Lucifer's Banker

by Bradley C. Birkenfeld

  Christ! Right away I had flashbacks to my parties in Long Island and Fisher Island with Richard Ziegelasch, Executive Director at UBS International, based in New York City. Martin Liechti had sent me directly to Ziegelasch to drum up more rich American clients to deposit their assets in Switzerland, because he hobnobbed with the the richest of the rich. Ziegelasch was the one who’d arranged my private introduction to some of them. No one in the United States knew?

  I realized that nothing was going to happen here, at least not in any public forum. Branson was there to serve as UBS’s fall guy and the Senate’s whipping boy. It was all a political dog-and-pony show. “Vote for us! See how hard we’re working for you?”

  Levin ended the hearings, promising that US lawmakers were going to get to the bottom of all this, and smacked his gavel.

  A week later Levin’s Committee held another grueling C-SPAN session. I watched it, but it was more of the same. UBS promised to negotiate in good faith regarding turning over the names of its 19,000 American account holders. The senators said, “Thank you very much.”

  I said, “You naive idiots. You’re going to have to take a chainsaw to UBS’s balls before they’ll even squeak out one name.”

  I still couldn’t fathom why they’d let Liechti off the hook. I thought that maybe because he’d pled the Fifth in public O’Connor and Downing simply hadn’t wanted to stand up in those hallowed Congressional chambers and scream, “We object! Make him talk or let’s put him in jail!”

  Yeah, that had to be it. They still had him in custody down in Miami. Now they were going to throw the book at him, just like they’d thrown it at me. At least if I had to go to prison, he would too. Maybe we’d be cell mates, and then I could laugh in his face every day while we both made license plates.

  In August Congress took their yearly month-long recess so they could all go off to play golf and sail. It’s a tradition that harkens back to long before Edison invented the lightbulb, when Washington was just too hot to get any of the people’s work done. Never mind that we’ve had air-conditioning now since the mid–twentieth century.

  When Congress isn’t in session, it’s the perfect time to stab them in the back. They’re not around to gather up their minions and fight the good fight. So August was the perfect time for Kevin Downing to arrange for Martin Liechti to be quietly released, two weeks after the hearing. Liechti was told to keep his mouth shut and then put on a plane back to Switzerland. Nobody knew. It didn’t even make the papers.

  But I knew, because I still had good friends in Switzerland. I called my lawyers and told them to call that idiot Downing and demand to know why he’d just let the mastermind of Swiss corruption go home.

  Rick Moran got Downing on the phone.

  “You just let Martin Liechti go free? He’s the key to this investigation. He’s also the key to Brad’s case! Why, for God’s sake?”

  Downing just laughed and hung up.

  2Marc Rich was a renowned oil trader, indicted for tax evasion and profiteering during the US–Iran oil embargo. He fled to Switzerland to avoid prosecution. Rich’s former wife, Denise, funneled millions of dollars to the Clinton Presidential Library and to earlier political campaigns. On the last day of his presidency, Bill Clinton called then–Deputy Attorney General Eric Holder to ask for the DOJ’s blessing for Rich’s pardon. And the deal was done.

  CHAPTER 12

  BLOWUP

  “Money plays the largest part in determining

  the course of history.”

  —KARL MARX, GERMAN ECONOMIST

  ON THE HEELS OF that summer, the storm clouds began to gather.

  Across the world’s financial markets, autumn 2008 was hurricane season. I could almost hear a rumble like rolling thunder. It was the sound of a tsunami, sucking the breath from the stock markets, crushing the real estate bubble into bursting, and heading straight for the towers of Swiss secret banking.

  Most of the American media was focused on a different drama, a clash of titans. Presidential hopefuls Barack Obama and John McCain were battling it out in a bloody arena, with Joe Biden and Sarah Palin hunched in the ring corners, icing their fighters’ black-and-blue eyes and shoving them back out for yet another round. That was the fodder for the masses, the stuff that brought in millions in television advertising money between rounds of breathless debates. So the public didn’t really notice the earthquake punching cracks in the underground vaults in Zurich and Geneva. But those of us who’d spent our professional careers in international banking certainly did. And one ex–Swiss banker in particular, a convicted scapegoat who’d set off the first explosion, paid little mind to anything else.

