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2010-01-07

Why Is the Whistleblower Who Exposed the Massive UBS Tax Evasion Scheme the Only One Heading to Prison?

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A former banker for the Swiss giant UBS who blew the whistle on the biggest tax-evasion scheme in US history is preparing to head to prison tomorrow to begin serving a forty-month federal sentence. Bradley Birkenfeld first came forward to US authorities in 2007 and began providing inside information on how UBS was helping thousands of Americans hide assets in secret Swiss accounts. We speak with his attorney, Stephen Kohn, the executive director of the National Whistleblowers Center. [includes rush transcript]

Transcript

This is a rush transcript. Copy may not be in its final form.

JUAN GONZALEZ:

A former banker for the Swiss giant UBS who blew the whistle on the biggest tax evasion scheme in US history is preparing to head to prison tomorrow to begin serving a forty-month federal sentence.

Bradley Birkenfeld first came forward to US authorities in 2007 and began providing inside information on how UBS was helping thousands of Americans hide assets in secret Swiss accounts. UBS pleaded guilty last February and paid a $780 million fine. UBS has also agreed to turn over the names of the nearly 4,500 of its American clients to the Justice Department. That’s only a portion of the 19,000 it claims the secret accounts of Americans it held. Meanwhile, thousands of other Americans with unreported offshore accounts have been allowed to belatedly disclose them and pay civil penalties.

AMY GOODMAN Government prosecutors have admitted the massive fraud scheme would probably not have been discovered without Birkenfeld blowing the whistle on UBS. So why is he the only one going to jail? Prosecutors claim Birkenfeld withheld information on how he had helped his biggest US client, California billionaire Igor Olenicoff, hide hundreds of millions of dollars in assets. Birkenfeld pleaded guilty in 2008 and received a forty-month sentence. His lawyers filed a formal complaint this week with the US Attorney General’s Office of Professional Responsibility, claiming the “main allegations used to secure [Birkenfeld’s] indictment and imprisonment were not based on accurate or truthful information.”

Stephen Kohn is now Bradley Birkenfeld’s attorney. He’s the executive director of the National Whistleblowers Center. He joins us now from Washington, DC.

Stephen Kohn, welcome to Democracy Now! Just explain why Bradley Birkenfeld is going to prison tomorrow.

STEPHEN KOHN:

Well, the prosecutor before the court said Mr. Birkenfeld was going to jail because he failed to disclose in 2007 his relationship with this billionaire, Mr. Olenicoff. Our investigation has shown that statement was not true.

When Birkenfeld met with the Justice Department, he begged them for a subpoena, or other compulsory service, to reveal names of clients, which was illegal under Swiss law. He was living in Switzerland at the time. They wouldn’t. So Mr. Birkenfeld went and asked the Senate Committee on Investigations to subpoena him. They did. Two days after getting that subpoena, in a sworn deposition, he revealed all his information about Mr. Olenicoff onto the record. That was all done in 2007, before Olenicoff was indicted and before he entered any plea. If there was any conspiracy to hold — to hide information about Olenicoff, it was from the Justice Department, that wouldn’t give Mr. Birkenfeld the process he needed to comply with Swiss law. And it was very simple for them to do that. Once he got it, he turned over all the names. He did it before the indictment. So then the prosecutor, to sentence Mr. Birkenfeld to forty months in jail, appears in court and accuses Birkenfeld of withholding Olenicoff, which was not true.

What’s triple outrageous — I’m going beyond double — is that then they recommend thirty months imprisonment for Birkenfeld. He gets forty months, more than probably every single tax cheat, the 19,000 of them that he turned in, will get collectively. Olenicoff, the billionaire, who for twenty years was hiding millions and millions of dollars willfully, got probation. A guy named Liechti, who was Birkenfeld’s third line supervisor in the Swiss bank, who was in charge of all the illegal accounts, who was detained and arrested by the Justice Department, was released and let to go back to Switzerland with no prison time or even a conviction, whereas Birkenfeld, who blew the whistle on the whole scheme voluntarily, is going to serve more time in prison than the worst of the wrongdoers that were involved in holding back $20 billion in illegal accounts.

JUAN GONZALEZ:

Stephen Kohn, I interviewed you at length earlier this week and wrote a column in the Daily News about this case, and I was astounded, as you presented the documents that you have accumulated, your client has accumulated over the years, for over how long a period Bradley Birkenfeld actually tried to get anybody to listen to what he believed was the illegal activity involved here. He first, for a period of more than a year, tried to get his own bank to investigate the situation, finally resigning. Then he goes not only to the Justice Department; he went to the IRS, he went to the Securities and Exchange Commission, as well as — as well as the Senate Investigations Committee. So it appears that he was actually trying to say, “Hey, this is a major, major international fraud operating here that I was involved in,” but the government — until the Senate committee got involved, apparently no one wanted to listen.

STEPHEN KOHN:

Well, what happened was — you’re 100 percent right. The record shows he went to — he was a typical whistleblower. When he read a document, that triggered, and he realized what he was doing was illegal — and even some of it illegal under Swiss law, by the way — he went to his supervisor. And as he tells it, he almost had a fistfight. I mean, they had an argument. That’s typical. He then went to internal compliance. He went to the lawyers. He wrote emails. He then filed an official whistleblower complaint within UBS, all of which was covered up.

He then travels to America. Big mistake. He went to the Justice Department criminal lawyers who do tax fraud. Those folks looked at him as an easy mark. Here’s a guy walking in the door who is giving you information about a massive tax fraud, voluntarily, without immunity. They said, “Oh, we’ll just go throw this guy in jail.” So that’s why they wouldn’t subpoena him or give him immunity or do things necessary to get all the information, because they wanted to get him from the start. It’s clear.

