Lucifer's Banker

by Bradley C. Birkenfeld

  Boom! Two hundred and fifty pairs of bulging eyes spun around to stare at me. “Who is this guy?” Carter’s face turned purple and the master of ceremonies jumped up and announced, “Ladies and gentlemen, this meeting is adjourned for today. Please enjoy doughnuts and coffee in the adjoining room.”

  Well, I like doughnuts and coffee as much as anyone else. Needless to say, at that postmeeting party, everyone avoided me like kryptonite. Except for the media. The reporters were all over me as I smiled and accepted their business cards.

  “Thank you for your concern,” I said. “You will hear more from me shortly.”

  But they never did. It was the morning of April 19, 1995, and at that very moment, Timothy McVeigh was blowing up the Alfred P. Murrah Federal Building in Oklahoma City. The story of a quixotic young banker tilting at windmills wasn’t going to make the news.

  What did make the news a couple of months later was my last stab at State Street’s heart. State Street had been sued by a female employee, Lisa Chui (my first boss), for unfair, prejudicial practices. She’d gone out on maternity leave with Nick Lopardo’s blessing, then upon her return he’d demoted her, claiming her previous position was no longer open! This pained me because I’d so admired the guy back when, but I also held him responsible for my debacle; he should have bitch-slapped those cowboys upstairs (Nick retired in 2001 shortly after he clashed with his management over having given Ray Bourque, the Bruins hockey hero, a victory ride home with the Stanley Cup to Boston from Colorado on the company jet). Anyway, Lopardo had been subpoenaed to give testimony as part of Lisa’s discrimination lawsuit. Somebody slipped me a copy of his deposition subpoena, from which I made five hundred printouts on thick pink stock paper. Then I hired two clowns, with bright orange hair, polka-dot dresses, red bulbous noses, and turned-up shoes. One fine summer afternoon, they were out there in front of State Street headquarters handing out copies of Lopardo’s deposition subpoena, right in the heart of the financial district, at the height of the pedestrian lunch-hour crush (Exhibit 4). The local news stations had a field day. Who doesn’t love clowns?

  Still, that was all schoolyard stuff and I knew it. None of it was going to stop State Street from robbing its clients and snubbing the law. This was serious stuff and it was time to throw one last grenade in the bunker.

  That summer, I walked into FBI headquarters at Government Center carrying a pile of documentation. At first, the agents were polite, solicitous, and curious. But they were also skeptical. After all, I was a twenty-nine-year-old unemployed banker with a beef, telling them that one of Boston’s oldest and largest financial institutions was essentially running illegal bait-and-switch scams. However, I knew my shit, and over the course of six separate meetings, the agents finally began to nod and raise eyebrows. They wanted ironclad proof and it was obvious I had it.

  The FBI opened a formal investigation into State Street, with Special Agent Ronald Keating of the Boston field office leading the charge. Somehow, word of the investigation leaked out to the media (how did that ever happen?). State Street struck back, claiming these were just “routine regulatory matters,” but they were far from routine and everybody knew it. Lopardo presided over an internal meeting and he was on one hell of a rant. One participant told me he said, “They can’t touch us! We have friends in the CIA and friends in the FBI!”

  You’d expect those words to fly from the mouth of some Mafia don who’d ordered a hit and wasn’t worried because he had the Feds on the payroll. But Lopardo was no Mafia don. He was a senior bank executive! And he was overseeing the pension funds of thousands of people around the globe, with billions of dollars in assets.

  Well, as it turned out, they really did have friends in the CIA and the FBI—powerful friends. State Street CEO Marshall N. Carter’s father had been Deputy Director of the CIA; the man who’d first shown President Kennedy surveillance photographs of the Soviet missile buildup in Cuba in 1962, launching the Cuban Missile Crisis. But what about the FBI? No problem. They had that covered as well.

  Sitting on the Board of Trustees of State Street Bank was a lawyer named Truman Casner, a partner in the high-powered law firm of Ropes & Gray. State Street hired Ropes & Gray to spearhead the bank’s defense against the FBI, and the first thing Ropes & Gray did was to hire a former special agent from the Boston field office to counter the FBI’s investigation. When I heard that I said to myself, “So this is how things work. No wonder Lopardo was so full of himself at that meeting.”

