Skadden, Arps, Slate, Meagher & Flom, LLP, had offices in every major city across the country. I’d arranged to meet Bob Bennett at their second largest enclave, in the nation’s capital on New York Avenue NW, a fine old building that took up half the block, ironically overlooking the US Treasury. Both of us knew the score when it came to attorney–client confidentiality; even though I hadn’t formally retained him yet, whatever I said would remain in his office. But still, I was careful. Turns out it didn’t matter much anyway. As soon as I revealed that my case would involve going up hard against UBS, he tilted back in his big leather chair.
“That’s a game-changer, Brad. I thought you were interested in litigating some sort of dispute with a displeased customer.”
“Don’t tell me, Bob. They’re your client.”
“They’re everyone’s client.” He shrugged and fingered his suspenders. “That’s what all the major financial firms do, especially if they’ve got big interests and lobbyists here in Wonderland. They put everyone on retainer. It’s like buying lawsuit insurance.”
“I know.” I sighed heavily. “I thought maybe they hadn’t gotten to you yet.”
“Well, I wouldn’t put it quite that way, but in essence … ”
“Okay, so who the hell can I go to? I need some kick-ass attorneys who can hold my coat.”
Bennett rummaged through his Rolodex and plucked out a card. “I think you should try these fellows. Good guys, and they’re both former Department of Justice attorneys. I have an instinct you’re angling that way, so you’ll need folks who know the ropes. I’ll give them a call.”
He did, and the next day I went over to a small building on 7th Street NW, where Paul Hector and Rick Moran ran a boutique law firm of which they were founding partners. Hector & Moran, LLP, wasn’t exactly a powerhouse like the ones I’d wanted, but Bennett had assured me they were clean of any conflicts and had great reputations in corporate internal investigations, agency enforcement matters, and white-collar criminal defense. That last bit was one of their talents I hoped I wouldn’t need.
With a recommendation from a big dog like Bennett, Paul and Rick welcomed me warmly in their modest shared office. They looked so much alike they could have been brothers; both about forty, short dark hair, clean jaws, white button-downs, slim ties, and stovepipe suits. They could have been actors on the set of Mad Men, if that show featured federal prosecutors.
“So, Mr. Birkenfeld,” Paul said as Rick poured coffee all around. “What’s the essence of your case?”
“It’s Brad,” I said, “and the essence is that I have inside information on a worldwide conspiracy, and I’d like you to represent me and help me take it to the US government.”
They looked at each other, took out their yellow legal pads, and clicked their pens.
“What sort of worldwide conspiracy?” Rick asked.
I leaned back in the chair across from their double desks and laced my fingers in my lap.
“I’m an American citizen, residing in Geneva, Switzerland. For the past ten years I’ve been working there as a private banker. The last four years were for a firm called UBS, AG, the Union Bank of Switzerland, from which I’ve now resigned. During my tenure there I was a director and head of business development for the Americas Desk. My job was to come over here, solicit wealthy American clients, and move large portions of their fortunes into secret Swiss numbered accounts.”
Hector and Moran were now scribbling furiously, glancing up at me and nodding for me to go on.
“The objective of all this,” I continued, “was to help these American citizens hide their money, avoid paying taxes, deceive spouses and business partners, and in effect defraud the US government. In my personal portfolio alone, I acquired about 150 clients, including thirty North Americans, and was very well compensated for it. At my branch of UBS in Geneva, we held approximately 7,000 such accounts. Throughout the three UBS branches in Switzerland that conducted offshore private banking business, the total number is about 19,000 American clients.” I paused for effect. “UBS encouraged these practices. In fact, they trained us all on the methods of secret solicitation, as well as on how to dupe American federal authorities. For all these years, I went right along with it, but now I’ve had a change of heart. The Swiss have been running this scam for almost a hundred years, hiding fortunes for drug lords, dictators, Mafiosi, politicians, movie stars, and plain old tax cheats. UBS is at the top of the great pyramid, and I happen to know where all the pharaohs are buried.”
