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Swiss Banks’ Tradition of Secrecy Clashes With Quests Abroad for Disclosure Swiss Banks’ Tradition of Secrecy Clashes With Quests Abroad for Disclosure
(about 2 months later)
ZURICH — For a while, it seemed, the tide had turned against the tradition of secrecy in Zurich, the pristine Alpine city that is a hub of global banking. ZURICH — For a while, it seemed, the tide had turned against the tradition of secrecy in Zurich, the pristine Alpine city that is a hub of global banking.
Switzerland joined 60 nations in signing a treaty intended to unmask wealthy clients. The American authorities have charged scores of Swiss bankers and financial advisers with facilitating tax evasion. And this month, after a carefully brokered deal, Swiss banks are expected to hand over hundreds more names of their employees to the United States Justice Department in return for forgoing prosecutions of the banks themselves.Switzerland joined 60 nations in signing a treaty intended to unmask wealthy clients. The American authorities have charged scores of Swiss bankers and financial advisers with facilitating tax evasion. And this month, after a carefully brokered deal, Swiss banks are expected to hand over hundreds more names of their employees to the United States Justice Department in return for forgoing prosecutions of the banks themselves.
But the impression of change is misleading, regulators and members of the insular banking fraternity here say. The reality, they say, remains closer to business as usual.But the impression of change is misleading, regulators and members of the insular banking fraternity here say. The reality, they say, remains closer to business as usual.
Even as the Swiss authorities have nodded at cooperation with frustrated governments abroad, at home laws on the books since 1934 make violating client confidentiality a crime and require bankers to guard secrecy like priests or lawyers. Bankers who cooperate with foreign officials and violate their “duty of absolute silence,” as it is known here, potentially face home raids, prison, fines for secrecy violations and industrial espionage, and the ostracism of colleagues and friends.Even as the Swiss authorities have nodded at cooperation with frustrated governments abroad, at home laws on the books since 1934 make violating client confidentiality a crime and require bankers to guard secrecy like priests or lawyers. Bankers who cooperate with foreign officials and violate their “duty of absolute silence,” as it is known here, potentially face home raids, prison, fines for secrecy violations and industrial espionage, and the ostracism of colleagues and friends.
If anything, a backlash is building to protect the vaunted traditions of secrecy that undergird an essential pillar of the Swiss economy. The right-wing Swiss People’s Party says it has gathered 80 percent of the 100,000 signatures required for a voter referendum in coming months to enshrine corporate secrecy in the Constitution, warning against the insidious effect of foreign demands for tax information.If anything, a backlash is building to protect the vaunted traditions of secrecy that undergird an essential pillar of the Swiss economy. The right-wing Swiss People’s Party says it has gathered 80 percent of the 100,000 signatures required for a voter referendum in coming months to enshrine corporate secrecy in the Constitution, warning against the insidious effect of foreign demands for tax information.
Last week, Pierre Condamin-Gerbier, a former banker, faced a Swiss prosecutor on accusations of violating professional secrecy in connection with leaking information to the French authorities. That information forced the resignation last year of a French budget minister who had a secret, undeclared Swiss account at a time when his government was cracking down on tax evasion.Last week, Pierre Condamin-Gerbier, a former banker, faced a Swiss prosecutor on accusations of violating professional secrecy in connection with leaking information to the French authorities. That information forced the resignation last year of a French budget minister who had a secret, undeclared Swiss account at a time when his government was cracking down on tax evasion.
The result is that the bankers — caught in a vise of competing legal forces — are damned if they help either side. In the meantime, those being pressured to reveal their secrets or those of their clients to American and other foreign authorities investigating tax evasion and other crimes are maintaining their code of silence. For those bankers whose roles have brought legal charges abroad or the threat of them, that means avoiding extradition by staying within Switzerland, living life in legal and personal limbo.The result is that the bankers — caught in a vise of competing legal forces — are damned if they help either side. In the meantime, those being pressured to reveal their secrets or those of their clients to American and other foreign authorities investigating tax evasion and other crimes are maintaining their code of silence. For those bankers whose roles have brought legal charges abroad or the threat of them, that means avoiding extradition by staying within Switzerland, living life in legal and personal limbo.