  Carl Levin and his fellow senators on the Permanent Subcommittee on Investigations were on the march. They were joined by powerful bipartisan friends, Claire McCaskill, Tom Coburn, and others, who all realized that the loss of millions in taxpayer revenues was something with which their constituents could identify, since so many of them were losing their homes. Just behind the Senate, the IRS smelled blood in the water, and they were hungrier than ever for convictions and fines. At the back of the pack, the Department of Justice had no choice but to follow along, while yapping as loud as they possibly could so that someone might think they were leading.

  In November, Raoul Weil, my former überboss and head of UBS Global Wealth Management, was indicted by a grand jury in Florida for aiding and abetting American tax abusers. Weil just shrugged it off, confident that the Swiss government would never respond to American demands for his extradition. After all, if Switzerland started turning over its biggest bankers, there’d be no one left to run the casino. But I knew Raoul, and I knew he was an arrogant son of a bitch, and that sooner or later he’d find himself ensnared somewhere like Martin Liechti had. Maybe this time the DOJ would have no choice but to put him on trial.

  Mark Branson, the UBS Chief Financial Officer who’d testified under oath before Levin’s committee and had sworn to cooperate with the “John Doe” summons, had gone back to Switzerland and apparently forgotten his promise. Doug Shulman, the Commissioner of the IRS, was still fairly new in his position, an appointment that generally runs for five years, and he intended to keep his position. He didn’t look like a hard-ass, but looks can be deceiving. In short order the IRS opened full-throttle in its lawsuit against UBS in a Florida District Court, demanding the release of the 19,000 names of American secret account holders, and this time they won. As we all know too well, the IRS has frightening powers. When it sues a major financial institution that then fails to cooperate, that institution often finds itself mortally wounded—privileges revoked, accounts frozen, fines levied each day in the millions of dollars—and thus unable to operate. At UBS headquarters in Zurich, Geneva, and Lugano, my former bosses were pissing down their legs.

  During that time I was back in Boston, planning my next moves with Doug. I took a long hard look at the progression of events since I’d first come forward to American authorities, and the scorecard on my side came up short. I’d taken my case to the Department of Justice, and now I was wearing an ankle monitor, virtually under house arrest, and awaiting a verdict which, given my strokes of luck so far, would likely include a prison term. The Senate had taken my evidence, then used it to build the biggest case against Swiss bank secrecy in history. But then they’d treated me like a pariah, kept me in the back room like some pregnant teenage daughter of a Father Knows Best family in the 1950s.

  You might think this next part is strange, especially given my ugly experience with State Street Bank, but I no longer trusted anyone in Washington and felt much safer in Boston. It felt to me like the old colonial days, when the seat of power in Washington was still infested with powder-wigged Brits and Boston was the center of rebels and tea parties. I was no longer going to commute to the capital, running back and forth with my hat in my hand, trusting men with questionable talents who’d spent their professional careers in that culture. I fired Paul Hector and Rick Moran. It was something I sho
uld have done long before.

  Then I did some extensive research and came up with a venerable Boston firm, Todd & Weld, LLP, and hired one of their most experienced attorneys, David Meier, to pick up my case. Meier had served for twelve years as the Chief of Homicide in the Suffolk County District Attorney’s Office and had a reputation for defending the wrongfully accused. In 2007 he’d been recognized as “Lawyer of the Year” by Massachusetts Lawyers Weekly. He seemed battle-hardened, knowledgeable, enthusiastic, and had no federal government connections. A Boston guy unsullied by Washington. David Meier contacted the DOJ and informed them that going forward, he’d be handling my case. Kevin Downing responded courteously with something like “Who the hell are you?”

  Downing didn’t like the fact that I’d fired Hector and Moran, who he had been able to control. Seems I had a lot of nerve hiring some attorney in Boston who he couldn’t just summon over to the Department of Justice for a browbeating whenever he pleased. Meier ignored Downing’s seethe and pressed for a confirmation date for my sentencing down in Florida.

  “I want it delayed,” Downing snapped. “I’ve petitioned the Court for a continuance, and I suggest you assent to that. Otherwise you can forget about me submitting any motions for leniency.”