The partners had stopped writing and were staring at me like some alien who’d just landed in their office in a flying saucer.
“I think it’s time somebody blew the whistle,” I said. “I think it’s high time somebody brought those bastards to their knees. Don’t you?”
I smiled at them. I thought they were going to fall off their chairs.
I hung around Washington for a few more days, most of which I spent with Hector and Moran in their office. I was lying pretty low because I knew people all over the world, and chances were high that I’d run into some client, consultant, or banker who might spot me walking into a law firm and say, “Brad! What the hell are you doing here in Lobbyland?” At any rate, I wasn’t there to party, and I had lots of work to do.
It took about two full days for me to lay out the details to Paul and Rick. We’d signed an agreement for my representation, which included strict confidentiality, so I held nothing back. After a day their heads were swimming and their fingers were blistered from scribbling like stenographers. I regaled them with very true tales about how UBS whipped us into bringing in Net New Money, as if we were oarsmen on a Roman galleon, and how the bank prepped us to lie, cheat, and—for want of a prettier term—steal. I gave them client names and account holdings that made their eyes pop: Igor Olenicoff, celebrities, corporate titans, Abdul Aziz Abbas (a shady character with direct ties to Saddam Hussein), porn stars, prominent physicians, and one of Osama bin Laden’s biological brothers. I’d brought along just enough documentation to prove my claims, but made it clear that they could not show any of those to US officials without my first getting immunity and a subpoena for protection from Swiss prosecution.
When our final session was done, Paul looked at Rick and gave me their tactical plan.
“Brad, we’ve decided to take this to the Department of Justice.”
“Okay,” I said, “but just tell me what informs that decision.”
“Well,” Rick said, “we’re both former federal prosecutors, so we’ll have common language, and we know how that system works.”
“You’re sure that’s the right move, guys?” I asked. “Not the IRS or the SEC?”
“We’re sure,” said Paul. “We’re going to put together a brief, about five pages, which’ll lay out the case without specifying exactly who you are or where you are. We’ll call you something like, ‘John Fortune, the Oil Trader,’ just to keep them off the scent. The brief will say that you’re ready to blow the whistle on Swiss private banking, and that you’ve got lists of American tax-evaders and lots of supporting documentation.”
“Sounds all right,” I said. “Just get me immunity and a subpoena from those Feds and I’ll be ready to spill the real beans.”
“We’ll get it,” said Paul. “Don’t worry, I have lots of friends over there at the DOJ. I used to work there.”
So we shook hands and I packed up and flew back to Geneva. Over the next few months, I assembled more supporting evidence to go along with Hector and Moran’s work-up for the DOJ. Then in August I came back to Washington to meet with them again, and flew back to Switzerland. I was feeling pretty positive about the whole thing. After all, Bob Bennett had convinced me that these two guys were slick, smart, and could thread the proverbial legal needle.
I had no idea that they’d just made a major tactical error that would change the course of my life.
It took another four months before Hector and Moran felt they were ready. Back in Geneva I cool
ed my heels and waited for word. Just after New Year’s Day 2007, they finally called up the Department of Justice and tossed their first hook in the water.
As bad luck would have it, the first fish that sniffed at it was a bottom-feeder named Kevin Downing, one of the lead prosecutors for the Tax Enforcement Division. Apparently Downing wasn’t in the best of moods, because he was in the midst of prosecuting the biggest tax fraud case in US history against a huge accounting firm called KPMG, LLP (162,000 employees worldwide). KPMG was accused of creating fraudulent tax shelters to help their richest clients skirt $2.5 billion in taxes. Sound familiar? Well, the DOJ had won the case back in 2005, but now it was on appeal and looking pretty bad for the Feds. And guess who was defending KPMG? Skadden Arps! So Bob Bennett of Skadden Arps, at that time the government’s worst nemesis, sends me over to lawyers who decide that the DOJ’s in the perfect frame of mind to receive me. I’m walking into a meat grinder.
