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Swiss Bank Whistleblower Smack Down

The Swiss banking industry is being hit particularly hard right now by some high-profile whistleblowers. We've already written a few words about Bradley Birkenfeld, the UBS whistleblower who stands to receive billions of dollars from the I.R.S. for helping to identify thousands of tax cheats. Another Swiss banker is coming forward with information that could further erode the historically impenetrable shroud of secrecy surrounding the Swiss banking industry.

Rudolf M. Elmer was COO for the Julius Baer Swiss bank until he was fired in 2002. Like Bradley Birkenfeld, Elmer lived the high life of a banker to the elite, albeit in the warmer (but equally tax evasion-friendly) clime of the Cayman Islands. Elmer's story is also reminiscent of that of another whistleblower profiled on this blog, big tobacco burner Dr. Jeffrey Wigand. Like Wigand, Elmer was harassed by private investigators allegedly hired by his former employer.

The fact that Elmer ran Julius Baer's operations in the Caymans is especially significant. The Caymans have a zero per cent tax rate, and their tax havens are believed to hold more than $11.5 trillion. It is estimated that the U.S. loses approximately $100 billion in taxes each year to tax evasion committed in the Caymans. Another significant fact about the Caymans, sure to elicit horror/admiration, depending on whom you ask, is this: 10 per cent of the islands' 52,000 inhabitants are accountants or lawyers.

Elmer discovered the documents in 2002, shortly before he was fired (the bank claims that he was angry about being passed over for a promotion and stole the documents). The documents concern scores of companies, trusts, and individuals. Elmer began turning the documents over to authorities, and was briefly jailed in2005 by Swiss authorities who plan to charge him with violations of Swiss secrecy laws. In 2009, Elmer posted documents to the Wikileaks website, which allows users (particularly whistleblowers) to post important documents securely. Julius Baer went to court and got the site shut down, but Wikilinks appealed and got the court order overturned.

Julius Baer's suit against Wikilinks drew the I.R.S.'s attention, and the agency contacted Elmer. Elmer subsequently turned over documents to the I.R.S., the New York City DA, and the Senate subcommittee on investigations headed by Senator Carl Levin.

Elmer's interest in holding the bank accountable goes beyond anything personal. In an interview with The Guardian, he stated

People don't know how the system works. They may hear of some case, but the big picture always disappears into bank secrecy, professional secrecy with lawyers and accountants, and tax secrecy. But they need to know that this is a system which undermines our society, our democracy.

Elmer doesn't seem to be revealing Julius Baer's secrets just to get a financial reward. He is thinking about the bigger picture here, and like many whistleblowers, he's willing to give up his career and even do some jail time to stand up against a wrongdoer.