Bradley Birkenfeld exposed the largest case of offshore tax evasion in history, and then was promptly sent to jail.
Capitalist propaganda regularly promotes lies that are meant to deceive the working class, like that rich and poor share the burden of paying taxes. The notion that tax fraud and tax evasion laws are equally applied is just as blatantly false. The circumstances surrounding the recent conviction of former United Bank of Switzerland (UBS) banker Bradley Birkenfeld reveal the truth behind the false propaganda.
As an employee of UBS, Birkenfeld, a U.S. citizen living in Switzerland, helped wealthy and privileged individuals from the United States establish secret Swiss bank accounts to avoid paying taxes. In 2007, Birkenfeld traveled to Washington from Switzerland at his own expense to meet with Justice Department officials whom he hoped would be interested in launching a criminal investigation of UBS and its clients.
Instead, he was charged and convicted. On Jan. 8, he began a 3 years’ and 4 months’ prison sentence.
Birkenfeld blew the whistle on one of the biggest tax evasion schemes in U.S. history, yet he is the only one going to jail. Clearly, he isn’t going to jail for helping the rich avoid taxes. He is going to jail for turning on his own class, hoping to increase his own fortune.
One would easily think that morals were at the center of Birkenfeld’s motives, but because capitalist culture is rooted in savage competition and deceit, there is ample reason to believe that turning whistleblower was motivated by his own ambition to become like his wealthy clients.
A law was enacted in the United States before Birkenfeld turned informant that would have allowed him the right to get up to 30 percent of collected assets, based on information he provided U.S. authorities.
Being aware of the risks he was undertaking, exposing powerful clients and violating Swiss law, Birkenfeld pleaded with Justice Department officials to be subpoenaed. But the Justice Department was reluctant to commit to such an agreement with Birkenfeld.
Birkenfeld then went to the Internal Revenue Service and to the Securities Exchange Commission, where he also sensed a reluctance to be heard. Birkenfeld then met with the U.S. Senate, which listened and documented his story.
This event undoubtedly stands out in the history of Swiss secret banking practices, which developed 300 years ago to protect the assets of Europe’s monarchies when menaced by the growing tide of bourgeois democratic revolutions. The modern-day capitalist class has likewise used the Swiss banking system to hide assets when needed.
In the 1930s, Switzerland strengthened this practice by making it a crime for bank officials to reveal the registered names and contents of secret accounts. This was a measure taken to repel pressure by France and Nazi Germany investigating its citizens with offshore bank accounts. Fascist Germany created a law that made it punishable by death for anyone to have a secret Swiss bank account.
Although Switzerland strictly enforces its banking laws, the U.S. and Swiss governments have an agreement that allows the IRS access to information on U.S. citizens with secret offshore accounts. The U.S. government used the agreement to pressure UBS after Birkenfeld made his initial disclosures.
This is the biggest criminal case of its kind in history in which offshore assets in the billions of dollars were kept hidden in violation of U.S. law.
In February 2009, UBS settled by pleading guilty and agreeing to pay a $780 million fine. As part of its penalty, UBS also agreed to provide the Justice Department with close to 4,500 names and accounts of U.S. clients. But this number was only a portion of 19,000 clients who UBS admitted to having provided with secret accounts. For those UBS clients whose accounts were revealed, they came to terms with the IRS and will get away with merely facing civil penalties.
Despite Birkenfeld’s insistent claim that he cooperated fully with U.S. authorities, he was criminally charged and convicted for withholding information on his biggest client, California real estate developer Igor Olenicoff, who pleaded guilty to concealing $200 million at UBS.
The deals made between the IRS and UBS, as well as with many of the account holders, eventually created unfavorable circumstances that left Birkenfeld unable to negotiate with the U.S. government.
The real significance of this case extends beyond UBS and Birkenfeld. What came to light was the fact that laws governing banking do not apply to the class of billionaires. Birkenfeld’s biggest mistake was that he overlooked the social class of his clients, for whom the social order is set up to serve and protect. Thus, he was rewarded with the vengeance of a prison sentence.
Birkenfeld’s supervisor at UBS, Martin Liechti, was just as much involved in the banking criminal scheme. He did not go to prison and was instead allowed to freely return to Switzerland.
Banking practices under capitalism are inherently corrupt. The banking system in general reflects the consequence of inequalities produced by capitalism. What other purpose do banks serve under the existing social and economic order if not to be the financial sustainers and organizers of imperialist plunder and the exploitation of the working class?
Swiss banks are not the only financial institutions that operate under secrecy. In the United States, the capitalist class manages its financial needs outside the knowledge of the general public. For example, what precisely happened to the trillions of dollars taken from the public treasury and handed over to giant financial firms as bailout money has never been disclosed—even to many members of Congress, whose job is to represent the ruling class.
The people of this country are always kept uninformed and outside the wall of secrecy when the topic of taxes, banks and the class of billionaires is alluded to, especially at a time when working people are encountering poverty and despair.
The fortunes held by these financial institutions were obtained through criminal means—the theft of wealth produced by workers and imperialist superexploitation—and hoarded in the hands of a few. These institutions continue to be the economic source of oppression in this society. But a revolutionary peoples’ movement can make the difference, by waging a struggle to establish a society where the vast wealth managed by the banks becomes an instrument for building socialism.