Hector and Moran set up their first meeting over at the DOJ with Kevin Downing and another assistant tax prosecutor, Karen E. Kelly. Downing skimmed through their “John Fortune, the Oil Trader,” brief and flicked it on the conference table.
“I’ll need a lot more than this fairytale,” he scoffed. “Who is this guy?”
“Can’t tell you that yet,” said Paul. “He’ll need some assurances.”
“Show me some evidence and we’ll talk again.”
Paul and Rick called me up, asking my permission to show Downing some of the supporting documentation I’d left in their office.
“Sure,” I said. “Just make sure you redact anything that points to UBS, client names, or my identity.”
“Will do.”
As the spring of 2007 grew breezy in Geneva, my attorneys prepared for their next big sit-down. Prior to that, they sent Karen Kelly a warm-up email. “We’re telling you, this is a once-in-a-lifetime case!”
“That’s just what I need,” she shot back. “Another once-in-a-lifetime case!”
Uh-oh. When they told me about the cool reception they were getting, I started to wonder if they’d made a mistake. Maybe they were barking up the wrong tree. Maybe they should have gone right to the IRS, which probably would have protected me as a confidential informant. I found out that back in December 2006, the IRS had instituted a program for whistle-blower rewards, something on a much larger scale than anything since Abraham Lincoln, who’d effected such programs to root out scofflaws during the Civil War. “Well,” I thought, “Bob Bennett recommended them, so they must be all right.”
Downing and Kelly looked over my documents, which included some client lists with the names redacted, but clearly laid out the huge amounts of untaxed holdings. Also in there were some redacted UBS memos about hunting-gathering all over the States. It wasn’t enough.
“You’re telling us this is potentially the biggest tax fraud case in the world?” Downing sneered. “And this is all you’ve got? Bring me some serious paperwork and we’ll talk.”
Paul and Rick begged me for a substantial pile that would make it impossible for Downing to reject our pleas any longer. I was already working for a friend of mine on some big private equity projects, but I put those aside and started assembling the mother lode: selecting, copying, redacting, yet highlighting the points that would just blow these guys away. This time I revealed the identity of the bank involved. But I wasn’t going to risk shipping the stuff off by FedEx. Who knew if the Swiss were already suspicious and might be intercepting my mail? So I got on a plane again, flew to Washington via a diversionary stop in Boston, handed the stuff off in person to Hector and Moran, and told them they’d better hit a home run.
I went back home to Geneva. Hector and Moran went back over to the DOJ. Kevin Downing and Karen Kelly took the fat portfolio of my evidence and said to my lawyers, “Don’t call us. We’ll call you.”
Late spring rolled around. A whole fucking year had passed since I’d first shown up in Washington. I decided on a “destresser,” spending a week with Mauro in the Philippines. As usual, we had lots of fun flying around in his helicopter and chasing women, and I was feeling pretty optimistic. With all the stuff that Paul and Rick had now laid in the laps of the DOJ, they couldn’t refuse me any longer, right?
“We’re not issuing any sort of subpoena for an anonymous snitch.” Downing had called Hector soon after May Day, which seemed appropriate since that’s what a pilot yells when he’s about to crash and burn.
“Well, how about immunity from prosecution?” Paul asked.
“No promises. He’s getting nothing till I meet this guy face-to-face.”
My two legal eagles sounded like they’d had all their feathers plucked when they called me up and gave me the news.
“What the hell do these people want?” I fumed. “A blood test and a urine sample?”
I told them I’d get back to them, and I thought about it long and hard. In fact, I pondered it for a month. I knew that once I made this move, there’d be no going back. In late May I made my decision. This was it. Game time. Balls to the wall. At that point, it would have been much easier to just let it all go; stay in my beautiful digs in Europe’s Candy Land, keep making money, forget about the screwing by UBS, and just chalk it all up to a sour experience. But as I’ve said before, I’m not built that way. Hammer looking for nails.
“I’m coming in,” I told Paul and Rick on the phone. “Get out your flak jackets.”
