Lucifer's Banker

by Bradley C. Birkenfeld

  I let them keep on reading while I gathered up my papers and packed them away. When Paul and I left for the day, nearly unnoticed, they were still sitting there reading. As I closed the door behind me, I heard one of them gasp.

  “No! Not her. You’ve got to be kidding me!”

  One week later there was a second session with the Senate. But this time something had shifted in Carl Levin’s boardroom. I could sense an undercurrent of rage in the committee staffers, not directed at myself, but at the very idea that the United States had been so abused, for so long, by an ostensible European ally. Granted, I had brought them volumes of evidence about the dealings of only one Swiss banking institution, yet one couldn’t ignore the conclusion that the Swiss government’s legal constructs had fomented and, by logical progression, encouraged UBS’s criminal behavior across international lines, as if they were a global cartel. The other 130 private banks just in Geneva were complicit in the same devious business as UBS, but at different levels.

  Once again I delivered more bad news. I added fire to their ire by informing them that while UBS was certainly the biggest offender of all the Swiss banks, they were certainly not alone. Just as I’d done with the DOJ, I spilled many beans on Credit Suisse, where I’d first been immersed in the whole Swiss shell game.

  But the Senate Committee, unlike the Department of Justice, refrained from shooting the messenger. The staffers had clearly done their homework, boning up on the voluminous materials I’d given them during our first session, and there were many more questions and requests for clarifications. It seemed to me that they were powdering their cannons for a broadside soon to be unleashed, and I hoped it was going to be aimed at all the government’s thus far incompetent law enforcement bodies. At times the staffers, as they asked more questions, seemed almost embarrassed.

  How could we not have known about all this? How could it be that the Internal Revenue Service, the Securities and Exchange Commission, and the Department of Justice have allowed this to go on under our very noses for decades? We have to rely on a single American citizen with a conscience to slay this dragon?

  Bob Roach swore me in again, and I began by first commenting on and reviewing a letter that, the day before, my lawyers had sent to the Committee, the DOJ, and the SEC. That letter was the result of inside information I’d just received from one of my mates still inside UBS, in which he told me that the bank had just issued instructions about altering the nature of its offshore business with US customers.

  “Gentlemen, it appears that UBS is starting to circle the wagons. Before you begin thinking that this might be the result of leaks from these closed-door sessions, I believe I can explain why.”

  “Please do, Mr. Birkenfeld,” said Roach.

  “About two months ago, while I was still in Geneva, the Department of Justice sent UBS a target letter. That letter essentially warned the bank that it was under investigation. Personally, I would regard that as a gross tactical error, but we are now witnessing the results. UBS has been warned, thereby making your efforts to discover their current practices all the more difficult. They are instituting travel bans and document destruction.”

  Someone slapped the table and hissed, “Christ.” I simply raised an eyebrow and shrugged.

  Over the rest of that day’s session, which was as long as the first, we all got deep in the weeds. I had to review lots of the documents and information I’d already provided, because these things were admittedly difficult to understand unless you’d worked in Swiss banking. But I also made sure to take some time to summarize all the steps I’d taken, first as an internal whistle-blower at UBS, and then the high risks I’d taken to bring the information to the US government. I wanted them to understand what I’d had to do, that even after leaving UBS I’d acquired up-to-date intelligence from inside the bank, used multiple pay phones and fax machines from rotating hotels to pass it on to my lawyers and then to the DOJ. I provided proof that I’d often traveled to European cities outside Geneva, for no other reason than to FedEx evidence from a secure location, and flown back and forth on my own dime. I wanted all my efforts on the Congressional record.

  After that, I politely explained why previous attempts by US authorities to rein in the Swiss behavior were useless.

  “The Qualified Intermediary Agreement, or QI,” I said, “was designed to force US investors, and the Swiss banks that court them, to formally state the nature and holdings of offshore accounts. It was an attempt to convert all ‘undeclared’ secret numbered accounts to ‘declared’ accounts. I’m sorry to inform you that UBS has developed tactics to circumvent that agreement and uses them frequently. My guess is that most other Swiss banks are doing the exact same thing.”

