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UBS Whistleblower Gets Out of Jail

Only one person in the UBS banking scandal served time: the one who blew the whistle.
David Rosenbaum, CFO.com | US
August 2, 2012

Bradley Birkenfeld, the former Geneva-based UBS AG banker who exposed the powerful bank's practice of helping wealthy U.S. citizens avoid paying taxes by hiding their assets in secret offshore accounts, phony trusts, and straw companies, was released from federal prison on Wednesday. He served 30 months of a 40-month sentence. Birkenfeld pled guilty in 2008 to helping one of his clients, California real estate billionaire Igor Olenicoff, commit tax fraud. (Last April, Olenicoff's suit against UBS for leading him astray was thrown out of federal court.)

Prior to his arrest in 2008, Birkenfeld brought evidence to the Department of Justice, the Internal Revenue Service, and the Senate Permanent Subcommittee on Investigations that UBS had for many years encouraged the bankers in its private banking division to travel to the United States to troll for wealthy clients at special VIP events (some sponsored by UBS). The bankers would then help those clients avoid U.S. tax-reporting requirements by arranging for them to open undeclared accounts with UBS, offering them the protection of Swiss banking secrecy.

Birkenfeld provided evidence that showed how UBS bankers were trained in countersurveillance techniques to disguise their activities on U.S. soil using cover stories and encrypted laptops. His testimony, contained in the Senate subcommittee's report "Tax Haven Banks and U.S. Tax Compliance," led to the imposition of a $780 million fine against UBS and forced the bank to release the names of 4,450 UBS account holders.

The chairman of the Senate subcommittee, Sen. Carl Levin (D-Mich.), concluded that he didn't think "any bank that goes to the extent UBS has gone to avoid doing what [its] agreements with the United States require [it] to do should be allowed to continue to do business."

In the six months prior to Birkenfeld's incarceration, while he was under house arrest and wearing an ankle monitor, I spent dozens of hours interviewing him for the purpose of helping him to write a book about UBS, his efforts to bring its malfeasances to the attention of the proper authorities, and Swiss banking in general. For various reasons, the project never came to fruition and I have not spoken to or communicated with him in any way since he went to jail. Today, neither he nor his brother, who has served as his spokesperson, responded to my e-mails.

 

I found Birkenfeld to be a difficult character, but that, I have been told, is in the nature of whistle-blowers. They often are difficult people. They do not go along to get along. If they did, they wouldn't be whistle-blowers.

Birkenfeld never claimed to be an innocent, never denied to me that he did not know that what he was doing at UBS was sketchy. But without his testimony, the case against UBS could not and would not have been made. The fact that of all the UBS executives either implicated or indicted (including many of Birkenfeld's direct superiors) only Birkenfeld, much lower down in the UBS hierarchy, served time, tends to lend credibility to his belief that the U.S. government failed to pursue UBS either energetically or wisely. It is, as Birkenfeld's attorney, Dean Zerbe, told me, "a head scratcher. I think we need to think hard about the prosecution of UBS. When you do, and you think that only Brad went to jail, you think, 'You gotta be kidding.'"

At the risk of sounding like Birkenfeld, it may simply be a matter of powerful interests not wishing to trouble a system that benefits them and no one else.

Birkenfeld has filed a claim under the whistle-blower law for between 15% and 30% of $400 million of that $780 million fine. A statement published yesterday on the National Whistleblowers Center home page states that the information Birkenfeld provided the U.S. government "directly resulted in over $5 billion in recoveries for American taxpayers."

The law under which Birkenfeld is seeking his reward was passed in 2006. According to the IRS, since then the agency has recommended three awards. Of those three, it was not disclosed if any have been paid or their size.

Zerbe, of Zerbe, Fingeret, Frank & Jadov, filed an amicus curiae brief in federal court last June essentially urging the IRS "to stop horsing around" with regard to settling whistle-blower claims. But he believes the IRS is beginning to "get it" and become more comfortable working with whistle-blowers. The government, says Zerbe, has to understand that it's not "going to have Boy Scouts and choir directors coming in."

 




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