Chapter 12: Blowup - Everything Falls Apart
Autumn 2008. The financial world is on fire. Barack Obama and John McCain are fighting for the presidency, and nobody in America is paying attention to the earthquake hitting Swiss banking. But Birkenfeld is watching every crack form from his ankle-monitored life in Boston.
New Lawyers, New Strategy
Birkenfeld fires his old DC attorneys. He is done trusting Washington insiders. He hires David Meier from a Boston firm – a former chief of homicide prosecution, “Lawyer of the Year,” and zero federal government connections. Kevin Downing at the DOJ is not happy about losing his leverage.
Then Birkenfeld finds Stephen Kohn at the National Whistleblower Center and tax lawyer Dean Zerbe, the guy who literally wrote the IRS whistleblower law. He shows them his mountain of organized evidence. Dean is stunned. Birkenfeld pulls up his pant leg, shows the ankle monitor: “I’ve had a lot of time on my hands.”
UBS Heads Start Rolling
November 2008: Raoul Weil, Birkenfeld’s old boss and head of UBS Global Wealth Management, gets indicted by a grand jury in Florida. He shrugs it off, confident Switzerland will never hand him over. By January, a judge declares him a fugitive. INTERPOL plasters his face across Europe.
Four days later, UBS caves. The bank signs a deferred prosecution agreement, admits wrongdoing, and agrees to pay $780 million in fines. Sounds like a lot. It is not. UBS made $200 million per year from secret American accounts over eight years – $1.6 billion total. They were sitting on $20 billion in American money. The fine was a wrist slap.
The very next day, the IRS hits them again demanding the 19,000 account holder names. UBS thought the check would make it go away. Wrong.
Then the dominoes fall. UBS CEO Marcel Rohner “retires” at 44 – on Birkenfeld’s 44th birthday. Board chairman Peter Kurer quits. Two more top managers get publicly fired. Christian Bovay – the guy who ignored Birkenfeld’s three-page memo years ago – gets dumped on the street. Birkenfeld dances a jig.
The Senate Goes Nuclear
Senator Carl Levin opens a second round of televised hearings. He is furious. UBS promised to cooperate and turn over names. In six months they handed over exactly twelve. Not twelve thousand. Twelve names. And the “19,000” figure was already low – Birkenfeld’s testimony showed the real number was closer to 52,000 accounts.
Levin says out loud what everyone is thinking: “The only conviction so far in this matter is that of Bradley Birkenfeld, the informant!”
Mark Branson from UBS deflects every question with “I have no knowledge of that, I’ve only been in this position for a year.” After four hours, Levin basically tells him to get out.
The Secret Deal
Here is where it gets wild. Secretary of State Hillary Clinton flies to Zurich and cuts a behind-the-scenes deal with her Swiss counterpart. Switzerland takes some Guantanamo detainees, helps with an American hostage in Iran, and in return gets leniency on the UBS scandal. UBS eventually turns over 4,500 names – cherry-picked nobodies, no politicians, no power players. The recovered assets and fines from those accounts would total $25 billion flowing back to American banks.
After the deal, UBS donations to the Clinton Foundation jump from $60,000 to $600,000. Bill Clinton gets $1.52 million in speaking fees from UBS. The bank issues a $32 million loan to a Clinton Foundation project.
None of this comes out until whistleblower Chelsea Manning dumps classified cables on the internet years later.
Sentencing Day Approaches
Downing delays Birkenfeld’s sentencing four times over a year, just to keep him miserable. But Birkenfeld uses every delay to build his whistleblower award case with Kohn and Zerbe. Finally the Florida court sets a firm date: August 21, 2009. No more delays.
Birkenfeld packs a small bag and flies to Fort Lauderdale. He knows it will not go well. His fate, he says, was already sealed by a rigged system.
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Part of the Lucifer’s Banker Uncensored series