“If you blow the whistle you are socially and financially dead,” said Rudolf M. Elmer, who ran the Caribbean operations for the Swiss bank Julius Baer until 2002 and has been under investigation for nine years for disclosing secret client information from a Cayman Islands outpost to the tax authorities in Switzerland and abroad. “You face the threat here of going to prison. Your banking career is ruined. You will never find a job.”“If you blow the whistle you are socially and financially dead,” said Rudolf M. Elmer, who ran the Caribbean operations for the Swiss bank Julius Baer until 2002 and has been under investigation for nine years for disclosing secret client information from a Cayman Islands outpost to the tax authorities in Switzerland and abroad. “You face the threat here of going to prison. Your banking career is ruined. You will never find a job.”
The situation is particularly galling to bankers — most at the midlevel — who say they are being pressured to take the fall for more powerful superiors in an industry that still jealously guards itself by closing its ranks.The situation is particularly galling to bankers — most at the midlevel — who say they are being pressured to take the fall for more powerful superiors in an industry that still jealously guards itself by closing its ranks.
Describing a life of secretive techniques worthy of James Bond (who quipped in a 1999 film, “If you can’t trust a Swiss banker, then what’s the world come to?”), bankers who were interviewed said that one of the practices under most intensive criminal investigation — the clandestine recruitment of clients in the United States — was not only known to their bosses, but was also part of a business model.Describing a life of secretive techniques worthy of James Bond (who quipped in a 1999 film, “If you can’t trust a Swiss banker, then what’s the world come to?”), bankers who were interviewed said that one of the practices under most intensive criminal investigation — the clandestine recruitment of clients in the United States — was not only known to their bosses, but was also part of a business model.
The bankers roamed the West and East Coasts of the United States with company instructions to recruit rich clients on a luxury circuit of five-star hotels, art exhibitions and tennis matches. Their bonuses, they said, depended on the business they cultivated and protected.The bankers roamed the West and East Coasts of the United States with company instructions to recruit rich clients on a luxury circuit of five-star hotels, art exhibitions and tennis matches. Their bonuses, they said, depended on the business they cultivated and protected.
One veteran banker, who declined to be identified for fear he could be prosecuted in Switzerland for secrecy violations, said every employee who worked with American clients followed strict security instructions.One veteran banker, who declined to be identified for fear he could be prosecuted in Switzerland for secrecy violations, said every employee who worked with American clients followed strict security instructions.
He said the bankers carried special laptop computers formatted so that information could be wiped out instantly with a few keystrokes, and portable printers to avoid leaving traces elsewhere. They avoided staying in the same luxury hotels, switching if anybody recognized them or called them by name. He said he cut the name of the bank off receipts. Customers called from pay phones, using code names.He said the bankers carried special laptop computers formatted so that information could be wiped out instantly with a few keystrokes, and portable printers to avoid leaving traces elsewhere. They avoided staying in the same luxury hotels, switching if anybody recognized them or called them by name. He said he cut the name of the bank off receipts. Customers called from pay phones, using code names.
He said he carried separate paper lists, one with code numbers and one with corresponding names. Those names did not surface on bank records because they were shielded in a maze of offshore trusts and foundations, he said. The real value of Swiss bankers to the American authorities, he said, is that the bankers know the identities of the clients, since they had met with them at high-end events like Art Basel in Miami Beach and golf tournaments.He said he carried separate paper lists, one with code numbers and one with corresponding names. Those names did not surface on bank records because they were shielded in a maze of offshore trusts and foundations, he said. The real value of Swiss bankers to the American authorities, he said, is that the bankers know the identities of the clients, since they had met with them at high-end events like Art Basel in Miami Beach and golf tournaments.
“It was all done for so many years,” the banker said. “Everybody knew. I remember a party a few years ago with other bankers and I said, ‘You know we all have one foot in prison.’ Everybody laughed. Maybe that’s why we were all paid so much.”“It was all done for so many years,” the banker said. “Everybody knew. I remember a party a few years ago with other bankers and I said, ‘You know we all have one foot in prison.’ Everybody laughed. Maybe that’s why we were all paid so much.”
While such tales might seem to come from the heyday of Swiss banking, the culture continues, bankers, regulators and other experts say.While such tales might seem to come from the heyday of Swiss banking, the culture continues, bankers, regulators and other experts say.
