenfeld’s client, the billionaire and real estate dealer Igor Olenicoff, who hid more than $200 million from U.S. tax authorities, only received a suspended sentence and paid $52 million to cover his tax arrears, interest and a fine.
The U.S. Department of Justice declined to comment on the case of Mr. Birkenfeld. Pursuing offshore accounts “remains one of the highest priorities,” said Caroline Ciraolo of the ministry’s tax department. She said that since 2009 more than 100 people with illegal offshore accounts had been indicted.
Investigations are also underway in France and the Netherlands. In Germany, UBS paid a fine of €300 million in 2014.
But UBS isn’t Mr. Birkenfeld’s only preoccupation. He’s fighting for the rights of other whistleblowers. Europe has no comparable protection or financial incentives for them. That may be about to change. French Finance Minister Michel Sapin is considering a new law to reward whistleblowers. The European Parliament is also calling for better protection and financial incentives.
“We have to look at the bigger picture,” said Mr. Birkenfeld. “This is a very interesting stage in my life. I can help governments changing laws in Europe.”
In the meantime, he has written a book about the tax scandal, and repeatedly spoken about “politically exposed persons,” so-called PEPs who were given special treatment.
“PEPs, billionaires and millionaires in all markets around the world have had accounts offshore illegally,” he said. “I can back everything up that I say. That is something UBS despises.”
The book is due to be published this coming summer, before the U.S. presidential election campaign enters its final phase.
Mr. Birkenfeld is clearly enjoying his mission. And it’s only just begun.
Astrid Dörner is a Handelsblatt correspondent in New York. To contact the author: firstname.lastname@example.org