Q. At UBS you were a well-paid star, earning far more than your peers, thanks to the deal you negotiated as a condition of your hire—namely, that you would receive a share of the return on assets from any “Net New Money”—money you brought in from new clients. Did any of your friends know then about your sweet deal? Did you make more money than burglar-tool-teeth Bovay, your boss? If so, do you think that contributed to his dislike of you? Or was his aversion due to the way you got that deal through?
A. There is little question that my compensation contract roiled virtually every UBS executive who was aware of it—not because there was anything untoward about it, but simply because I was more effective than they ever imagined possible. It was an unprecedented employment contract for a Swiss private banker, and it was pulled off by one of “them”—an American—another thorn in their side.
Q. What became of Valerie, your loyal secretary whom Bovay stole from you and then failed to pay her the proper salary and bonus?
A. Valerie is now happily married with two children, living in Switzerland.
Q. You aren’t afraid to tell the truth, Bradley, even when it paints you in a less-than-ideal light. So forgive me for asking this, but can you tell us what your primary motive was for blowing the lid off UBS’s practices and Swiss bank secrecy? Was it to retaliate against Bovay, who clearly had it in for you?
A. It is very important to keep in perspective the events that eventually led to my historic whistle-blowing. While Christian Bovay was clearly a thorn in my side, he was simply a bitter man, resentful and envious of my success, but not loath to take the credit for the success I helped bring to his unit. I had a strong contract in place, and he had limited scope to cause me any harm. I had certainly dealt with more devious characters in the past.
As I mentioned earlier, there was also growing unease with the motivations of many of the bank’s clients for opening accounts. As I worked principally with Americans with legitimate business interests, the gnawing ethical dilemma was related to tax obligations. But to be quite clear, I was a banker, not a tax consultant; the client was and still is responsible for their tax obligations. Avoiding taxes arguably competes for the title of the world’s oldest profession, raises many ethical dilemmas, and was a battle I was not lobbying to become the poster boy for.
The discovery of the “Three-Page Memo,” hidden deep in the bowels of the UBS intranet where no banker would be able to find it, was the trigger for my historic actions. The memo defined the principal activities of our group as prohibited. The firm was prepared to continue to reap the rewards of our efforts, but if ever challenged by authorities, it would be able to point to the memo and argue our efforts were not sanctioned and thus it would not stand behind the efforts of those “rogue bankers.” They would hang us out to dry! This was not a philosophical dilemma. The bank understood they were putting us in legal jeopardy; they did not inform us; and they would be easily able to wash their hands of our efforts.
My first action after uncovering the memo was to raise questions directly with UBS legal and compliance. After getting no responses from my repeated written requests, I realized the bank was not prepared to acknowledge the seriousness of the situation; they were happy to continue with the status quo, which placed us bankers at grave legal risk. Based on recommendations of Swiss counsel, I then tendered my resignation and escalated the concern directly with the executive team and board of directors of the bank, invoking UBS’s very own whistle-blower policies. At this point the general counsel called for an internal investigation, and after cursory effort, came to the conclusion my concerns were primarily the result of misunderstandings: There was no admission our unit had been charged to perform illicit activities. This was my motivation to then approach US authorities and eventually become a US whistle-blower.
Others have argued my whistle-blowing was motivated by the prospects of receiving a substantial reward. What they conveniently forget is the whistle-blower law that eventually compensated me was not in place when my saga began; even after I applied as a whistle-blower, long after I initially blew the whistle on UBS in Switzerland, the prospects of ever collecting any reward were very remote, given the statutory standards and the difficulties experienced by whistle-blowers in other programs. Not to mention, I received a very hostile response after I first contacted the Department of Justice. But I persevered and continued to provide information, despite knowing that rather than receiving an award for my historic testimony, I ran the real risk of being incarcerated. Which of course I was: I spent thirty-one months in a federal penitentiary for uncovering the largest, longest-running tax fraud in US history; and, to date, no other UBS bankers have been jailed for this fraud.
So, no, my whistle-blowing testimony was not driven by a change in conscience relating to my clients’ potential tax avoidance. It was driven by UBS implementing and promoting an illegal business plan, hiring me and my colleagues as unknowing agents, and then making clear their intention to disavow any responsibility for our actions. Simple as that. A collateral benefit of my whistle-blowing is that the US Treasury has been able to recover $12 billion and counting in taxes, fines, interest, and penalties from clients who had evaded their obligations for years. So while tax-avoidance practices of private clients had been gnawing at my conscience, it was my whistle-blower actions against UBS that directly led to the substantial amounts collected from tax-evaders and their enablers.