  The folks in the room looked pretty sheepish. Clearly nothing they’d tried before was working.

  “How do you suggest we counter these tactics?” one of the staff members asked.

  “I’d suggest the US government get serious,” I said. “A full-on assault against Swiss secret banking practices. I’d suggest legislation, and with it, prosecution. Some pressure on the Department of Justice to actually do something might help.”

  They all looked at each other, and I could tell that’s what they already had in mind.

  “I have no desire to harm my colleagues,” I said, “those at my level who’ve been bound by Swiss law. However, those above them, the managing directors, board executives, bank chairmen, the designers and, if you’ll excuse the expression, the financial pimps. I can help you catch them at their game.”

  “Will you?” Roach asked.

  “I will.”

  And that’s pretty much how that second long session wrapped up. They thanked me, I thanked them, and I left with my lawyer, after assuring them that further information would be forthcoming.

  I’m guessing it was within the next twenty-four hours that Carl Levin was briefed by Bob Roach. Levin and the senators on his Committee went nuts, calling immediately for open hearings on Switzerland’s flouting of American laws. I’m also guessing that Levin made a call to the Department of Justice and screamed his head off. Why is that my guess? Because two days after my last session, Kevin Downing called my attorneys. He ranted and raved, apoplectic that I’d gone to the Senate, testified, and taken his precious investigation public.

  The politicians had gotten out front on this, causing an enormous embarrassment for the DOJ; they could no longer suppress my evidence or the brewing scandal. However, no open accusations of corruption or obstruction of justice flew between Senate Democrats and Republicans, because both sides knew full well that they all had dirty fish in the fire. But they had no choice now except to excavate the Swiss numbered accounts and hold their breath, with no way of knowing which rats would scurry out. It must have been rough on those poor politicians. I wonder how many of them called their Swiss bankers in a panic. Though my testimony was secret, I knew that a storm was raging on Capitol Hill.

  As for me, I just sat back with a smile and watched it all happen. I’d just pulled the pin on a hand grenade and tossed it into the room, and I was waiting to see who was left standing.

  For the first time in history, Swiss banking secrecy looked about to collapse like a house of cards.

  PART III

  CHAPTER 10

  HUNTED

  “You must be the change you wish to see in the world.”

  —MAHATMA GANDHI, INDIAN LEADER

  IT WAS JANUARY 2008 and I was back in Geneva. A free man again, at least for the moment.

  Cold winds blustered across the lake and the Swiss Alps were slathered in snow, but breathing in that frigid air was like getting a hit of pure oxygen. It was good to be far, far away from the slimy tentacles of the ungrateful Department of Justice. I had spilled my guts to the US Senate, given them everything I had, and I intended to keep on giving to the Committee as well as to the IRS and the SEC. The responses from those government bodies had been thankful, even warm, but I had no illusions about my precarious po
sition. Carl Levin and his staff viewed me as a courageous whistle-blower, while Kevin Downing still saw me as a scorpion in his bedroom slipper.

  The Department of Justice had let me go home to Geneva, but I was certain that Downing was out to get me, some way, somehow. He was furious that I’d pissed in his Cheerios and turned to other branches of the US government. With what I’d revealed to the Senate, I knew that Downing would now have no choice but to start seeking indictments, and I was pretty damn sure that one of them would have my name on it. Carl Levin’s committee might see me as a gift from the gods, but the irony was that the Senate could protect me from the Swiss, but not from that vengeful prick Downing, who could still have me indicted as a coconspirator in tax fraud. If he could pull that off, I knew he would. No doubt about it.

  Still, with the pops of the New Year champagne corks, I was at last released from the stress of bouncing from one federal agency to another, able to take a break from trying to prove my verity and worth.

  I wasn’t going to sit in my beautiful flat in Geneva and brood. Life goes on, and there were deals to make, parties to attend, and maybe a few women to woo. I threw myself back into some private equity deals with my close friend Dave, a guy with an eye for great start-ups and matching investors. I winged over to Mumbai and met with the Indian Minister of Oil and Gas, where we signed a deal for the purchase of American coal, the “clean” type.

