August 15, 2010 11:59 PM
- Text
Banking: A Crack In The Swiss Vault
(CBS)
If there's anything that the Swiss take more seriously than the precision of their watches or the quality of their chocolate, it's the secrecy of their banks. The subterranean vaults of Geneva and Zurich have served as sanctuaries for the wealth of dictators and despots, mobsters and arms dealers, corrupt officials and tax cheats of all kinds.
It's a world U.S. law enforcement has rarely been able to penetrate. So the idea that UBS, one of Switzerland's largest banks, would hand over information on thousands of American tax cheats would have been unthinkable just a few years ago.
You'll hear the twisted tale of how it all happened, from a man some people have called one of the most important whistleblowers ever who has been rewarded with a federal prison term and the possibility of endless riches.
Though he was born and raised in the Boston area, Bradley Birkenfeld spent most of the last decade living in Switzerland, helping wealthy Americans hide their money. He was based in Geneva, where he says there may be more money-counting machines than parking meters, in a country that once bragged it had more banks than dentists.
"It's not Swiss money in those banks. It's foreigners'," Birkenfeld told 60 Minutes correspondent Steve Kroft. "You have a culture there that has been ingrained in society about managing people's money, protected by Swiss bank secrecy."
"And who has a right to that information under Swiss law?" Kroft asked.
"Only the banker and the bank itself," Birkenfeld explained.
"How unusual is it for a Swiss banker to come forward and say, 'This is how it works?'" Kroft asked.
"It's never happened before in history. I'm the first one," Birkenfeld replied.
When Birkenfeld, a midlevel banker with an undistinguished employment history, knocked on the door of the U.S. Justice Department in the spring of 2007, he touched off an investigation that would threaten one of the world's largest banks with extinction and shake 300 years of Swiss banking secrecy to the foundations of its underground vaults.
He did it by providing inside information and documentation that his former employer, banking giant UBS, was actively involved in helping its American clients defraud the U.S. Treasury out of billions of dollars in unpaid taxes.
Asked what he thinks is the most valuable thing he gave to the U.S. government, Birkenfeld told Kroft, "The amount of clients and the amount of assets managed by UBS in the United States out of Switzerland."
"And that was how much?" Kroft asked.
"That was 19,000 clients and around 20 billion Swiss francs, which is about $19 billion," Birkenfeld replied.
"Of the percentage of American accounts that you represented, how many would you say were trying to evade taxes?" Kroft asked.
"My own clients?" Birkenfeld replied. "I would say about 90 percent."
Asked if people told him this was their intention when they opened their accounts, Birkenfeld told Kroft, "It was the unwritten rule. You didn't have to discuss it. People wouldn't fly all the way to Switzerland to open accounts just because they wanted to declare their money."
And as a private banker for UBS, Birkenfeld would help his clients invest, spend and move their money. One example he told us about involved withdrawing cash from a customer's account, buying some diamonds in Geneva and then smuggling them into the U.S. for the client inside a toothpaste tube.
Birkenfeld claimed it was legal because the diamonds he said were worth less than $10,000 and didn't have to be declared at customs.
"If it was legal why did you put them in a toothpaste tube? I'm having trouble with that," Kroft said.
"Oh, it was just a way of carrying them so I wouldn't lose them. Where would you put two diamonds?" Birkenfeld replied.
"I think I'd put them in a money belt or I think I'd put them in a case," Kroft said.
"It was a one-time event. That's not my business. I just put them in a toothpaste tube," Birkenfeld replied.
He told Kroft he wasn't trying to hide the diamonds from U.S. Customs. "Not at all," Birkenfeld said.
It's a world U.S. law enforcement has rarely been able to penetrate. So the idea that UBS, one of Switzerland's largest banks, would hand over information on thousands of American tax cheats would have been unthinkable just a few years ago.
You'll hear the twisted tale of how it all happened, from a man some people have called one of the most important whistleblowers ever who has been rewarded with a federal prison term and the possibility of endless riches.
Though he was born and raised in the Boston area, Bradley Birkenfeld spent most of the last decade living in Switzerland, helping wealthy Americans hide their money. He was based in Geneva, where he says there may be more money-counting machines than parking meters, in a country that once bragged it had more banks than dentists.
"It's not Swiss money in those banks. It's foreigners'," Birkenfeld told 60 Minutes correspondent Steve Kroft. "You have a culture there that has been ingrained in society about managing people's money, protected by Swiss bank secrecy."
"And who has a right to that information under Swiss law?" Kroft asked.
"Only the banker and the bank itself," Birkenfeld explained.
"How unusual is it for a Swiss banker to come forward and say, 'This is how it works?'" Kroft asked.
"It's never happened before in history. I'm the first one," Birkenfeld replied.
When Birkenfeld, a midlevel banker with an undistinguished employment history, knocked on the door of the U.S. Justice Department in the spring of 2007, he touched off an investigation that would threaten one of the world's largest banks with extinction and shake 300 years of Swiss banking secrecy to the foundations of its underground vaults.
He did it by providing inside information and documentation that his former employer, banking giant UBS, was actively involved in helping its American clients defraud the U.S. Treasury out of billions of dollars in unpaid taxes.
Asked what he thinks is the most valuable thing he gave to the U.S. government, Birkenfeld told Kroft, "The amount of clients and the amount of assets managed by UBS in the United States out of Switzerland."
"And that was how much?" Kroft asked.
"That was 19,000 clients and around 20 billion Swiss francs, which is about $19 billion," Birkenfeld replied.
"Of the percentage of American accounts that you represented, how many would you say were trying to evade taxes?" Kroft asked.
"My own clients?" Birkenfeld replied. "I would say about 90 percent."
Asked if people told him this was their intention when they opened their accounts, Birkenfeld told Kroft, "It was the unwritten rule. You didn't have to discuss it. People wouldn't fly all the way to Switzerland to open accounts just because they wanted to declare their money."
And as a private banker for UBS, Birkenfeld would help his clients invest, spend and move their money. One example he told us about involved withdrawing cash from a customer's account, buying some diamonds in Geneva and then smuggling them into the U.S. for the client inside a toothpaste tube.
Birkenfeld claimed it was legal because the diamonds he said were worth less than $10,000 and didn't have to be declared at customs.
"If it was legal why did you put them in a toothpaste tube? I'm having trouble with that," Kroft said.
"Oh, it was just a way of carrying them so I wouldn't lose them. Where would you put two diamonds?" Birkenfeld replied.
"I think I'd put them in a money belt or I think I'd put them in a case," Kroft said.
"It was a one-time event. That's not my business. I just put them in a toothpaste tube," Birkenfeld replied.
He told Kroft he wasn't trying to hide the diamonds from U.S. Customs. "Not at all," Birkenfeld said.
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