was born in Brookline, Massaschusetts, just outside of Boston in 1965,
the youngest of three boys of a neurosurgeon father.
He fell into
the finance industry as a summer intern at State Street Bank in Boston,
ultimately working as a trader for institutional pension plans.
was there that Birkenfeld said he had his first brush with
whistleblowing. Birkenfeld said he discovered irregularities in the
procedures at the bank. “It was first errors, and then, knowingly,
committing a cover-up of that, which is fraud,” Birkenfeld said. He
began to keep copies of relevant documents at home, as well as at work.
“The problem was that they weren’t willing to admit fault.”
at the bank, though, were able to find fault in Birkenfeld: They put
him on probation, and then fired him, Birkenfeld said. He added that
executives began circulating critical stories about him.
spokeswoman for State Street confirmed Birkenfeld’s employment at the
firm, but was unable to substantiate his account of events decades ago.
Birkenfeld said he went to the FBI with what he knew. But he found the
FBI agents didn’t have a grasp of the intricacies of banking. “They were
totally clueless,” he said.
Frustrated, Birkenfeld headed to Switzerland.
got an MBA at the American Graduate School of Business alongside Lake
Geneva in La Tour-de-Peilz, Switzerland, and then began to look for
His first stop was Credit Suisse, then a couple of years
later to Barclays where, for the first time, he worked directly with
One of the clients he made contact with was billionaire
American real estate developer Igor Olenicoff. When Birkenfeld switched
jobs again, to UBS, Olenicoff, and what became a $200 million account,
came with him. Birkenfeld’s mission at UBS was business development for
the United States. UBS wanted rich Americans as clients, and Birkenfeld
was one of a team of bankers sent to lure them in. He became one of the
very few Americans admitted to the inner sanctum of Swiss bank secrecy.
Olenicoff pleaded guilty to a count of filing a false tax return,
admitting tax evasion and paying a $52 million penalty
Olenicoff declined to comment through his lawyer.
said he began to see clients coming into the bank with a million
dollars in a suitcase. Specialized couriers bringing cash into
Switzerland and turning it over to the bank’s clients for deposit. He
learned that $10,000 in bills was exactly a quarter-of-an-inch thick.
And he learned that the best banknote for cash transactions was the
1,000 Swiss franc bill. “The largest note in the world,” Birkenfeld
said. “I mean, you could put a half a million dollars in your pocket, no
They didn’t ask too many questions about where the
money came from. “It wasn’t our business to know,” Birkenfeld said. “We
weren’t policemen. We were bankers.” He noticed that many clients tore
up receipts of deposit on the spot.
It’s not illegal for Americans
to have bank accounts in Switzerland. But under the law, taxpayers must
disclose all foreign accounts and pay tax on any earnings in them.
Similarly, bankers must be registered with the SEC in the United States
before providing investment advice here.
Inside UBS in
Switzerland, though, thousands of American clients were ignoring the tax
rules and scores of bankers were traveling back and forth to the U.S.
to recruit clients without ever registering with the SEC.
an enormous effort into identifying and cozying up to the richest people
in America. The firm targeted families with inherited wealth,
entrepreneurs who’d cashed out of businesses, and even professionals
with modest wealth such as doctors, architects and lawyers. To reach
them all, UBS bankers hit the social circuit. UBS strove to put on the
best events in the world and lure in billionaires: art festivals, music
venues, yachting events. Former UBS employees say much of it was
organized by a charismatic and smiling colleague they nicknamed “Captain
CNBC contacted several former UBS bankers and
executives in Switzerland, as well as former consultants and advisors
outside the bank. A number of them spoke candidly, if privately, about
life inside the ultra-discreet world of Swiss banking.
(article) concerns a legacy issue for UBS that has been well documented
and is many years behind the firm. UBS fully and finally resolved all of
our U.S. cross border issues in November 2010,” said a UBS spokeswoman.
“The business described has been closed since July 2008. UBS today is a
different firm, with a different strategic focus and senior management
team,,” she continued. “Mr. Birkenfeld was convicted for aiding and
abetting tax fraud and for lying to U.S. authorities about his own
misconduct. Following 40 months of prison for conspiracy, he remains on
supervised leave to this day.”