  That wasn’t the first time Downing stalled my sentencing hearing. He’d already done it with Hector and Moran, and he’d do it again, three more times over the course of a year, for no other reason than to keep me sitting on razor blades. Think this country has ironclad laws designed to protect the rights of American citizens? It does, but only you have to abide by them, while the lawmakers abuse the hell out of them.

  However, while Downing was getting great satisfaction from letting me twist in the wind, he didn’t realize that he was actually doing me a huge favor. I had nothing to do but to work on my case, so I turned my attention to finding out more about the IRS whistle-blower award program. UBS hadn’t yet been forced by the government to pay any penalties or fines, but I felt in my bones it was coming. A number of well-intentioned nonprofit support groups had reached out to me, such as POGO, the Project on Government Oversight, and GAP, the Government Accountability Project. But while they railed against my indictment and had thousands of people signing petitions in my favor, they had no “teeth” when it came to turning my situation around, or maybe getting me paid for my efforts on the back end.

  That’s when I discovered the National Whistleblower Center in Washington. It was a small organization yet staffed by talented, knowledgeable folks who firmly believed in protecting informants like myself. The NWC’s Executive Director was Stephen M. Kohn, also a law partner at Kohn, Kohn & Colapinto, cited as the best whistle-blower firm inside the Beltway. Kohn had represented Linda Tripp, the Department of Defense employee who’d outed Bill Clinton and Monica Lewinsky. Tripp had suffered withering retaliations, sued the government, and won a $595,000 award plus full reinstatement to her previous position, with retroactive benefits. Kohn was obviously my guy.

  Steve flew up to Boston and we met at the Langham Hotel. I liked him right away; he was diminutive, intense, with curly gray hair, wire-rimmed glasses, and a steel-trap intellect. He already had years of experience representing whistle-blowers, testifying in Congress, and writing several comprehensive books on the subject, but he understood that I was talking about something unprecedented. Then another talented lawyer who Steve had recommended join our team, Dean Zerbe, flew up and we met at the Hilton Hotel at the airport. Dean was a real savvy tax lawyer and was the author of the whistle-blowing law in the Senate Finance Committee. If you want to ask about the Constitution, ask Thomas Jefferson. If you want to know about the IRS whistle-blowing law, ask Dean Zerbe. Dean was stunned when I showed up with all the evidence of my whistle-blowing history, filed, tabbed, and supported by reams of UBS documents.

  “This is incredible! I can’t believe all this stuff!” Dean gasped. “We won’t even have to go through the usual hours of client interviews. How’d you do all this, Brad?”

  I pulled up my pant leg and showed him my black ankle monitor. “Well, I’ve had a lot of time on my hands.”

  A few days later, Steve and Dean made the trip together and we met once more, at the Boston Harbor Hotel. I signed a retainer agreement.

  “It’s going to be a battle,” said Steve. “But you’re well armed, Brad.”

  “And dangerous.” I smiled.

  Steve Kohn and Dean Zerbe fired their first shot at the Senate, filing for a transcript copy of my depositions. They needed that transcript in order to demonstrate to the IRS just how much I’d given the government. But Bob Roach refused the request, citing Committee rules. Really? My own words were being withheld, from me? It would take six more months of wrangling before Steve and Dean were finally allowed to review the transcript, in a secure room on Capitol Hill. It confirmed everything I’d told them, but they weren’t allowed to make copies.

  Still, I was starting to feel optimistic. Not so much about my sentencing, which had been delayed yet again by Downing, but about someday getting some sort of financial retribution for everything I’d had to endure. Every newspaper and blog that covered my case railed against the injustices done and slammed the government for trying to persecute their own best informant. None of it had any impact, but I knew it would help Steve and Dean’s case. As the New Year’s bells rang once again and I hobbled into 2009, I felt a little less shackled, ready for some hope and change.

