As fresh revelations about the banking secrets of the world’s wealthiest individuals continue to emerge from the so-called Panama Papers data leak of last April, David Roberts finds the just-published, tell-all tale of the central figure in an earlier tale from the world of banking secrecy – UBS’s American whistleblower Bradley Birkenfeld – page-turning.
In Lucifer’s Banker: The Untold Story of How I Destroyed Swiss Bank Secrecy, Bradley Birkenfeld, pictured, gives us a fast-paced, colloquial account of the unraveling of Switzerland’s legendary banking secrecy web. It is certainly entertaining, which isn’t always what one expects to find in a book about banking.
For those who weren’t following the saga of Switzerland’s banks and the beginning of the end of their secrecy culture in 2008, Birkenfeld was a banker who specialised in looking after wealthy clients, first with Credit Suisse, then Barclays, and finally with UBS, where he was based in Switzerland. And it’s here, on the leafy, private-bank- and designer-boutique-studded streets of Geneva, that his extraordinary story begins.
As a managing director of UBS Wealth Management, Birkenfeld was in charge of identifying and signing up ultra-high-net-worth individuals, principally North Americans, as clients. What that meant effectively was that his clients would move substantial sums of cash into numbered bank accounts held by UBS in Geneva. In some cases these deposits amounted to hundreds of millions of dollars.
Additionally, the bank was happy to accept portable “real assets” of all kinds: artwork, jewellery, gold bullion. Safely hidden from the prying gaze of the US Internal Revenue Service, in four subterranean floors of safe-deposit boxes, clients’ principal, income, and capital gains grew tax-free.
This acquisition and servicing of the bank’s clients, as Birkenfeld tells it, involved plenty of non-stop, front-of-the-plane travel; high-end resorts; lavish entertaining, and, inevitably, Ferraris. And women. All of which he describes for us in detail.
For four years, in fact, he says, he lived the high life on company expenses, while pocketing 18% of the monies he brings in to UBS.
Then, in around 2005, things began to sour for our Brad. First, there is conflict with his disagreeable boss, who tries to short-change him on his annual bonus (he doesn’t get away with it, of course).
More important is the discovery of what Birkenfeld calls “the Three Page Memo”, revealed to him “one early evening in April 2005” by a Scottish colleague as he sits at his desk. Issued by UBS’s Legal and Compliance Department in the US, and buried deep in the company’s intranet, it’s dated six months earlier.
Birkenfeld is shocked to see this as, clearly in response to increased US regulatory scrutiny, it sets out … “a dire warning to all Private Wealth Managers on the Americas Desk”.
“PWMs shall not travel to the Continental United States for the purposes of seeking out our American clients”, Birkenfeld reads.
“PWMs shall not propose products which fall outside the legal parameters of US tax regulations … PWMs shall not engage in subterfuge while soliciting clients with marketing proposals in order to acquire Net New Money.”
Writes Birkenfeld, describing the moment of realisation, as, hands trembling, he scans his computer monitor, and the course of his life changes forever: “In other words, ‘PWMs for UBS shall not do all the things we’ve been telling you and paying you to do for years, over and f****g over!’”
This treachery on the part of his employer – which had never distributed the memo to staffers, but merely posted it in an obscure part of the intranet – coupled with his growing distaste for the whole tax evasion construct, galvanises Birkenfeld into action.
He leaves UBS with a lorry-load of evidence: next stop, the US Department of Justice.
His reception there proves to be less than enthusiastic, despite the fact that Birkenfeld has detailed information on the 19,000 (later revised upwards to 53,000) US accounts held by UBS in Switzerland.
The DOJ, we learn, is sceptical of Birkenfeld’s motives, choosing to believe that he is purely after the financial reward recently introduced to encourage whistleblowers.
And so it is that despite an estimate in 2008 that the US Treasury was losing US$100bn a year in tax revenues from offshore tax abuses, the DOJ will neither grant Birkenfeld immunity from prosecution, nor issue the subpoena for him to testify which he needs to avoid Swiss legal proceedings against him.
Turning eventually to the US Senate, he gets the subpoena he needs from the Permanent Subcommittee on Investigations, and becomes a star witness. This doesn’t deflect the vindictive DOJ, however, which secures a 40-month jail sentence, plus a further three years’ probation, for conspiracy to defraud the US Treasury.
Prison is something the adventure-loving author, (who earlier tells us of the “powerful” influence his Battle-of-Iwo-Jima-war-hero Uncle Don had been growing up), naturally takes in his stride.
“They could have locked me up in solitary again, but truth be told, I intimidated the hell out of the staff,” he writes at one point, and later, “(Prison) was pretty smooth sailing once I set them all straight”.
Towards the end of his time in the lock-up, he learns that the IRS is awarding him a whistleblowers’ award of US$104m, which will no doubt have helped make the 31 months he spent in prison seem more bearable.
This is a fascinating tale, albeit, in places, told in somewhat comic book fashion. Still, it is an engaging read, starring a larger-than-life central character (who also happens to be 6ft 4in, we learn in the book’s second paragraph) with boundless self confidence.
Along the way, much light is shed on the clandestine world of numbered accounts, murky practices and the US system of justice.
Lucifer’s Banker: The Untold Story
of How I Destroyed Swiss Bank Secrecy
By Bradley C. Birkenfeld
Greenleaf Book Group, 344pp
October 2016
Hardcover
ISBN: 9781626343719
List price, UK: £23.50 (US: $26.95)
To read about a recent appearance Birkenfeld made, to speak before a London audience of financial services executives about his experiences – in which he urged his audience to come forward themselves and blow the whistle themselves, if they were in a position to – click here.
To view an exclusive International Investment video interview of Birkenfeld, conducted after his London talk, click here.
This book review was originally published in the December/January issue of International Investment magazine.