  Now, you might be thinking I had a jaundiced view of the FBI’s Boston field office. But history has revealed that, in 1995, it was the most corrupt FBI office in the nation’s history. At the same time the FBI was supposed to be investigating State Street, they were also conspiring with the notorious gangster James “Whitey” Bulger. That’s right. Boston’s federal agents covered for Whitey and his gang, accepted bribes from him over many years, and turned a blind eye to his multiple murders of rival mobsters and innocent victims.

  So, while the Boston FBI was supposed to be investigating State Street Bank, with plenty of supporting evidence and testimony from me, things went sideways, and then south. Despite corroborating evidence and the sworn affidavit of another eyewitness who still worked at the bank, the investigation started to flatline. It turned out that the former FBI agent hired by Ropes & Gray to kill the investigation was having sit-downs and lunches with Ronald Keating, the agent who was leading the investigation! Isn’t that nice? I hope they enjoyed their sushi, pensioners around the world be damned.

  Not long after these little get-togethers the investigation was dropped. So much for “truth, justice, and the American way.” As for me, these were lessons learned … about banks … about the Feds … and about how to deal with them. Store it for later.

  Finally, I decided to let it all go. It was time to get back to work and start making a living again. Two banking institutions in Boston had looked over my resume and offered me positions, and I was just about to settle and accept one of the offers when suddenly they were pulled. State Street had put out the word on me, all across Boston. I was blackballed, and that old Hollywood adage echoed in my head.

  “You’ll never work in this town again.”

  It was time to go, and far away. Somewhere out there, I knew I’d find a welcoming, gleaming shore, where a sharp young banker could make his name and fortune. I thought about it long and hard. Where oh where might that be?

  Ah, yes.

  Switzerland.

  CHAPTER 3

  CRACKING

  THE CODE

  “If you can’t trust a Swiss banker,

  then what’s the world coming to?”

  —JAMES BOND, THE WORLD

  IS NOT ENOUGH

  SUMMER 1995

  Switzerland was a banker’s Disneyland, and I was thrilled to be there.

  I stared out the window of the 747 as the rolling plains of Europe rose from the mist. I’d chosen a night flight without thinking much about it, but I realized now as the sun began to rise that it must have been a subconscious plan to embrace the dawn, a sign of rebirth, a quest to begin again. Boston was behind me, rolling away in the big jet’s wash like so much flotsam in the churn of a navy frigate.

  After burning my bridges in Boston and tossing a few hand grenades, I figured it was time for an expatriate sabbatical. If I could find someplace overseas to get a decent MBA, I’d be that much more marketable when I went on the hunt again. Plus, disappearing for a while would give me a clean slate. I’d found this small American university in a quaint Swiss town called La Tour-de-Peilz on the shores of Lake Geneva. The classes would be conducted in English, so I wouldn’t have to dust off my rusty French. And who knew? Maybe when it was over somebody in Europe might offer me a job. I’d been to Lugano, Switzerland, in 1979 as a kid with my grandmother. It was beautiful, clean, safe, and there was no better place to ski, one of my favorite sports. If the job gambit didn’t pay off, at least I’d have fun.

  As the p
lane circled Zurich I thought about Boston, where I’d learned many things, but mostly about how my idealistic view of the world was sadly the detritus of childhood fantasies. Maybe if I’d stuck it out as a ROTC grad and become an air force officer, I would have thrived in a realm of real heroes, but I had my doubts about that fairytale too.

  State Street had taught me that, at least in the world of big banking and mega-finance, heroes were as rare as Boy Scouts in a biker gang. If you bucked the system, you’d be a lonely outcast, never fully trusted or accepted, left in the garage to mop up the oil spills while the rest of the boys went off riding and carousing, getting all the hot girls and never getting caught. I wanted to ride with the big dogs somewhere, but without screwing the customers and feeling bad about myself. I’d picked up lots of tricks of the trade, but I wanted to use them to make my clients richer, and then reap the benefits. That’s how I saw my role as a banker. Everybody goes home happy, right?

  As the plane sank lower and the engines bled off, the twinkling landscape grew larger. There it was, the land of kings and billionaires, CEOs and priests, soft sweet chocolates and women to match. I’d had dealings with Swiss bankers while at State Street, and I knew that in Switzerland money talked and bullshit walked. You could do just about anything with secret accounts that the law allowed, and Swiss law allowed almost anything but homicide. I didn’t know the system yet, but I’d be learning it all soon enough. At the moment I was squeezed into a cheap coach seat with my knees practically slamming my chin as we bounced on the runway. I smiled and said to myself, “Birkenfeld, if things work out, this is going to be one of your very last trips in coach class.”