  Yet those platitudes I dreamed about were mine, rather than that of America’s new president. Certainly, just like most Americans who’d learned their history and lived through stormy times of racial oppression, I sincerely wished Barack Obama the best of everything, and hoped he’d raise our country up to a new plateau of harmony and fine ideals. But at the same time, like most Americans who’d been burned before by the campaign promises of politicians, my attitude was wait and see. I was sort of like a cop who’s seen too much blood and has lost his faith in humanity. As an international banker I’d seen too much corruption and abuse of wealth to have much faith left in my leaders. I’d given campaign contributions to politicians of every stripe; not because I believed the bullshit they were selling, but because they’d then introduce me to their wealthy friends. It had worked every time, and I’d come to view politics as the “cake” that’s fed to the masses, while behind our backs the deals are already done. So while I liked the new president’s promises—superb universal healthcare, racial harmony, no more fighting other people’s endless wars—I figured he’d renege on half of it and screw the rest up. He did.

  Then there was that other small item, Obama’s choice for a new Attorney General. Bush’s Attorney General, Alberto Gonzales, had been replaced by Michael Mukasey after Gonzales was accused of “politicizing” the DOJ and using it to punish George Bush’s enemies. Now Mukasey was out; Eric Holder was in, and he’d turn out to be the biggest “politicizer” the Department had ever had. The new AG was also the guy who’d recommended the pardon of Marc Rich, the billionaire oil king who’d screwed the United States out of tons of tax revenue (ironically Rich’s attorney, Bob Tomajan, had $25 million in a Swiss secret numbered account at UBS in Zurich). And just prior to his new gig, Holder had been an extremely well-paid lawyer for UBS. So Kevin Downing had a new boss who wasn’t likely to love me. Not much hope for a change there.

  Boston can be a bitch in the winter, but I like it; always have. After all, I was raised in that area and had spent my winters on hockey rinks and ski slopes, so the bitter winds slicing through the city’s concrete canyons and the piles of dirty snow don’t move me much. Doug didn’t have a fireplace in his condo, but I was warmed by the news of firecrackers going off all over the finance world, especially since I’d lit the fuse.

  That grand jury down in Florida that had indicted Raoul Weil had been tapping their feet since November, waiting for the Swiss to show some good faith and turn him over. I knew that wasn’t going to happen, and eventually they figured it out too. O
n January 14, 2009, the presiding pissed-off judge declared Weil a “fugitive from American justice.” Problem was, Weil hadn’t set foot in the States during his recent tenure with UBS, and he wasn’t likely to show up now for a vacation at Graceland. However, when the United States says it’s seeking an international banker for high crimes and misdemeanors, INTERPOL, the International Criminal Police Organization, takes notice. Weil was eventually arrested in Italy and tried in a federal court in Florida in the fall of 2015. Despite Martin Liechti’s testimony that Weil knew that thousands of accounts didn’t comply with US tax law, and UBS’ own admissions, Weil was acquitted of all charges. The DOJ never called me to testify! Then, in June 2016, French prosecutors announced that they are seeking to try UBS and Weil for tax evasion.

  Maybe that was a big red flag for UBS, because just four days later the bank threw up its hands under withering fire from the US Congress. UBS entered into a deferred prosecution agreement with the DOJ, admitted to “certain conduct,” and agreed to pay the US government $780 million in fines. How they came up with that figure, and why the Florida judge agreed to it so quickly, no one will ever really know; but I knew it was only a symbolic wristslap. The DPA clearly stated that for the eight-year period from 2000 to 2007, UBS had made $200 million per year from its North American secret accounts, a total of $1.6 billon! And just remember that UBS had approximately $20 billion in American account holder cash and securities. Even if that huge amount had all been locked up in a mom-and-pop savings account in Rhode Island, the interest would have been a lot more than what they agreed to pay. Ironically, it would turn out later that the fine was based only on the amounts that I had been able to prove they’d scammed! Still, at least it was something. The US government accepted the terms and got ready to cash a check and take the credit. UBS thought they were off the hook.

  Then, bam! The very next day the IRS slammed UBS with yet another motion to enforce the “John Doe” summons and make them turn over the 19,000 names. Maybe UBS had thought their $780 million payout would make it all go away. Wrong. Eric Holder might be the new president’s stooge, but Doug Shulman at the IRS had been appointed by George Bush. Seems he was taking his job seriously, and he had full public and Congressional support.