A few days before
Christmas in 2008, Hervé Falciani was in a meeting at his office, in
Geneva, when a team of police officers arrived to arrest him. Falciani,
who was thirty-six, worked for H.S.B.C., then the largest bank in the
world. He was on the staff of the company’s private Swiss bank, which
serves clients who are wealthy enough to afford the minimum deposit—half
a million dollars—required to open an account. Falciani had been at
H.S.B.C. for eight years, initially in Monaco and then in Geneva. He was
a computer technician who helped supervise security systems for the
handling of client data. He had grown up in Monaco, where as a young man
he had worked as a croupier at the Casino de Monte-Carlo, and developed
an excellent poker face. As the Swiss police escorted him from the
building, he insisted that he had done nothing wrong.
Officers
questioned Falciani at a nearby station. They were investigating a data
theft from the bank. Since 1713, when the Great Council of Geneva
banned banks from revealing the private information of their customers,
Switzerland had thrived on its reputation as a stronghold of financial
secrecy. International élites could place their fortunes beyond the
reach of tax authorities in their own countries. For Swiss wealth
managers, who oversaw more than two trillion dollars in international
deposits, the promise to maintain financial privacy was akin to a
religious vow of silence. Switzerland is the home of the numbered
account: customers often specify that they prefer not to receive
statements, in order to avoid a paper trail. In light of these
safeguards, the notion of a breach at H.S.B.C. was shocking.
Police
officials told Falciani that someone calling himself Ruben al-Chidiak
had stolen client data from the bank. They weren’t sure how much
information had been taken or how the theft had been engineered. But
they suspected that Chidiak was a pseudonym, and that the real culprit
was Falciani.
Falciani told the
police that his job was to protect data: How could they accuse him of
compromising such information? As darkness fell, he asked to go home.
His wife, Simona, would be worried about him. The investigators released
him, but instructed him to return for further questioning the next
morning.
Falciani walked through
streets strung with Christmas lights to his apartment, in a dingy
building on the Rue des Mouettes. He and Simona packed a few bags,
bundled their three-year-old daughter, Kim, against the cold, and
prepared to flee the country. Despite his protests, Falciani had stolen
the data.
When the Falcianis walked
out of their apartment, they left the keys in the door. Falciani rented a
car, and they drove through the Alps. The next morning, as Swiss
investigators assembled at the police station in Geneva, Falciani was
approaching the South of France. He left the rental car at the airport
in Nice. His wife and daughter went on to Italy, for a visit with
Simona’s family; Falciani travelled to his parents’ home, in Castellar, a
hill town near the French-Italian border.
W.
Somerset Maugham once described the Côte d’Azur as “a sunny place for
shady people,” and Falciani, who was now a fugitive, hunkered down in
Castellar. As a precaution, he had not travelled with the stolen data,
instead uploading the information to remote servers. He now downloaded
the files onto his laptop. The Swiss had asked French authorities to
help track down Falciani, and at dawn on January 7, 2009, gendarmes
raided his parents’ house. The prosecutor in Nice who handled the case,
Éric de Montgolfier, told me that authorities in Switzerland were so
eager to seize Falciani’s computer that they sent a Swiss prosecutor to
accompany the gendarmes.
The
French police arrested Falciani and seized his MacBook Pro and his
iPhone. But when he was out of earshot of the Swiss prosecutor, on the
way to the police station in nearby Menton, he told the gendarmes that
his computer contained information of possible interest to the French
state: names, account numbers, account balances. The hard drive held
evidence, he said, of “tax evasion committed by French people.” Falciani
had obtained sixty thousand files relating to tens of thousands of
H.S.B.C. clients from nearly every country. An H.S.B.C. lawyer later
described Falciani’s crime as “the largest robbery of a bank ever
committed in the world.”
Falciani’s
flight to France coincided with the onset of the global financial
crisis. Many countries were scrambling to secure revenues and crack down
on citizens whose fortunes were stashed in offshore tax havens. Years
before the leak, this April, of the Panama Papers—a cache of documents
from Mossack Fonseca, a law firm in Panama City that specializes in the
creation of anonymous shell companies—there was ample evidence that the
global plutocracy has many outlets for dissimulation in the realm of
personal finance. “Only the little people pay taxes,” the billionaire
Leona Helmsley once remarked—to her housekeeper. In 1989, the
housekeeper recounted the exchange to a New York jury, and Helmsley
spent eighteen months in prison. Most tax evasion, however, goes
unpunished.
According
to a 2012 study by James Henry, a former chief economist at McKinsey
who now advises the Tax Justice Network, the world’s wealthiest people
salt away at least twenty-one trillion dollars beyond the reach of tax
authorities. In a book published last year, “The Hidden Wealth of
Nations,” the economist Gabriel Zucman offers a lower, yet still
enormous, estimate: $7.6 trillion, or eight per cent of the world’s
personal financial wealth. Zucman calculates that “the fraud perpetuated
through unreported foreign accounts each year costs about $200 billion
to governments throughout the world.”
The
data that Falciani stole could function as a treasure map, enabling a
country like France to recover some of that lost revenue. Montgolfier
said, “When you have so many French people with Swiss accounts”—he
raised his eyebrows and his shoulders in a synchronized Gallic shrug—“it
has a perfume of fraud.”