  I’ll skip the mundane details about my higher education. Let’s just say that the next year went by like a rocket, as years seem to do when you’re twenty-nine years old and off on the first great adventure of your life. I settled into a rental flat in La Tour-de-Peilz and threw myself into advanced studies in corporate finance, econometrics, business law, managerial accounting, and international marketing (Exhibit 7). My fellow students were wealthy, ambitious, and exotic, hailing from Dubai, Russia, Germany, and Finland. I made some great friendships that have lasted up through today, and we spent the weekends exploring Copenhagen, Barcelona, Prague, and Rome. I studied hard, partied harder, skied every mountain that had a chairlift, and discovered with great joy that European women use only one part of a bikini: the bottom. I met a beautiful girl, Charlotte, part Austrian and part Swedish, and we moved in together and enjoyed all the perks of lusty youth and boundless energy. As I neared graduation in the spring of 1996, I felt “well armed and financially dangerous,” yet I still wasn’t sure what would happen next. I’d come over to Switzerland to polish off my resume with an MBA, but without a Swiss work permit I didn’t really think I’d get hired. But what the hell; I figured I’d interview anyway and take my best shot.

  In late spring of 1996 I sent my curriculum vitae to Dr. Reto Callegari, head of French-speaking private banking for the vaunted mega-banking firm Credit Suisse. To my pleasant surprise, I was invited to interview with him. He was tall, slim, with gray hair and spectacles, had a PhD in finance from the University of Zurich and perfect English from an MBA at Stanford. I knew right away that here was a dude I had to impress.

  Dr. Callegari asked me all sorts of professional finance questions, which I answered to a T. And then I turned the tables on him.

  “Dr. Callegari,” I said. “I have a question as well.”

  He raised an eyebrow. “Mr. Birkenfeld, you do realize that I am here to interview you.”

  “Yes, sir, that’s true.” I smiled warmly. “But I just need to ask you this question. I need to know where your top three problems are at the bank.” Both eyebrows arched at that point, but I pressed on. “You see, I regard myself as somewhat of a problem solver. So, if you’re considering taking me on and giving me a very good salary and a Swiss work permit, but I don’t really know where the firm’s problems are, then you shouldn’t be hiring me.”

  That seemed to amuse him, and of course he didn’t share any of his firm’s delinquencies with me, but I didn’t expect him to. We exchanged business cards and that was that.

  Well, not quite. One of the things I’d learned in Boston was that smarts and talent are good to have, but friends are better, and you make friends in the business world not just by having two-martini lunches, but by delivering the goods. I’d serviced my clients as if every one of their requests were a life-and-death emergency. My work ethic was “Never wait. Do it now,” and that’s how I’d made friends with Joe Gelsomino, who worked at Credit Suisse First Boston as head currency trader in New York. I’d given tons of trades to Joe and naturally liked him, so right after my interview I called him up.

  “Brad! What’s up, buddy?”

  “Hey, Joe. I need a small favor. I’m interviewing at Credit Suisse in Geneva, Switzerland, and wondering if you could put in a good word for me.”

  “Of course! Who’s the guy? Gimme his name.”

  “Dr. Reto Callegari.”

  “Wow, he’s a player! Leave it to me.”

  Ten minutes later, Joe sent Dr. Callegari an email from New York. I’m sure it was very polite and respectful, but the gist of it was “Bradley Birkenfeld is absolutely the best young banker I worked with at State Street.”

  One week later, before I’d even started my final exams, I got the offer from Credit Suisse: starting salary, 150,000 Swiss francs,1 plus a Swiss work permit and four weeks of vacation. Holy crap! It was four times what I’d been making at State Street, and I’d be working directly for Dr. Callegari in Geneva. I thought maybe he wanted to keep an eye on me, but that was all good because I wasn’t going to let him down.

  The only melancholy part of that chapter was that Charlotte and I parted ways. She had a great job in Vevey with Nestlé and wasn’t about to move, and I wasn’t about to commute every day by bus and train to Geneva. I wasn’t too happy about it, but my buddy Luigi took me to lunch and straightened me out.