But just before I packed up every single UBS disc and document I had, I came up with an insurance policy. I knew that from the moment I stepped into the Department of Justice, I’d be in a black hole, possibly never to come out whole. But, if somehow my story were already out there, headlines blazing and with shocking revelations about Swiss secret banking, it would be that much harder to shove me off into some witness protection program, which would definitely not match my lifestyle.
Before going anywhere near American federal agents, I needed to whet their appetites and make it impossible for them to turn me away. I was sure that once they heard my story, they’d welcome me as an American patriot, a virtual Paul Revere.
I’d been reading the Financial Times for years, and there was this one investigative journalist on the paper who couldn’t be bought or swayed from a story: Haig Simonian, an old-school reporter and highly respected expert in financial funny business. I put on my coat and walked down Eaux-Vives in a driving rainstorm to the tram-switching circle, where a bank of pay phones perched outside a warm cafe. I popped a phone card in the slot and called the Times. Simonian got on the line.
“Yes? Who is this, please? And how can I help you?”
“Mr. Simonian, you are going to know me only as ‘Tarantula,’” I said. “And I’ve got a story that will blow you away and end Swiss banking secrecy forever.”
I stood there with the rain soaking my hat and shoulders, and in twenty minutes of rapid fire gave him a scoop that would turn out to be the out-of-the-park grand slam of his career. I could hear his keyboard hammering away like a machine gun.
Just as had happened with my attorneys, Simonian nearly fell off his chair.
CHAPTER 8
THE MEXICO SETUP
“The world is a dangerous place, not because
of those who do evil, but because of those
who look on and do nothing.”
—ALBERT EINSTEIN, GERMAN PHYSICIST
AT THE DEPARTMENT OF Justice in Washington, DC, this anonymous Swiss private banker was already becoming a major problem.
Kevin Downing, a senior prosecutor for the department’s Tax Division, had approached his superiors with the case, and they were less than happy. First of all, this guy whom they hadn’t yet actually met was a “walk-in,” an informant, which meant the DOJ hadn’t initiated the case based upon its own detective work. And if what this informant’s lawyers were claiming was true, it could turn out to be the biggest tax fraud case in US history.
Now that might seem to be a good thing, but this anonymous
banker was promising lists of names, American names, rich folk who’d hidden their money in Swiss accounts. Plus, he apparently had lists of Swiss banking officials who’d orchestrated this whole shell game themselves and had partied with American bankers and politicians who knew exactly what was going on.
From Downing’s point of view, this Benedict Arnold in Switzerland appeared ready to come over and hand him a roster of PEPs, or Politically Exposed Persons. Who knew who’d be on that list? Downing still worked for the Bush administration, but it was already in its waning days. An election was looming and powerful people were throwing millions in campaign contributions at Obama, Clinton, Giuliani, and McCain. Who knew which way the winds would blow? Normally with a switch in administrations, a new Attorney General took the helm and civil-servant lifers like Downing remained at their desks. But if this case broke open and somebody high up the food chain got burned, he and his colleagues might all be out on the street.
It might get even uglier. Obama had already picked out Eric Holder as his candidate for Attorney General. Holder was a partner over at Covington & Burling, one of the most powerful law firms in DC. And guess what? One of Holder’s biggest clients was UBS.
Kevin Downing didn’t want this case. His head was still reeling from the KPMG case, which had just gone into the shitter. The DOJ had won the case back in 2005 by strong-arming KPMG into not contributing funds to their employees’ defense. But a judge had just ruled that tactic outrageous and unconstitutional, a violation of the defendants’ Sixth Amendment right to legal counsel, and thirteen of them had walked, a huge loss for the DOJ. In his stunning rebuke of Kevin Downing and the entire prosecution team from the DOJ in Washington, Judge Kaplan stated in his written ruling: “The government has let its zeal get in the way of its judgment. It has violated the Constitution it is sworn to defend.” The next case up had to be a home run, or it might mean Downing’s ass. If he had to take it on, he would, but only if he could hijack it and get all the credit.
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