Banking: A Crack In The Swiss Vault

Bradley Birkenfeld Tells 60 Minutes He's The First Swiss Banker Ever To Speak About Secretive World of Swiss Banking

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Based on information provided by Birkenfeld, the Justice Department and the IRS obtained a court order demanding that UBS turn over records on the 19,000 Americans believed to have secret Swiss accounts.

UBS then enlisted the help of the Swiss government to try and negotiate a settlement, finally agreeing to pay a $780 million fine, cease its offshore banking activities with Americans, and for the first time in history turn over the names of more than 4,000 U.S. citizens suspected of tax fraud.

"I think they knew we had a very strong case," Perrelli said.

"Right. And they did that because the U.S. government said that 'if you don't cooperate, we're going to take away your license to do business in the United States,' " Kroft remarked.

"Well, we certainly told them that we had a strong case for criminal prosecution and that if we couldn't find another way to resolve that, that that's where this was headed," Perrelli replied.

UBS realized that the Justice Department was holding all the cards. UBS had a major presence and 30,000 employees in the U.S., and it could not survive as a global banking power without access to the U.S. market.

"If you had such a strong case, why didn't you get the names and numbers of every American account holder in Switzerland?" Kroft asked associate attorney general Perrelli.

"We got the accounts that really are the core of the fraud, the largest accounts, the accounts that are most clearly, likely to be associated with fraud," he replied.

Since the scandal broke, nervous clients have withdrawn $160 billion from UBS' wealth management operation. And 14,700 Americans have notified the IRS that they had offshore bank accounts, taking advantage of a program that allows them to pay back taxes and penalties and escape prosecution, which should provide a windfall for the U.S. Treasury.

Asked how much tax revenue he thinks the government will have gained from this, Perrelli told Kroft, "I've heard, certainly, the commissioner of the IRS say in the billions of dollars."

With the government claiming victory and UBS breathing a sigh of relief, the only person with grounds to be really unhappy is Bradley Birkenfeld, who the last time we saw him, was wearing an electronic ankle bracelet. The federal government had restricted his movements to the commonwealth of Massachusetts.

"I gave them the biggest tax fraud case in the world. I exposed 19,000 international criminals. And I'm going to jail for that?" Birkenfeld asked.

As it turns out, while the U.S. government was using Birkenfeld's information to go after UBS, the Justice Department was closing in on his biggest client, Igor Olenicoff, for tax evasion.

Olenicoff cooperated with the investigation, and paid $52 million in fines and back taxes and got off with no jail time. But because Birkenfeld hadn't told prosecutors about his relationship with Olenicoff, he was arrested and charged with conspiracy to commit tax fraud.