  “Bradley, my friend, do you have any idea of the circles you will soon be traveling in? Or the types of women you are going to meet? You’ll soon be over her, just you wait.”

  Seemed a bit callous to me, but I soon discovered he was right. My wounds were salved when Credit Suisse found me a gorgeous one-bedroom flat in central Geneva: second floor, parquet floors, marble fireplace, French doors out to the two balconies. Perfect place for a single guy, and only 1,200 Swiss francs a month! My troubled heart healed quickly.

  At Credit Suisse, I quickly discovered that my new responsibilities as a highly paid American “guest worker” were essentially nil. The Europeans, bankers in particular, have an interesting work ethic: Show up at a respectable hour, dress well and absorb the ingrained culture, enjoy a two-hour gourmet lunch, leave at cocktail time; lather, rinse, repeat. Dr. Callegari wanted me to become an expert in private banking, which meant servicing and socializing with wealthy clients and suggesting creative ways in which they could make more money—invest in commodities, numismatics, artwork, securities, currencies, etc. Other than that, I was expected to write my dissertation for my MBA. “And if you don’t mind, Bradley, make it a long and complimentary tone about the workings of this firm.” Yessir! Why not?

  So, basically I was being paid to learn the ropes. In the meantime, I also learned the history and machinations of “creative” Swiss private banking, which is something you should know too if you’re reading this story. If you’re already an international banking maven, skip it. Otherwise, pay attention; it’s not a pretty tale.

  The Swiss numbered accounts. You’ve heard all the stories. They’re the stuff of legends and lore.

  For nearly a century, secret bank accounts in Switzerland served as the treasure chests for the world’s super-rich and all-powerful. They were the place to hide one’s gold, jewels, bundles of cash, and bearer bonds—no names attached (Exhibit 5). They were the purview of the privileged few, and a subject of fascination fo
r oh so many.

  Oil barons loved them, spy novelists thrived on them. Dictators could always depend on the Swiss to look the other way as they raided a Third World country of its resources and delivered the spoils to Geneva by suitcase via private jet. Politicians could skim from their election coffers, make a quick stop in Zurich, and ensure their retirements for decades to come. A shipping magnate could sell off a hundred-foot yacht for cold hard cash, take a comfortable ride down a gleaming brass elevator to his safety deposit box in Basel, and never think twice about paying a single euro in taxes.

  Those secrets were as safe as a whispered confession to the Pope. After all, who would tell? Certainly not the Swiss.

  Switzerland, however, wasn’t always known as a safe haven for rogues. The finer traditions of Swiss banking began with the Revocation of the Edict of Nantes in 1685 by Louis XIV, declaring Protestantism illegal in France. This led to the persecution and torture of Protestants and the eventual migration of hundreds of thousands to other countries, including Switzerland. Many private banks were established there to offer investment services to the wave of wealthy, newly arrived Protestant migrants. This wasn’t a secret enterprise; simply a wealth management option for men of means. Later on, Switzerland became host to many respectable traditions, such as the establishment of the International Red Cross, the Geneva Convention governing the rules of warfare, and the League of Nations, later to evolve into the United Nations (or devolve, in my own jaundiced view). At any rate, there was nothing nefarious about any of these watershed traditions. They were accomplishments of which the Swiss could be proud.

  Then, in 1934, the Swiss Banking Act was incorporated into the Swiss Constitution, Article 47, establishing Swiss bank secrecy. From that point on, no Swiss banker could reveal the details of a client’s account, nor his or her identity, without risking prosecution and a life behind bars. Coincidentally, or not, this was just when the Nazis were reaching the pinnacle of power in Germany. Fascists throughout Europe were delighted at the prospect of depositing purloined property with stony-faced bankers who were now forbidden by law from revealing the source. Jews, who were already being persecuted and saw the writing on the wall, made haste to Geneva and Zurich, hoping their nest eggs would survive the coming cataclysm. Their savings did survive, but most of the account holders didn’t, and billions disappeared into Swiss coffers, to the benefit of the banks. Throughout World War II, Switzerland reveled in its neutrality, with nary a banker’s hair mussed. After all, everyone hid their fortunes in those vaults, Axis and Allies alike. The ongoing joke was that Switzerland would never be invaded. Who would be so stupid as to bomb their own bank?