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Part 4: UBS whistle-blower pays a high price for tipping off US investigators.
NEW YORK — On Oct. 5, 2005, high-flying American banker Bradley Birkenfeld abruptly resigned his plum position in the Geneva office of Switzerland’s premier financial institution, UBS. The sole reason, he said, was his discovery of an internal document that, in his mind, revealed a calculated plan on the bank’s part to disown him, or any one of his fellow cross-border bankers, should the music suddenly stop in UBS’ dubious $20 billion dance with America’s most wealthy.
The offending document was an internal brief from UBS Legal that cataloged cross-border banking activities illegal in the United States, where Birkenfeld and the other private bankers in UBS’ wealth management division routinely made regular prospecting trips for wealthy U.S.-resident clients.
The rub was that – point by point – the list of prohibitions contradicted the fundamentals of Birkenfeld’s job description: No establishing of business relationships “for securities purposes” the document read; no “solicitation of account opening” or “cold calling or prospecting;" and no contacting U.S. clients by “telephone, mail, email, advertising, the internet or personal visits.”
“I’m like, ‘Holy shit, this is a stick of dynamite!’” Birkenfeld said.
While it could hardly have come as a surprise to a sophisticated banker that aiding wealthy U.S. residents in shielding billions in offshore accounts and corporate shells skirted the law, to see the bank essentially disown that business in a formal document raised burning concerns. “It was a sandbag job,” Birkenfeld said.
Though the document was dated November 2004, six months prior to Birkenfeld’s discovery of it, none of the U.S. cross-border bankers had been told to stop what they were doing, Birkenfeld said. Quite the contrary: There were constant encouragements to book “new money” during the U.S. trips.
When Birkenfeld went to his boss and demanded an explanation, the boss brushed him off and Birkenfeld blew his stack. “I said, ‘I’ll fucking go outside with you right now. I want some answers and I want them now.’”
Birkenfeld continued to press the point in a series of terse emails addressed to Peter Kurer, the chairman of UBS, Martin Liechti, the head of UBS Wealth Management Americas International, and other UBS executives.
The bank, Birkenfeld suggested, seemed to be building an alibi for itself in the eventuality that an unlucky cross-border banker got caught.
Birkenfeld, in turn, may have used the document to create an alibi of his own, according to the timeline pieced together by prosecutors from the U.S. Justice Department years later.
“On or around” June 12, 2005, court records show — just five days before Birkenfeld sent his first angry memo to UBS management — Birkenfeld traveled to Liechtenstein to meet with his most important client, Orange County billionaire Igor Olenicoff, and a Liechtensteiner trust manager. The IRS had just raided Olenicoff’s home and businesses roughly two weeks prior, discovering incriminating documentation of Olenicoffs dealings with Birkenfeld and UBS. Together now in Liechtenstein, the banker, the billionaire and the trust manager agreed to move Olenicoff’s $200 million out of UBS to a Liechtenstein bank that could offer greater secrecy.
After Birkenfeld announced his resignation from UBS in October 2005, but before it became formal, he continued to pepper senior management with emails about the damning UBS legal memo, demanding that he be recognized as an internal whistle-blower. UBS chairman Peter Kurer responded on behalf of the bank, assuring Birkenfeld that UBS’ in-house general counsel would conduct “an independent investigation.” Kurer then instructed the general counsel to resolve an outstanding bonus dispute between Birkenfeld and the bank, documents show. Birkenfeld received 575,000 Swiss francs (about $535,000) in the out-of-court settlement.
But if Birkenfeld’s UBS bosses thought he would go quietly, they were wrong. Instead, he would gather a raft of damning UBS internal documents and fly to Washington, where he’d secretly arranged to meet with prosecutors from the U.S. Department of Justice.
The question is why? He could have stayed put and lived happily ever after in the shadow of the Alps. What was waiting for him in Washington?
Potentially, a pile of cash a whole lot bigger than his 575,000 Swiss franc settlement from UBS.