UBS knew the billionaires had a lot
of choices—invitations to anything and everything. They strove to make
their events stand out. One easy way to do that: parties often had “two
women for each gentleman,” recalls one event attendee.
private wealth team wanted to forge an emotional connection to the
clients, say former employees. The goal was to spend a week with a
billionaire in St. Barths, and to be the only banker on the yacht. Don’t
worry about meeting the client at 9 a.m. in his office, but pin him
down at 8 p.m. at Carnegie Hall.
One tactic that worked especially
well, the event attendee said, was seeking out the oldest women in the
room, charming them, and then asking for introductions to all the
billionaires at the event.
As dazzling as the social swirl was,
the day-to-day reality of Swiss banking in Zurich and Geneva could be
grimly competitive for the rank and file.
Many bankers inside the
secretive private wealth management unit arrived at their desks by 7
a.m., only to find a worksheet on their desks detailing the previous
day’s profits and losses. It listed every banker’s results by name. “You
had a hit parade that showed this guy was No. 1, this guy was No. 2,
and this guy was No. 35,” recalls one former banker. “Imagine what type
of climate that was to work in.”
The Swiss bankers saw themselves
as carrying out a solemn duty to protect their clients’ identities. For
many, it was a point of pride: “Every client was treated the same,” says
one. “Numbered accounts, named accounts, they were under the same
The bankers were given elaborate instructions on
maintaining client privacy. To some of the bankers, it began to feel as
if they were becoming undercover agents. Birkenfeld provided CNBC with a
document he said was handed to bankers in the private wealth division
during a training session, in order to role play various scenarios they
might encounter as they traveled to the U.S. to recruit clients. The
paper encourages UBS bankers to mail sensitive account documents ahead
of time to trusted contacts so not to be caught carrying them through
U.S. customs. It suggests they should not detail client names in their
electronic devices, and to only note “very short remarks” about the
topics for any meetings with American clients.
According to one
former UBS banker, managers gave the private-wealth team specially
encrypted laptops that could be easily deleted in case U.S. authorities
barged in. “They told us about the computers, ‘if ever you run into
problems in the U.S. with the IRS, just push button X twice, and
everything will be deleted,’ ” said the banker. “It was like James
But the elaborate efforts to keep the U.S. government in
the dark began to worry the bankers. “When these computers came along,
some of the people realized, ‘My God, what we are doing may actually be
illegal,’ ” the banker said. “We never were instructed on American law
and what was allowed. We never had any lessons.”
Also worrisome to
some of the UBS employees were the identities of the American
lawbreakers they were protecting: names that still have not been made
public despite years of investigations.
“There are some very big
names, and it would shock the establishment,” said a former UBS insider.
“Movie stars, upper East Coast establishment figures, people who trace
their origins to the ’20s, ’30s and ’40s. They’re the walking history of
the American economy.”
Beyond that, Birkenfeld said there was an even more secret category of client: American political figures.
international banking law, banks are required to treat their political
customers with a higher degree of scrutiny in an effort to root out
international corruption. One set of international guidelines sets aside
a separate category of client, known as a “politically exposed person,”
or PEP. They are defined as heads of state, heads of government
ministries, senior judicial officials, high-ranking military officers,
as well as senior officials of political parties and their close
associates and families.
Birkenfeld said UBS had a specific
banking desk to deal with PEP clients, and that desk had an American
division. “It was another level of secrecy,” Birkenfeld said. He does
not know the names of any American political figures who had secret
accounts in Switzerland, or how many there were, because he did not work
on the desk. But he said it was widely discussed inside the bank: “My
bosses used to tell us, ‘If you ever have a PEP it goes to the PEP desk
in Zurich,’ ” Birkenfeld said.
Other former UBS insiders back up Birkenfeld’s account of politically connected Americans inside the bank.
“The so-called PEP clients? That’s definitely true,” said one.
“They existed, yeah,” said another.
said that he has given the names of all of the American clients he
has—30 people—to the U.S. government. But, he said only one has been
named publicly, and none have gone to jail.
According to a
document compiled in 2013 by the legal team working for Beanie Baby
billionaire Ty Warner—one of the few Swiss bank clients whose name has
been made public—just under 50 American clients of offshore banks have
been sentenced in the U.S. since the Birkenfeld revelations. One
received a 19-month sentence. But Warner’s team found that nearly 30
were given punishments that included no jail time at all. In the end,
Warner was also sentenced to probation without jail time.
Birkenfeld served more time in prison than any of them.