Last Friday, The Wall Street Journal reported that while its amnesty program for tax cheats is coming to a close, the IRS will continue its decade-long investigation of income tax evasion by tens of thousands of American billionaires and millionaires holding secret offshore accounts in Switzerland or otherwise. The program’s success, WSJ noted, was partly owned to one UBS bank whistleblower, Bradley Birkenfeld, who exposed his bank’s industrial scale criminality and helped recoup some over $780 million in owed taxes from UBS for the government.
Birkenfeld was awarded $104 million by the government for his efforts. What was unsaid, however, even more astonishing: they awarded him after sending him to prison for two years. This despite all of his game-changing disclosures, which not only included the massive UBS corruption but helped expose schemes totaling some $17 billion from the most powerful banks in the world.
As we’ve seen with the federal government so many times—no good deed goes unpunished in this town.
An American citizen, Birkenfeld became a senior level employee in 2001 at UBS after several shorter stints at Credit Suisse and Barclays Bank in Geneva. He both witnessed and facilitated income tax evasion by countless one percenters through marketing and managing UBS numbered accounts then protected by Swiss bank secrecy laws. The Swiss banking system was nothing less than an urbane version of organized crime. But it had escaped scrutiny by United States law enforcement authorities. Money talks in politics. And one percenters and Too Big To Fail banks characteristically underwrite political campaigns and politicians.
Like Paul on the way to Damascus, Birkenfeld became conscience stricken in 2006. Before congressional enactment of a whistleblower awards program, he decided to unbosom UBS’s conspiracy with tens of thousands of one percenters to evade income taxes. Without invoking the Fifth Amendment privilege against self-incrimination or asking for immunity, Birkenfeld shared with the United States Department of Justice, the Internal Revenue Service, the Securities Exchange Commission, and the Senate Permanent Subcommittee on Investigations a treasure trove of documents and testimony implicating UBS and tens of thousands of one percenters in criminal tax evasion and sister crimes. Birkenfeld, the field marshal of whistleblowers, singlehandedly revolutionized offshore banking and catalyzed the recovery of more than $17 billion by the United States government based on secret offshore accounts. Aside from the UBS contribution, the Credit Suisse Group gave back a total of $2.6 billion.
On August 21, 2009, before the United States District Court for the Southern District of Florida, Assistant United States Attorney Kevin Downing volunteered:
Without Mr. Birkenfeld walking into the door of the Department of Justice in the summer of 2007, I doubt as of today that this massive fraud scheme would have been discovered by the United States Government.
[B]y allowing us to begin our investigation back in June of 2007, that investigation now has resulted in not only changing the way in which we obtain foreign evidence from banks in Switzerland, it has caused the Swiss government to come and enter into new tax treaties with the United States Government through which the United States Government will now obtain information in civil tax cases which never happened before and more readily obtain them in criminal cases.
…It has now led the investigation into other Swiss financial institutions and financial institutions in other tax havens.
…There is approximately 150 United States taxpayers under investigation as a result of the initial disclosures made by Mr. Birkenfeld about this massive tax fraud scheme perpetrated by UBS and others.
I have no reason to believe that we would have had any other means to have disclosed what was going on but for an insider in that scheme providing detailed information, which Mr. Birkenfeld did.
The assistant United States attorney praised Birkenfeld’s assistance as “timely, significant, useful, truthful, complete, and reliable.” That praise was echoed in letters authored by Senator Charles Grassley, then-ranking member of the Senate Finance Committee; Senator Carl Levin, chairman of the Permanent Subcommittee on Investigations; the Enforcement Division of the Securities and Exchange Commission; and the Office of Legal Counsel of the Internal Revenue Service.
But now the surprise O. Henry ending. Birkenfeld was prosecuted by President Barack Obama’s Department of Justice headed by Attorney General Eric Holder for aiding and assisting tax evasion. He was sentenced to 40 months imprisonment instead of haloed as the slayer of the offshore banking dragon, and did his time from 2010-2012. Corrupt politics and money explain this coup de theatre.
The Obama administration refrained from pursuing criminal charges against UBS and other banks and one percenters that Birkenfeld had ignited. Attorney General Holder had previously represented UBS at Covington & Burling. He testified before the Senate Judiciary Committee his tenderness for giant banks: “It does become difficult for us to prosecute [megabanks] when we are hit with indications that if we do…bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy. It has an inhibiting influence, impact on our ability to bring resolutions that I think would be more appropriate.”
UBS contributed $600,000 to the Clinton Foundation and paid former President Bill Clinton $1.5 million in speaking fees while Hillary Clinton served as Secretary of State. In that capacity, Ms. Clinton agreed to leniency for UBS, Credit Suisse, and their marquee American clients with Swiss Foreign Minister Micheline Calmy-Rey in exchange for Switzerland’s acceptance of two Chinese Uighur detainees at Guantanamo Bay and negotiating with Iran for the release of American Roxana Siberi.
Birkenfeld uniquely has served prison time for the offshore banking scandal implicating tens of thousands of one percenters—like prosecuting Oliver Twist while leaving Fagin’s school of thieves undisturbed. Congress and the Trump administration should be investigating this flagrant injustice.
Bruce Fein was associate deputy attorney general and general counsel of the Federal Communications Commission under President Reagan and counsel to the Joint Congressional Committee on Covert Arms Sales to Iran. He is a partner in the law firm of Fein & DelValle PLLC.