  Then I flew over to Beijing and Shanghai, meeting with senior Chinese officials and pitching my coal deal, as well as some prime real estate opportunities in Europe. Naturally I had some fun in between, and you already know what kind. But all in all, I felt like I was in a state of limbo, waiting for the axe to fall.

  In between brokering international deals, I kept on feeding more information to various American government agencies. Kevin Downing had blown me off when I offered to serve as an ongoing informant, but the Senate, IRS, and SEC were still hungry for anything I could provide. So I turned myself into an undercover agent, hobnobbing with all my friends still working at UBS and coaxing the secrets out of them. They had no idea what I was doing with their fun new facts; it must have seemed like old-boy-network office gossip, over dinner and plenty of alcohol. James Woods and I had dinner one night at Restaurant Les Armures up in the Old Town. It’s a pretty little place that spills out onto the cobblestones of Rue du Soleil Levant (Street of the Levantine Sun).

  “So, how’s it going over there in the black magic kingdom, James?” I asked him as we enjoyed our French cuisine.

  “It’s a bloody horror show, Brad! You should see the panic. All sorts of travel bans, new security protocols, and if anyone even mentions a trip to the States, Bovay has a shit fit! I am so glad I listened to you and switched to South Africa.”

  “I’m glad you did too, James.” I smiled.

  “It’s almost as if someone is feeding the Americans UBS’s money-hunting tactics, in real time! Every move the bank makes is instantly thwarted.”

  He said that innocently, and I replied in kind.

  “Interesting theory, James. But no one would do that, unless he or she wanted to wind up locked away in a dungeon in Zurich.”

  “I know. But you should see Martin Liechti’s latest directive. Don’t bloody go anywhere unless I approve it!”

  I laughed. “I’d love to see that memo, just for shits and giggles.”

  “I’ll send you a copy. But don’t tell a soul.”

  “Cross my heart. More wine?”

  In about mid-January, the Financial Times broke another big story about UBS. Haig Simonian authored the piece and in it he quoted bank officials who’d announced with a flourish that UBS would be ending all secret relationships with US clients, in effect closing down their numbered accounts. I knew my former Swiss bosses too well, which meant that I knew the whole thing was a red herring, an attempt to cool the heat. But it didn’t cool mine, because I also knew that if that idiot Kevin Downing and his DOJ bumblers hadn’t warned UBS with their “target letter,” we could have rolled up the entire operation, just as the Brazilians had done. It was as if I’d fingered a mansion in the suburbs for a crack den, whorehouse, and weapons cache, and the cops had said, “Really? Let’s go knock on the door and ask.”

  But at the very least I could rub their noses in it, so I dictated a cover letter to my lawyers and had them send it, along with copies of the Financial Times article, to the SEC, IRS, Senate, and DOJ. I know that probably seems like I was fanning the flames of my own fire while being burned at the stake, but it was part of my next tactical phase. And besides, by now you understand that I don’t retreat under fire.

  Meanwhile, I gathered more and more info on what they were actually doing over at UBS. And what they were doing was circling the wagons, destroying incriminating evidence that pointed to illicit relationships with American clients, rerouting their hunter-gatherers to target countries that didn’t seem to care much about tax fraud, and moving assets to other jurisdictions with new offshore structures. They were telling everyone to stay away from the States. They should have done the same thing with France, because eventually their shenanigans there would cost them a shocking 1.1 billion euros in frozen funds in escrow, with a high risk of up to 6 billion in fines! Well, you can’t fix stupid, or arrogant. By this time, I had my secret communications methods down pat: moving from pay phones to Internet cafes, taking short “vacations” outside Geneva, and FedExing packages to Hector and Moran. It was all fresh intel.