Q. It’s impossible to read this book without imagining it as a movie—partly because you write the scenes so well and give us a great cast of characters. So when that day comes, who would you like to see up on the silver screen in the role of Bradley Birkenfeld? How about actors portraying other people in the story?
A. I really haven’t thought about who should portray these people in a possible film. But I certainly won’t allow somebody with a fake, unnatural Boston accent to play me in any possible film. A real Boston accent is like having swagger: you either have it or you don’t. As the first Swiss private banker to have exposed this epic saga, the basis for a hard-hitting exposé has been laid.
Q. What did you learn in all this? If you had to do it over, would you blow the whistle on UBS? Would you do it sooner? Clearly you’d have avoided the DOJ—or maybe not, despite the grimness of solitary confinement?
A. I certainly would do it all over again if I had the chance. My efforts brought more than $12 billion (and counting) into the US Treasury and exposed thousands of tax cheats who thought they were above the law. New tax laws were passed and new tax treaties were ratified as a direct result of my whistle-blowing efforts. I destroyed Swiss bank secrecy, which was thought for years to be impregnable. The one thing that I would do differently would be to bypass the Department of Justice. I’ve now witnessed their corruption from the inside. Of the many things the prosecutors were seeking, justice was not one of them.
Q. Have you looked at the recently revealed “Panama Papers” detailing offshore accounts? Any names you found familiar? Will there be more such revelations, in your view, from other places around the world?
A. I am aware of the news accounts about the Panama Papers scandal. One name that was reported as part of that story was none other than that convicted tax felon Igor Olenicoff. My goodness, that Igor certainly gets around!
The Panama Papers were files from a single law firm, Mossack Fonseca, a meaningful player in the offshore trust world. There are sure to be future disclosures involving other law firms, accounting practices, and banks. In a similar but separate vein, Lux Leaks (also uncovered by the ICIJ, the International Consortium for Investigative Journalists) disclosed files detailing the preferential tax treatments that major multinational corporations were able to secure from Luxembourg to reduce their European tax bills. It’s not just individuals who have an aversion to paying their taxes!
Q. And yet, despite cracking down on UBS and the offshore accounts that keep the rich from having to pay taxes, isn’t the United States still a country of tax laws
that favor the wealthy? Warren Buffett is outspoken about the fact that he, a multibillionaire, pays a lower percentage in income tax than does his lower-paid secretary. How much closer have we come to real tax equity—toward helping out that hardworking American you thought about when you decided to blow the whistle?
A. Rich and powerful people, both inside and outside the United States, clearly play by a different set of rules than do most people. I’m not endorsing it; I’m just recognizing this reality. My whistle-blowing efforts forced many of these people out into the open, into clear view, and many were held accountable. To that extent, I did my share to help level that playing field—while also bringing more offshore money back into the US banking system than any other individual in history.
Q. Any final words for your readers?
A. It’s a known historical fact that Switzerland has never been successfully invaded … until I came along.
ABOUT THE AUTHOR
BRADLEY C. BIRKENFELD is a retired financial industry professional renowned as the most significant financial whistle-blower in history.
Birkenfeld began his banking career in Boston. From there, he moved to Europe and established himself as a successful private banker for Credit Suisse, Barclays Bank, and UBS. In 2005, he objected to UBS management about the illicit practices of its private bankers serving high-net-worth American clients who engaged in tax fraud. Rebuffed by UBS management, Birkenfeld then contacted American authorities, starting the process by which his bombshell revelations helped the US Treasury recover over $12 billion in back taxes, fines and penalties from American tax cheats.
The Birkenfeld case commenced a broader crackdown on tax fraud by European governments. These strikes against Swiss bank secrecy after Birkenfeld’s case resulted in a monumental change in the regulatory and enforcement environment, causing changes previously unimaginable before “L’Affaire Birkenfeld.” Switzerland yielded to pressure from US and European governments to impose stricter bank regulations. As a result of Brad’s historic whistle-blowing, the risks and costs to financial institutions that support clients’ tax evasion, fraud, corruption, and terrorist activities have increased dramatically.
Birkenfeld holds a BS in economics from Norwich University and an International MBA from the American Graduate School of Business in Switzerland. He is dedicated to supporting whistle-blower initiatives exposing and eliminating fraud. An avid Boston Bruins fan and major memorabilia collector, assisting the team’s efforts to help disadvantaged children ranks high among his philanthropic endeavors.
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