Now, Birkenfeld was a whistleblower. When he detected this hostility from Justice — and, by the way, he met with them for two full days and turned over all the information about the bank. But he detected that hostility, so he instructed his lawyers, and they reached out separately to the Securities Exchange Commission, the Internal Revenue Service and the Senate. And at his own expense — he’s living in Switzerland — he voluntarily flies to the United States and meets with these other groups and makes major disclosures, the same disclosures that he made to the Justice Department about UBS, but also disclosures about the clients.

What’s good about the Senate disclosure is they had a court reporter who took it down. No one can deny it. It has the date. It has the statements. So as the Justice Department has attempted to mislead the public about what Mr. Birkenfeld did and when he did it, there’s a transcript that proves Birkenfeld right.

He was a traditional whistleblower. He did what he did to serve the interest. And what’s incredible is that taxpayers, you and I, are saving billions. As Juan correctly pointed out, UBS paid a $780 million fine. That’s the beginning of it. So far, 14,000 tax cheats — these are millionaires, powerful people who had illegal Swiss accounts —- have all come in and voluntarily disclosed their crimes. Why? They only have to pay a penalty. They don’t go to jail. And their identities remain secret. So there are people who have withheld -—

AMY GOODMAN:

Who are the 4,500 whose names are known, Stephen Kohn? The 4,500 whose names are being made public?

STEPHEN KOHN:

The forty-five — well, we don’t know if they’re going to be made public or not. So far, like twenty names have been turned over. That’s all being hotly contested. There’s issues of Swiss law. The vast amount of turnover so far were through the voluntary program, where people were afraid Birkenfeld may have information about them, so they stepped forward voluntarily. Very few actual names have been turned over by the bank. We hope they all get turned over. We’ll see what happens.

JUAN GONZALEZ:

Stephen Kohn, could you talk a little bit about the extent, how massive this fraud was? Because, as you explained to me earlier this week, every one of these Americans who were holding these accounts had to, on their tax forms every year, check a box. The government required them to say whether they held any foreign bank accounts. And they were not reporting those to the government. So every annual tax form that each of these rich Americans was filing was a fraud. And that the bank actually agreed never to provide any written documentation to their clients, that basically Birkenfeld and all of the UBS bankers, every quarter, came to the United States with encrypted computers to have personal meetings with these clients so they could know what was going on with their accounts?

STEPHEN KOHN:

Yeah, exactly. What you’re saying is completely true. They secretly entered the United States under false pretexts. They had — Birkenfeld didn’t bring an encrypted computer, but the forty-nine others did, secretly met with clients. Birkenfeld laid all this out to the Justice Department. He agreed to wear a wire. He agreed to go — live in Switzerland with the people he hung out with, wear a wire, to tell the Justice Department when these bankers were traveling, what hotels they were staying at. He gave them their cell phone numbers. He pointed them in the direction of how they could learn the identities of these thousands of Americans.

And remember, they’re all very rich people, very powerful people. They could be judges. They could be senators. They’re all rich. They’re all probably very powerful in their local communities. How guilty were they? Just what Juan said. Every year they checked a box that was a lie on their tax form that permitted them to hide millions and millions in assets. Each time they checked that box, they committed a felony. So if they were doing it for fifteen, twenty years, these are large felonies.

They also had this thing called “mail hold.” The Swiss bank would never send them a letter, so no one could ever track it down. It was personal between that millionaire cheater and the bank. And all of their mail would be held in a secret vault. So when they traveled to Switzerland, they could sit and open all their mail, all their receipts, all their statements, and then shred them when they were done looking at them. In other words, the bank was actively facilitating the fraud, but each client was actively engaged. And these were not small frauds. These were major frauds by millionaires and billionaires.

And right now, the American people don’t know who they were. Think of that. Fourteen thousand multimillionaires and, we know, billionaires had illegal accounts for years. They hold positions of authority in the United States. And the Justice Department has essentially given cover to every single one of them. And Birkenfeld explained how you could catch them. And instead of letting Birkenfeld wear a wire, they want Birkenfeld to wear stripes. Instead of letting Birkenfeld go back to Switzerland and help with law enforcement, they’re putting him in jail for forty months, more than everyone else.

I mean, they’re sending a message: if you want to blow the whistle on this level of wealthy and powerful individual in the United States of America, be prepared to go to jail. And what I want to say is, I’m praying it’s an aberration, that this will be fixed, because it will set the cause of whistleblowing back, and that we cannot afford. Whistleblowers detect fraud. They must be encouraged. And an action like this is detrimental to the public interest.

AMY GOODMAN:

Last question.

STEPHEN KOHN:

I also would like just to —

AMY GOODMAN:

Alright, ten seconds.

STEPHEN KOHN:

The last thing I want to say is, the National Whistleblowers Center, on our webpage, whistleblowers.org, you can come on, and you can sign a very simple email letter to the Attorney General asking for a review of Mr. Birkenfeld’s case. I think it’s very important that the public weigh in on this.

JUAN GONZALEZ:

Although Attorney General Holder has had to recuse himself, because he once was a bank — he once was a lawyer for UBS.

STEPHEN KOHN:

Yeah, exactly.

AMY GOODMAN:

Well, we will leave it there. Stephen Kohn, thanks for joining us, and we’ll link to that at democracynow.org. Stephen Kohn, the lawyer for Bradley Birkenfeld and executive director of the National Whistleblowers Center.

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