  In February Hector and Moran brought both the SEC and the Senate up to date on my activities. Those were telephone calls, but shortly thereafter in March I had them start funneling active intelligence and documentation to both bodies. Later that month I fired off another broadside, more information showing that the UBS big dogs were basically trying to figure out how to outsmart the US Department of Justice, which shouldn’t have been a problem given the DOJ’s miniscule minds. My instincts told me that sooner or later the DOJ was going to go after me, so I’d better keep doing my “charitable works” as a way to counter their claims. I felt like I was doing well: smart moves, preemptive strikes, all of which I’d use to parry the stiletto that Kevin Downing wanted to plunge into my spine.

  Then came the indictments. And they were sealed.

  A sealed indictment means you don’t tell the guy you’re going to bust that he’s about to be taken down. I’m pretty sure that if Downing and his bosses could have gotten away with it, they would have snuck out to pay phones themselves and called lots of Swiss cell numbers—the ones I’d given to the Senate. But thanks to my efforts, the Senate had a hard list of all the Swiss perps, the UBS managers making it all happen, and so did the IRS and the SEC. They’d turned them all over to the DOJ and said, “Go get these international tax fraud criminals!” Well, I’m pretty sure that Downing busted a gut when he saw the source of the intel—me—but he had no choice at this point. And if he fucked up the indictments, lots of fat fingers would be pointing his way. My guess is that his bosses, Kevin O’Connor, and above him the Attorney General, probably said, “Do what you have to do. We’ll handle anything ‘sensitive’ later.” That might be supposition, but in the end that’s how it worked out, so I’ll stick with my assessment.

  At the top of the hit list was Igor Olenicoff. Downing could have had his name when I first walked into the DOJ, but he’d refused to give me a subpoena, so he only discovered Olenicoff as a result of my Senate testimony. He was probably drooling at the prospect of dropping the hammer on Igor, because he was linked directly to me. But then Downing discovered what the rest of the world already knew: Olenicoff was already being prosecuted by the IRS and the US Attorney’s office in Orange County, California! Downing couldn’t go after him because he’d already been snagged. I’m sure that one pissed him off and made him even more determined to nail me to a cross.

  But Igor was no fool (Forbes 400 list). He had already hired a former DOJ prosecutor from the exact same office that was prosecuting him to mount his defe
nse (remember that revolving door?), and to avoid the public embarrassment of being indicted, quickly pled guilty to a single felony count of filing a false tax return for 2002! He admitted to tax evasion and failing to inform the IRS about his offshore accounts in the Bahamas, Liechtenstein, the UK, and Switzerland—with apologies, of course. The government decided he could make it all good by paying a fine of $52,018,460.36 and repatriating all of his money to the States. Igor smiled and took out his checkbook. For a guy worth more than $2 billion, it was chump change. Ironically, it was later uncovered through discovery in a civil lawsuit against Igor Olenicoff that he and his son (Andrei) had opened their Barclays Bank account in the Bahamas with Yugoslavian passports. Yet neither one was born in Yugoslavia, they did not reside in Yugoslavia, nor did either of them work in Yugoslavia. The Olenicoff scams continued …

  In case you’re thinking that Olenicoff was just a fun-loving, basically upstanding, sometimes forgetful billionaire with a few quirks (you know, a regular Joe), note this. He was “selective” about honoring his commitments. Proudly displayed in front of numerous offices of his “Olen Properties” were beautiful, expensive sculptures—all unlicensed copies. Over the years he’d recruited two world-class sculptors, Don Wakefield and John Raimondi, to submit detailed proposals of original works, with mockups, photographs, dimensions, and prices. Wakefield and Raimondi never heard from Igor again, because he had the sculptures knocked off by a Chinese artist (the Chinese have made copyright infringement and patent theft into national pastimes). Both enraged artists sued Olenicoff, federal juries found him guilty as charged, and he was ordered to pay Wakefield $450,000 in damages, and Raimondi $640,000. Again, that was parking-meter money to Igor, yet it might have cost him less to just pay for the original works and not need his lawyers. But, used to getting his way, Igor chose to appeal the verdicts rather than pay the artists.