Lucifer's Banker

by Bradley C. Birkenfeld

  About a week after that, Marcel Rohner, the Chief Executive Officer of UBS, handed in his resignation. UBS announced that Rohner was “retiring,” at the tender age of forty-four, but it was obvious he’d been forced to walk the plank. It was February 26, the day of my own forty-fourth birthday, and I couldn’t have gotten a better gift! Doug and I opened a bottle of champagne. It went down nicely with my birthday cake and a box of Swiss chocolates.

  On March 2, Eric Holder received a distinguished visitor in his Washington headquarters. Eveline Widmer-Schlumpf, Switzerland’s Minister of Justice and Police, had jetted over to Washington with her hair on fire. The US Senate Permanent Subcommittee on Investigations, having finally cracked the spine of UBS, had turned its sights on over a dozen other Swiss banks. First on the list was Credit Suisse, where I’d begun my career in private banking; the Senate wanted unconditional surrender. Widmer-Schlumpf, Holder’s counterpart in Switzerland, said she only sought “fair and equal treatment” of all the Swiss banks currently under assault. She was begging for mercy. The Department of Justice declined to discuss their boss’s response, but apparently Holder told her that more Swiss heads would have to roll. She went home with her tail between her legs.

  Two days later the chairman of the board of UBS handed in his resignation. It was Peter Kurer, the man who’d battled me over my bonus, dismissed my UBS whistle-blower complaints, and shit-canned the entire internal investigation. After that he’d risen to the top of the heap, and now he was out on the street. Swiss banking was quickly becoming a target-rich environment.

  On that very same day, Senator Carl Levin opened a second round of televised Permanent Subcommittee hearings. Beside him on that long curving dais were Senators Claire McCaskill of Missouri and Tom Coburn of Oklahoma. The government’s witnesses were IRS Commissioner Doug Shulman and John A. DiCicco, the Acting Assistant Attorney General of the Tax Department at the US Department of Justice. DiCicco looked just like the hapless civil servant he was: clueless about the facts, adorned in an oversized cheap suit, and he spoke in a mundane, monotonous voice. DOJ’s finest.

  Nowhere to be seen was Kevin O’Connor, who’d been Kevin Downing’s boss. Turns out he had left his job as Associate Attorney General of the United States, the number-three position in the DOJ, to go work as a partner with Rudolph (Rudy) Giuliani—former mayor of New York—at the New York offices of Bracewell & Giuliani, a firm with $325 million in revenues. Of course, the Abdul Aziz Abbas connection jumped to the forefront of my mind. I had informed Downing and the DOJ two years earlier that Abbas was a friend of Giuliani’s.

  This time Levin was so pissed off you could almost see the steam hissing out of his ears. UBS had been cornered by the IRS, grudgingly admitted its wrongdoings, signed a Deferred Prosecution Agreement, and promised to pay $780 million in fines. However, even though the IRS had then pursued UBS to force them to reveal the names of 19,000 American account holders, and the bank had promised to do that, they were now retreating under cover of “Swiss banking laws.”

  But what really enraged Levin was that Mark Branson, during the summer session, had offered up that figure of 19,000 names as a firm and final number. As Levin and his staff had already discovered from my testimony, the real number was more like 52,000 American accounts! Worse than that, since August, six months earlier, when UBS had promised to cooperate by revealing a “substantial number” of its US account holders, the bank had turned over a mere twelve names!

  It was a shit show. I watched with my feet propped up and a bowl of popcorn on my lap. The gloves were off, and Levin, McCaskill, and Coburn ripped into Branson for now behaving exactly like what he really was: an arrogant stooge and apologist for UBS. Levin actually said, “The only conviction so far in this matter is that of Bradley Birkenfeld, the informant!”

  Branson ignored that and deflected ninety percent of the senators’ questions about UBS’s crimes against America, claiming, “I have no knowledge of that, since I’ve only been in this position for a year.” How convenient for UBS to send an until-then Japan-based employee to answer to Congress for Swiss activities he was not familiar with. Then he stated that the bank would pay the agreed-upon fines, but it wasn’t going to turn over even one more name unless compelled to do so by the Swiss government. “The payment of fines is a legal matter that has been resolved in court,” Branson sneered. “In regard to the account holder names, that is a matter of negotiations between statesmen.” UBS was praying its government, embracing Swiss privacy laws, would save its hide from disclosing an embarrassing list of client names.

