The story of Bradley A. Birkenfeld, the first in our series of Unusual Millionaires
Bradley C. Birkenfeld, 51, blew the whistle on the Swiss bank UBS for helping Americans avoid paying taxes, leading to about $15 billion in recovered tax money, fines and penalties. He spent two and a half years in prison, but he later was awarded $104 million by the I.R.S. for his role in exposing the scheme.
The thing about offshore banking is if someone goes to Switzerland to open an account, that’s totally legal. Bank secrecy is written into the Swiss constitution. But a Swiss banker isn’t technically supposed to leave Switzerland to solicit clients. You can go nude on a beach in France, but if you do the same thing in Minnesota, you’ll get arrested. It’s sort of like that, but not as interesting.
At the start, I played a role in all of this, too. As a director of UBS KEY clients with a net worth of more than $25 million, part of my job was to go to the United States and drum up new business — even though legally, potential clients were supposed to come to us; we weren’t supposed to go to them. UBS did the same thing in Germany, Asia, Scandinavia, the Middle East, South America and Canada. To further help with client prospecting, UBS sponsored events all over the world: Music festivals, art shows, classic car expos, you name it. Our job would be to hide behind the scenes and troll for new clients — or, to be more blunt about it, aid and abet tax evasion.
There were other signs, too: Training documents that told us how to avoid detection at customs and encrypted laptops, which I never took with me. But I honestly didn’t think too much of it until April 2005, about four years after I began working at UBS. A colleague of mine brought me a document from the UBS intranet. It was three pages and contradicted everything we were doing, explicitly saying we shouldn’t solicit clients in other countries.
I couldn’t get it out of my head. It was a full-on cover-your-ass document that made us easy scapegoats for rogue banking. If we got caught soliciting a client or doing anything else illegal — even if UBS told us to — the bank could simply say, “We told you not to do it. There it is right in the company system.”
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Of course, the reality was that they didn’t want someone at my level finding the document and asking questions. It was meant to be lost amid an endless pit of compliance forms, account-opening forms, PowerPoints and training documents. You’d have a better chance of seeing God than reading everything on the UBS intranet.
That’s why I immediately printed out a number of copies, which I handed out to my senior colleagues. I asked if they’d seen it, and they said, “No, how did you get it?” I then went to my boss’s office and said, “What the hell is this?” He told me, “Don’t make a big deal about it.” DON’T MAKE A BIG DEAL ABOUT IT? I wanted to punch the guy right there. Anyone who had written a document like this had to get approvals, both to write it and then to put it on the intranet. This wasn’t a rogue or errant posting; this was deliberate.
A month later, I sent a copy of the document to the heads of both legal and compliance in an email and interoffice memo. No response. I sent it again the next month. No response. I sent it a third time. No response.
That’s when I started taking documents out of the bank. I grabbed accounting records, emails, phone records, PowerPoints, training manuals, internal memos. I covered my tracks. I didn’t use email or my mobile phone. I used pay phones in Switzerland. I hid documents across the border in France in a friend’s barn in case they raided my home. I told him it was a box of old clothes I didn’t have room for anymore.
It’s important to understand that no one else in the bank would do anything. They were too afraid. Their salary was from UBS. Their mortgage was from UBS. Their car loan was from UBS. Their kids were in private school because of UBS. Turning on the bank would be like punching your parents in the face before they send you to college and cover the whole bill. But me? I was an outsider — the American who was unafraid. Someone told me I’d never work in Switzerland again. I didn’t give a shit. While I loved Switzerland and made great friends there, I knew I had to stand up for what I believed was right.
Since I couldn’t get anyone within the company to respond to me, I resigned in October 2005 — six months or so after I first became aware of the document. We did an exit interview as if everything was normal. They even asked me why I was resigning. How cute. I told them, “It’s because you won’t give me an answer about this three-page document.” They said I’d never get an answer. I was defiant. “You’re fucking wrong,” I responded. Then I sued them for the bonus they were obligated to pay me. It was part of my contract, but they tried to renege because I resigned. Eventually, they settled and paid me what they owed me.
Unfortunately for them, this was just the beginning. I attached the three-page document to three UBS internal whistleblowing policies and sent a letter to the chairman and copied the entire Board of Directors. It informed them that they were all on the hook and that none of them could say they didn’t know about it. They didn’t like that at all.
A few months later, I went to the Justice Department. I thought they’d be thankful, but instead, they were hostile. Think of it this way: You have some civil-servant hack who’s uninterested in someone coming in and handing them an investigation they should’ve been able to crack themselves decades ago. All I asked for in return was a subpoena or immunity. They said no. And in an ironic, almost hilarious twist, they charged me with conspiracy to commit bank fraud for not giving up one of my clients. Meanwhile, all of my bosses got non-prosecution agreements.
I was sentenced to 40 months in prison in August 2009. The judge basically confirmed that the fraud never would’ve been exposed without me coming forward. The prosecutors even said so. And yet, they kept saying I was hiding a name. Yeah, I was hiding all right. Hiding by walking right up to the DOJ headquarters in Washington, D.C. and dropping this massive, calculated tax evasion scheme in their laps.
I fired my first attorneys after I went to prison. I did my homework and found Stephen Kohn. He brought in Dean Zerbe. These guys are a dynamic duo. They understand the law. They’ve testified in front of Congress. They’ve written books. They’ve fought cases in the tax court. In 2006, Zerbe even wrote the law that allowed for whistleblowers to receive 15 to 30 percent of the recovered tax money they helped the government uncover.
For me, that was $104 million. That’s right, the same government that threw me in prison owed me more than $100 million before taxes. (It is, however, extremely important to me that I make clear that I had no idea there was a law like this for a reward when I resigned from UBS in October 2005, as the law passed in December 2006.)
I was still on house arrest when I found out I got the reward. Kohn called me and said I had to sign this check. Since I couldn’t travel out of New Hampshire at the time, I asked my attorneys to hold a press conference at the National Press Club in Washington D.C. and announce the reward. I like to think that pissed a lot of people off. I know for sure it pissed off Kathryn Keneally, an assistant attorney general in the Justice Department’s tax division at the time. She told The New York Times she was so mad about the reward she threw her BlackBerry across the room when she heard about it. Why, I’m not sure. I was never the enemy or the bad guy they tried to make me out to be.
I’ve tried to invest the reward money wisely. I collect Formula One memorabilia and antique hockey gear and sweaters from the NHL’s Original Six teams. I’ve also invested in artwork and real estate as well as written a book about my experience called Lucifer’s Banker.
I’m hoping to help other potential whistleblowers, too. I’ll gladly talk to anyone who finds themselves in a similar predicament to mine, whether they are individuals or they represent governments. It can be anonymous. But most importantly, I want there to be more protections and assurances for people who are putting their careers, families and lives on the line by telling the truth. Unfortunately, they’re necessary in this fucked-up world. Because I can tell you firsthand, widespread change only happens when someone from the inside speaks up and tells the truth.
— As told to Ben Feldheim
