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Whistleblower Exposes Swiss Bank Tricks

PTI 20 Jan 2010, 12:58:07 IST
PTI

From his home in the quiet village of Rorbas, outside Zurich, Rudolf Elmer is chipping away at the centuries-old traditions of Swiss banking secrecy. 

Elmer, who ran the Caribbean operations of the Swiss bank Julius Baer for eight years until he was dismissed in 2002, moved to Mauritius in the Indian Ocean and began parceling out to global tax authorities what he said were the secrets of his ex-employer, reports New York Times. 

Now back in his native country, he continues to disclose the inner workings of Julius Baer — one of many Swiss institutions that investigators say help clients evade billions of dollars in taxes by routing money through offshore havens in the Caribbean and Switzerland.

"It is a global problem, and I am only the messenger who provides the bad news, or even better, the truth," Elmer, 54, wrote in a recent email message. "Offshore tax evasion is the biggest theft among societies and neighbor states in this world."

He said that he would fly on Tuesday to Düsseldorf, Germany, where the tax authorities are putting him up in a five-star hotel as he prepares to divulge client secrets. 

Elmer joins a group of whistle-blowers that includes Bradley Birkenfeld, the former UBS private banker who disclosed the bank's secrets, pushing it toward a settlement with the US government, and Heinrich Kieber, a former data clerk at the LGT Group, the Liechtenstein royal bank, who stole client data and funneled it to American and European authorities. 

Elmer's disclosures are attracting particular interest as the Internal Revenue Service and the justice department embark upon a strategy of "it takes a rogue to catch a thief" to encourage insiders who engaged in wrongdoing to reveal the secrets of their employers. 

Lawyers and Congressional investigators who have begun to review Elmer's claims say that his internal bank and client documents provide fresh ammunition for American authorities as they take their crackdown on offshore tax evasion beyond UBS to clients of other banks.

Elmer has given documents to the IRS, a Senate subcommittee investigating tax evasion and investigators for Robert Morgenthau. They cover more than 100 trusts, dozens of companies and hedge funds and more than 1,300 individuals, from 1997 through 2002. 

Elmer contends that his documents detail the undisclosed role of American investment management companies in funneling American, European and South American clients who wished to avoid taxes to Julius Baer; the backdating of documents to establish trusts and foundations used to evade taxes; and the funneling of trades for hedge funds and private equity firms from high-tax jurisdictions through Baer entities in the Cayman Islands. 

"What he has is the confirmation of something very important: that a number of other banks in the voluntary disclosure process are turning up," Elmer's lawyer Jack Blum said, referring to 14,700 wealthy Americans, many of them UBS clients, who came forward to disclose their secret accounts last year. The IRS declined to comment on Elmer's case but said it was "probing other banks that have enabled Americans to evade taxes." 

Nothing indicates that Julius Baer, a 120-year-old private bank, is under IRS investigation.