  I thought Levin was going to take his gavel, spin it across the room, and embed it in Branson’s head. After four hours of ugly exchanges, Levin finally adjourned with barely polite formalities, but the message was clear: “We’re going to burn your Swiss asses. Now get the hell out of my chambers!”

  I hadn’t enjoyed a courtroom drama that much since A Few Good Men.

  As with every great courtroom drama, the most fascinating aspects were those going on behind the scenes: the heated arguments between battling attorneys, the blood-pounding pressures on defendants and victims, and the sub rosa deals. The Swiss secret banking crime and corruption scandal was a blazing firestorm across the world’s financial markets, but it was merely the surface. Way down below, powerful people were cooking the books.

  On March 6, newly minted US Secretary of State Hillary Rodham Clinton arrived in Zurich for secret talks with her counterpart, Swiss Foreign Minister Micheline Calmy-Rey. Ms. Calmy-Rey was no doubt agitated, as Switzerland’s two largest banks, UBS and Credit Suisse, were under assault by American authorities. UBS, with more than 80,000 employees worldwide and hundreds of billions in assets, was hemorrhaging value like a freshly slaughtered steer. The bank’s stock had just hit an all-time rock bottom of $7.45 per share, free-falling ninety percent, and it was staring at a charge-off of $53 billion. Calmy-Rey begged her power-sister Clinton for a break. If UBS had to cough up 19,000 American account holders, the rest of its clients would jump ship and drag Switzerland’s largest bank to destruction.

  Apparently Secretary Clinton had a few creative ideas. Her new boss, President Barack Obama, had made a campaign promise to at last close down the terrorist prison christened by George Bush at Guantánamo Bay, Cuba. Clinton, ever the political expedient, probably didn’t express how much she despised Obama (she and her husband had made a devil’s deal; Bill would support Obama’s candidacy, and Obama would make Hillary Secretary of State, and from that power perch she’d make her hard drive for the presidency, whenever Obama finally got sick of the job). Secretary Clinton suggested perhaps Micheline would consider accepting some low-level terrorists from Guantánamo and resettling them quietly in Switzerland. Just a couple of Chinese Uighur Muslim fellows captured in Afghanistan—basically harmless. Oh, and Obama was also interested in opening up a secret dialogue with the Ayatollahs of Iran. Since the United States had no embassy in Tehran, US interests were represented there by none other than the Swiss. Perhaps the Swiss could put some pressure on Tehran to release an imprisoned American citizen, and in turn Obama would start work right away on denuding those silly sanctions imposed by the Bushies over Iran’s nuclear ambitions. After all, everyone deserved a fair shot at energy independence. The Israelis would freak, but Obama, being the admiring son of a rabid anti-colonialist, didn’t much care for them anyway, and he had all those left-leaning American Jews in his pocket. Clinton suggested to Calmy-Rey that those small gestures weren’t too much to ask in return for a little leniency on this whole UBS scandal (at the direct expense of the American taxpayers).

  Micheline Calmy-Rey promised to think about it, and Hillary Clinton flew off to her next international television appearance. Lo and behold, shortly thereafter, a pair of Chinese Uighurs found themselves blinking in the Swiss springtime sun. A couple of months later, an American hostage in Iran, Roxana Saberi, found herself doing the same in New York. Miraculously, the IRS and Department of Justice gave UB
S a stay of execution, while Calmy-Rey informed UBS that they’d better come up with some American account holder names—lots of names—because Hillary Clinton had just saved their asses.

  I wonder if Clinton was concerned that some of her billionaire friends might get burned, if and when UBS surrendered.

  None of us American taxpayers had a hint of what was going on at the time. Ms. Clinton’s under-the-table deals with the Swiss wouldn’t come out until another whistle-blower, Bradley Manning, dumped thousands of classified US government emails and cables all over the Internet. Included among those were just a few State Department after-action reports about Clinton’s quid pro quo with UBS and the Swiss. Whatever further discussions on the subject she had with Calmy-Rey were gone forever, because she’d sent them from her own private email server at home, and then had them destroyed. Nothing to see here, folks. Move along.

