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Special Reports

Part 1: A UBS insider blows the whistle on Swiss banking.
Part 2: Feeding the UBS obsession with North American wealth.
Part 3: Meet Bradley Birkenfeld's biggest client, and nemesis, US billionaire Igor Olenicoff.
Part 4: UBS whistle-blower pays a high price for tipping off US investigators.
Part 5: As whistle-blower is jailed, perpetrator of massive tax fraud gets backdoor bailout.

Telling Swiss secrets: A banker's betrayal

Part 1: A UBS insider blows the whistle on Swiss banking.

“Birkenfeld must be considered among the biggest whistle-blowers of all time,” wrote the editors of Tax Notes, the arcane but influential industry journal, in a column naming Birkenfeld its “Person of the Year” for 2009. “He single-handedly made 2009 the year in which the world finally got serious about cracking down on tax evasion.”

Never in UBS’ 150-year history had an insider turned on the bank, and the betrayal has now reportedly opened the doors to justice department scrutiny of the Swiss operations of Credit Suisse and HSBC. Germany is also armed with insider information and on the offensive against tax evasion, German police officers, prosecutors and tax inspectors raided all of Credit Suisse’s offices and branches in the country in mid July.

It seems the era of secrecy in Swiss banking is ending and Birkenfeld had everything to do with that.

Birkenfeld received letters from Sen. Carl Levin and investigators at the Department of Treasury and the Securities & Exchange Commission acknowledging his contribution, but it was Kevin Downing, the DOJ attorney who spearheaded the criminal investigation against UBS, who was the most emphatic.

Bradley Birkenfeld
(Gasper Tringale/GlobalPost)

“I will say that 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,” Downing said in federal court last August at a sentencing after Birkenfeld pleaded guilty to one count related to his relatively minor role in the fraud. The praise was reiterated in Downing’s brief to the court: “Defendant Birkenfeld has provided substantial assistance in the investigation and prosecution of others who have committed offences,” he wrote. “This substantial assistance has been timely, significant, useful, truthful, complete, and reliable.”

Less than 15 minutes later, however, in a switch that stunned most everyone in the courtroom, Downing suddenly turned on his star informant.

“We are seeking jail time,” he told Judge William Zloch of the U.S. Southern District, something almost unheard of in a case like this (whistle-blowers are rarely prosecuted, let alone sent to jail). Continuing, he accused Birkenfeld of trying to game the Justice Department, plotting a complex fraud even while cooperating with government prosecutors.

In short order, Judge Zloch sentenced Birkenfeld to three years and four months in federal prison — far harsher than the slap on the wrist one might expect in a whistle-blower case. News footage shows a shaken Birkenfeld literally running from the courthouse. (His sentence did not begin immediately).

Many who had followed the case were outraged. “UBS whistle-blower Bradley Birkenfeld deserves statue on Wall Street, not prison sentence,” blared the headline in the New York Daily News. “Why is the UBS whistle-blower headed to prison?” asked Time magazine. The National Whistleblowers Center in Washington, which took up Birkenfeld’s case, called on President Barack Obama to pardon him.

As his Jan. 8 report date for prison drew near, however, there was no presidential pardon, and a last-ditch appearance on 60 Minutes failed to win Birkenfeld sympathy from Judge Zloch, who tossed aside a final motion to delay Birkenfeld’s imprisonment.

In an age of stomach-turning Goldman bonuses and ungodly federal bank bailouts, it’s tough to empathize with a sometimes hot-headed former high-flier in a $2,000 suit — especially one whose motives would emerge as complicated, and self serving. But Birkenfeld isn’t asking people to like him; he just wants us to see the forest for the trees.

Sitting for our full-day interview in a suite at a Boston hotel on the eve of his long drive to the Schuylkill Federal Corrections Institution near Minersville, Pennsylvania, Birkenfeld seemed sad but defiant. “I took on the biggest bank in the world and brought them down, and I took on the biggest government in the world and exposed their corruption, and I’m being rewarded with jail,” he said, squinting his deep blue eyes. Still, he added, “I would do it again.”

Go to the next story in this 5-part series: 222 billionaires

Michael Bronner, a New York-based investigative journalist, previously worked for the weekday edition of CBS News/60 Minutes. He has been a freelance contributor to Vanity Fair since 2005. A screenwriter, producer and director, he was also a co-producer on the Universal Pictures/Working Title feature film “Green Zone” about Iraq and an associate producer on the Oscar-nominated “United 93.”

Editor's note: The subheadline of this story was updated.

http://www.globalpost.com/dispatch/europe/100724/swiss-banking-secrecy