“Strictly nothing has fundamentally changed,” said Jean Ziegler, a Swiss sociologist and author. “The big issue in these banks is that violating secrecy is considered treachery.”“Strictly nothing has fundamentally changed,” said Jean Ziegler, a Swiss sociologist and author. “The big issue in these banks is that violating secrecy is considered treachery.”
Swiss banks manage more than $6 trillion in assets, more than half of it from abroad and a figure that has remained relatively stable even through the economic crisis and pressures from governments abroad for greater transparency of depositors, according to Daniela Fluckiger, a spokeswoman for the trade group, the Swiss Bankers Association.Swiss banks manage more than $6 trillion in assets, more than half of it from abroad and a figure that has remained relatively stable even through the economic crisis and pressures from governments abroad for greater transparency of depositors, according to Daniela Fluckiger, a spokeswoman for the trade group, the Swiss Bankers Association.
To date, the United States Justice Department has charged more than 35 Swiss bankers and 25 financial advisers with misconduct for facilitating tax evasion. Six have been convicted or pleaded guilty.To date, the United States Justice Department has charged more than 35 Swiss bankers and 25 financial advisers with misconduct for facilitating tax evasion. Six have been convicted or pleaded guilty.
Raoul Weil, the former head of UBS’s global wealth-management business, awaits trial under house arrest in central New Jersey with a global positioning device to track him. The others live essentially marooned in their own country.Raoul Weil, the former head of UBS’s global wealth-management business, awaits trial under house arrest in central New Jersey with a global positioning device to track him. The others live essentially marooned in their own country.
Some bankers who are under scrutiny say their own personal banks have refused mortgages or canceled personal accounts because of concerns about their reputations being tarnished. One woke up to a dawn raid when his computer and telephone were seized.Some bankers who are under scrutiny say their own personal banks have refused mortgages or canceled personal accounts because of concerns about their reputations being tarnished. One woke up to a dawn raid when his computer and telephone were seized.
Now employees are bracing as 100 or more Swiss banks are expected to turn over more than 1,000 names and information to the United States, according to the Swiss Bank Employees Association, a trade group. The Justice Department said those names would be used to investigate Americans who evaded taxes along with the banks, bankers and advisers.Now employees are bracing as 100 or more Swiss banks are expected to turn over more than 1,000 names and information to the United States, according to the Swiss Bank Employees Association, a trade group. The Justice Department said those names would be used to investigate Americans who evaded taxes along with the banks, bankers and advisers.
“We are going to look very carefully that employees don’t have to pay for the strategies of their bosses,” said Denise Chervet, a spokeswoman for the association. “It’s unbelievable now that some of the top executives claim they didn’t know.”“We are going to look very carefully that employees don’t have to pay for the strategies of their bosses,” said Denise Chervet, a spokeswoman for the association. “It’s unbelievable now that some of the top executives claim they didn’t know.”
To many bankers, Mr. Elmer’s case is instructive. Now unemployed, he has been imprisoned in the past for more than 200 days and sometimes held in solitary confinement as part of continuing investigations for secrecy violations — even though some of those violations involved turning information over to the Swiss tax authorities.To many bankers, Mr. Elmer’s case is instructive. Now unemployed, he has been imprisoned in the past for more than 200 days and sometimes held in solitary confinement as part of continuing investigations for secrecy violations — even though some of those violations involved turning information over to the Swiss tax authorities.
Mr. Elmer and his former bank have sparred over private detectives who trailed his family, reaching a financial settlement for his daughter in 2011, according to legal documents.Mr. Elmer and his former bank have sparred over private detectives who trailed his family, reaching a financial settlement for his daughter in 2011, according to legal documents.
A bank spokesman for Julius Baer, which is also under investigation in the United States for aiding tax evasion, declined to discuss Mr. Elmer’s case.A bank spokesman for Julius Baer, which is also under investigation in the United States for aiding tax evasion, declined to discuss Mr. Elmer’s case.
In the last few years, Mr. Elmer watched former colleagues face similar stark choices about whether to break the code of absolute silence. None of them, he said, have cracked. “They do have the power to destroy your life,” Mr. Elmer said.In the last few years, Mr. Elmer watched former colleagues face similar stark choices about whether to break the code of absolute silence. None of them, he said, have cracked. “They do have the power to destroy your life,” Mr. Elmer said.