  Even more jaw-dropping revelations would come out later about UBS’s expression of gratitude for Hillary’s intervention. Up until 2008, UBS had only made small donations to the Clinton Foundation, which brags that its mission is to “convene businesses, governments, NGOs, and individuals to improve global health and wellness, increase opportunity for girls and women, reduce childhood obesity, create economic opportunity and growth, and help communities address the effects of climate change.” From my observations, the Foundation, while contributing a small portion of its buckets of donated funds to worthwhile causes, is really a Clinton mini-state, which overpays hundreds of employees to lock in their loyalty and boldly purchases political influence where no man has gone before. At any rate, prior to Clinton’s deal with Calmy-Rey, UBS had only seen fit to contribute $60,000 to the Foundation, an amount that wouldn’t even cover the bank’s annual parking tickets. Afterward the Clinton Foundation’s cash registers rang up $600,000 in UBS gifts. The bank also decided to partner with the Foundation on some inner-city development programs, issuing a $32 million loan at very reasonable rates. Oh, and suddenly UBS also thought that Bill Clinton would make a very fine paid speaker about global affairs, so they paid him $1.52 million for a series of fireside chats with the bank’s Wealth Management Chief Executive, Bob McCann. It was Bill Clinton’s biggest payday since leaving the office of the presidency.

  But that’s not necessarily tit-for-tat, a quid pro quo, is it? I mean, let’s say you’re a local small-town legislator and your local bank’s having some zoning issues with the town council. You step in and fix the problems, and just by coincidence, the bank turns around and donates thousands to your favorite charity, then partners with that charity to finance its projects, and then pays your politician husband the value of a mansion just to have him sit down for coffee with the bank president. That couldn’t be considered bribery, could it? I mean, no one would even raise an eyebrow in your district, right?

  You’d be in fucking jail.

  Anyway, none of Hillary’s Mafia-style antics would come out until long after 2009. In the meantime, since no one knew she was massaging the shoulders of Micheline Calmy-Rey, UBS was still in a nosedive. Outraged Swiss citizens, banking customers, and UBS shareholders started calling for heads to roll. Marcel Rohner and Peter Kurer had already fallen on their swords, and on March 17, two more top managers, Michel Guignard and Daniel Perron, were publicly fired. On April 1, UBS closed down its “Art Banking Department” (no more Rodin exhibits or Art Basel extravaganzas, boys). Right after that, if you’d happened to be looking up at the windows of Doug’s condo, you might have spotted me dancing a jig. Christian Bovay had just been dumped on the street like a drunken sailor. Fired. Gone. You’re welcome, Valerie! Just think, if Christian hadn’t blown me off about that Three-Page Memo, you probably wouldn’t be reading this story. The Swiss should have marched him out to a firing squad, without a blindfold.

  On April 2, the G20 Summit on Financial Markets and the World Economy was held in London, bringing together heads of state, finance ministers, and central bank governors from twenty of the world’s largest economies. For the first time in history, Switzerland was placed on the summit’s “gray list,” which meant the country’s economic status was now shaky at best. In effect, it was a public slap in the face for being naughty boys.

  On April 15, UBS held its annual shareholders’ meeting in Zurich. I wish I could have been there along with a couple of clowns, but my friends who attended told me it was nearly a free-for-all, with shareholders screaming at UBS managers and tearing up their annual reports, which weren’t worth the high-grade paper stock they’d been printed on. Five days later, trying to reinject some value into its tumbling share prices, the bank sold off its entire Brazilian offshore private banking operations. The sale brought in $2.5 billion, but it still wasn’t enough. The bank had just posted a “larger-than-anticipated” loss of $1.7 billion for the first quarter. In other words, “We’re fucked.”

  Well, not so much, because George Bush’s Treasury Secretary Hank Paulson, Fed Chairman Ben Bernanke, and New York Fed President Tim Geithner were already playing fast and loose with hundreds of billions in TARP bailout money. Interestingly, Geithner’s peccadilloes regarding his own personal finance didn’t faze Obama when it came time to appoint Paulson’s successor at the Treasury. “Turbo-Tim” failed to pay $35,000 in Medicare and payroll taxes during his employment at the International Monetary Fund from 2001 through 2004, a lapse that was accidentally discovered during an IRS audit. Tim blamed the “error” on his tax software: “Turbo-Tax did it.” The new Democrat-controlled Congress nevertheless ignored Geithner’s “eye-twitch” and confirmed his appointment.

