Inside the Cartel: Bradley Birkenfeld

In October 2001, Bradley Birkenfeld began working at ubs, in Geneva, as a private banker for high-networth clients primarily in the United States. After learning that ubs’s secret dealings with American customers violated an agreement the bank had reached with the Internal Revenue Service (irs), he attempted to solve matters with ubs internally for approximately a year and a half. After these efforts failed, he resigned and provided the irs with information about 19,000 alleged tax cheats with accounts worth more than $19 billion—the largest whistleblower case of its type ever exposed.

However, the Justice Department did not view Birkenfeld as being forthcoming about his largest client, a Russian émigré and California real-estate developer, who was convicted of having hidden some $200 million. Though Birkenfeld voluntarily disclosed information about this client to other government agencies (which issued him a subpoena that protected him from prosecution for violating Swiss bank secrecy laws), the Department of Justice refused to issue Birkenfeld such a protective subpoena, even after repeated requests. Arrested on a single charge, he pleaded guilty and was sentenced to 40 months in a federal penitentiary, a stiffer sentence than the 30 months demanded by prosecutors. On January 8, he entered a federal penitentiary, where he wrote this note for World Policy Journal.

MINERSVILLE, PA—Switzerland has been revered as the epitome of safety, luxury, and privacy for centuries. This is a small mountainous country, nestled in the center of Europe, composed of 7.6 million inhabitants with four official languages. Switzerland has vigorously defended its independence from its inception in 1291 and has never been successfully invaded. More recently, Switzerland has refused admission into the European Union as well as the European currency as unnecessary. It is world renowned for gourmet cuisine, luxury watches, pristine ski resorts, and, most notably, bank secrecy.

Swiss bank secrecy was implemented into law under Article 47 of the Swiss Banking Act of 1934. This was done in direct response to thwart the dubious measures taken by the German Third Reich to execute any German who transferred any monies outside the country. In the years immediately following World War II, international business expanded rapidly, foreign governments imposed taxes, illegal enterprises evolved globally, and the attraction of Swiss bank secrecy began to quietly thrive worldwide.

With the expansion of criminal conduct in the world (including, but not limited to: intelligence agencies, corrupt dictators, drug cartels, arms dealers, corporate malfeasance, individual tax dodgers, etc.) Switzerland was the ideal offshore jurisdiction to deposit, shield, and invest illegal assets, due primarily to strict bank secrecy laws, an ingrained culture of deniability, and the lack of any accountability or transparency. Today, in Geneva, there are over 120 licensed Swiss private banks for a population of approximately 200,000 residents, which equates to one bank per 1,666 residents.

The Swiss government, private banks, and businesses have all benefited directly from this massive illegal enterprise. If the Swiss government was truly serious about prosecuting senior executives at ubs for their extensive illegal conduct, that would mean investigating itself, an inherent conflict of interest and something that has proven to be a total farce. In essence, bank secrecy is analogous to criminal racketeering—and the Swiss government, along with every Swiss private banker, is a co-conspirator.

In 2007, I voluntarily approached the U.S. Department of Justice (doj), the Securities and Exchange Commission (sec), the irs, and the Senate Permanent Subcommittee on Investigations with everything I knew about the Swiss banking industry. I became the very first Swiss private banker in history to reveal to the outside world the inside secrets behind these illegal practices. I outlined in great detail how the illegal ubs enterprise was operated, who was directing the enterprise, and how they tried to conceal what they were doing for so long from U.S. law enforcement authorities. In the summer of 2007, I voluntarily provided virtually every essential and material fact contained within the now-famous “John Doe” summons to ubs. I revealed tax evasion on a massive...