  One of the biggest benefactors of Paulson, Bernanke, and Geithner’s $700 billion shell game was AIG, the mega insurance firm designated “too big to fail.” One hundred eighty billion dollars was funneled to AIG, and AIG turned around and slipped $100 billion of that to twenty of its foreign bank business partners.

  Want to guess who got a huge chunk of your hard-earned and squeezed-from-your-savings-account taxpayer money? That’s right: UBS. AIG slipped UBS a cool $5 billion from the bailout received. And nobody knew about it. It didn’t come out until Geithner was forced to divulge exactly how he’d spent the people’s money. But that’s why UBS wasn’t too worried about having to write a check for $780 million to the IRS. In public, they cried and whined and had tantrums about it. In private, they were laughing their asses off. Another “deal of the century,” and the American taxpayer gets screwed (again).

  As the old saying for UBS goes, “You and Us.”

  Meanwhile, as I was watching this circus from the bunker in Boston, my new defense attorney, David Meier, kept petitioning the Florida court to at last set a sentencing date for my case. Downing delayed it again and again without even a blush. A facile and expert bullshitter, he kept claiming that more evidence regarding my case was still forthcoming, which was incredulous since I happened to be the only witness he had who knew anything about it. So I just kept working on my whistle-blower award tactics with Steve Kohn and Dean Zerbe, while David Meier went around soliciting compliments from government officials about how, without my testimony, they would never have been able to nail the Swiss.

  But Hillary Clinton had already made damn sure that the Swiss wouldn’t really suffer. Micheline Calmy-Rey had promised to pressure UBS into turning over a big chunk of those 19,000 names. In turn, UBS at last came up with a list.

  On April 30, 2009, in a district court in Florida, UBS finally responded to the “John Doe” summons and turned over the names of 4,500 American secret account holders. That’s 4,500 out of 19,000 American account holders; you do the math. The list was cherry-picked; no one of any significance was on it. They were all trust-fund babies, doctors, small-business owners, and self-made millionaires. No politicians, power players, campaign fund-raisers, defense contractors, or lobbyists. Sacrificial lambs. It was a whitewash, and a super-slick deal for UBS as well as the account holders. Their names would remain anonymous, as long as they came in through the IRS voluntary discl
osure program, repatriated their cash and securities, and agreed to pay penalties and fines to the IRS. The recovered assets would accrue to $12 billion and counting; American money returning to American banks.

  In all modesty, I brought that money back in. You’re welcome, America. Happy to help.

  But UBS had already paid its $780 million penalty. They couldn’t be tried all over again and have their punishment recalculated. Double jeopardy, you know. Hillary Clinton and Micheline Calmy-Rey’s secret arrangement had produced nice results for all parties involved, and now it was all tied up with a pretty bow. UBS must have had a party in Zurich. “You Only Pay Once.”

  Kevin Downing kept me hanging, but I didn’t mind all that much. I was still a free man, and in some ways I felt like the last man standing after an Old West gunfight. I’d watched with satisfaction as my former UBS bosses fell from their perches, one after another, and the bank was forced to give up its dirtiest business forever. In terms of penalties, they hadn’t paid nearly enough for my liking. But in terms of stock value they’d taken a beating, and their arrogant chins now drooped to their chests. Over $200 billion had been withdrawn from the bank by account holders. The stock options held by the senior executives were tied to the bank’s stock price, so they were now worthless (I’d cashed my stock in a long time ago, when it was still riding high). As for their reputation as the bank of choice for secret numbered accounts, they were finished, over, well done; stick a fork in it. No American on earth was ever again going to ask UBS for a comfy elevator ride down to their magnificent vaults. And I knew that more bad news was coming. The bank had been scamming plenty of other countries with the same tax fraud schemes, and those countries had now witnessed America getting its payouts. France and Germany were already waking up, just cranking up their investigations. UBS was just in the eye of the storm, getting a little breather. But the back half of the hurricane loomed on the horizon. Things were going to get a lot, lot worse.