The
Swiss prosecutor demanded that Montgolfier turn over Falciani’s laptop,
but he demurred. “We’ll look at the computer,” he said. “Then we’ll
decide if we return it.” To the Swiss government, Falciani was merely a
thief, but the French saw him differently. “I would characterize him as a
bit messianic,” Montgolfier told me. “There was the context of the
world crisis, provoked by finance and all these big banks enabling tax
evasion, and this guy just wanted to set the world free of those
behaviors.” In a memoir recently published in Europe, “Earthquake on
Planet Finance,” Falciani writes of his motives: “I wanted a different
world for my daughter. I didn’t want her to grow up in a reality where
money rules, where the abuse of power and the constant bypassing of the
rules was the norm.”
As if to
underline the incendiary implications of Falciani’s data, Montgolfier
placed the laptop in a safe. While French authorities deliberated how to
proceed, Falciani spent the night in a holding cell in Menton. But the
next morning, in a gesture that indicated a shift in Falciani’s status,
his guards surprised him with coffee and croissants.
When
I first met Falciani, on a winter day at the Place d’Italie, in Paris,
in 2014, he had been living under police protection, fearful that his
life was endangered because of the information he had exposed about
unscrupulous élites. He often travelled with three bodyguards, who were
provided by the French state, but when we met Falciani arrived alone, on
a fold-up scooter. He had proposed a curious venue for our meeting:
Hippopotamus, a chain restaurant that caters to French children, with a
cartoon mascot and colorful menus featuring an array of tiny steak frites.
Falciani ordered a slice of
cheesecake. He was dressed in the manner of a Tarantino assassin: white
shirt, skinny black tie, aggressively tailored black suit. He is
soap-star handsome, with a dimpled chin, olive skin, and what one French
newspaper described as “a commercial smile.” His sideburns tapered to a
sliver. “My father worked in a bank,” Falciani said, in accented
English. As a child in Monaco, which is one of Europe’s oldest tax
havens, he often accompanied his father to work and marvelled at the
discreet power of the institution. The bank was immaculate, and
everybody spoke in hushed tones. It reminded Falciani of a church. After
business hours, he liked to dash through the carpeted hallways.
As
Falciani grew older, he noticed that the flow of money into Monaco was
affected by political events. When war ravaged Lebanon during the
eighties, wealthy Lebanese moved their families, and their fortunes, to
the principality. When François Mitterrand came to power in France, the
country’s aristocrats, fearful of new taxes, stashed their money in
Monacan banks. Sometimes suitcases filled with cash arrived for deposit,
and Falciani watched his father count the money by hand. The names of
clients were never mentioned.
Falciani
studied math and physics at the University of Nice, then began working
in the Casino de Monte-Carlo, initially on the gaming floor and later in
the casino’s internal bank, which extends lines of credit to wealthy
clients. In 2000, he joined H.S.B.C. Around the time he started working
there, an employee named Stephen Troth, who had handled celebrity
clients in Monaco, was discovered to have skimmed millions of dollars
from their accounts. “It was a very simple scheme,” Falciani told me,
adding that he had followed the scandal closely. When the fraud was
revealed, the Monaco branch determined that it needed to improve the
security of its internal network, and Falciani was one of the employees
who worked on devising better systems. In 2006, he was transferred to
the private bank in Geneva, where he undertook a similar project. He was
excited about this new challenge, he recalled: “I had great
expectations.”
H.S.B.C., or the
Hong Kong and Shanghai Banking Corporation, traces its origins to 1865,
and its early success to the opium trade. The bank has grown
substantially over the past two decades—it now has nearly fifty million
customers—and it has acquired a reputation for being less than
scrupulous, even by the loose standards of international banking. In
2012, a U.S. Senate investigation concluded that H.S.B.C. had worked
with rogue regimes, terrorist financiers, and narco-traffickers. The
bank eventually acknowledged having laundered more than eight hundred
million dollars in drug proceeds for Mexican and Colombian cartels. Carl
Levin, of Michigan, who chaired the Senate investigation, said that
H.S.B.C. had a “pervasively polluted” culture that placed profit ahead
of due diligence. In December, 2012, H.S.B.C. avoided criminal charges
by agreeing to pay a $1.9-billion penalty. The company’s C.E.O., Stuart
Gulliver, said that he was “profoundly sorry” for the bank’s
transgressions. No executives faced penalties.
The
private bank in Geneva had become part of H.S.B.C. in 1999, when the
company, which is headquartered in London, acquired Republic National
Bank from the estate of Edmond Safra, the Lebanese-born financier. Safra
had split his time among homes in Geneva, Monaco, and the Riviera town
of Villefranche-sur-Mer, where he owned a palatial villa that had once
belonged to King Leopold II, of Belgium. Many of Safra’s clients had
been Russians alleged to have criminal ties. As a U.S. prosecutor once
remarked, “Republic always had some very interesting customers who find
the government looking at them, more so than maybe other banks.”
When
Falciani arrived in Geneva, he told me, he realized that H.S.B.C. was
engaged in a “gigantic swindle.” Clients were not only placing their
fortunes in accounts that were “undeclared” to tax authorities; H.S.B.C.
bankers were actively assisting clients in hiding their money, by
setting up shell companies and sham trusts in the British Virgin Islands
and Panama. In some instances, the bankers were handing customers
hundred-thousand-dollar bricks of U.S. bills, allowing money to be
smuggled back home. In a subsequent investigation by French prosecutors,
an H.S.B.C. client said that the bank had instructed him to “make a
company in Panama, which should open an account at H.S.B.C. in Lugano,
into which I should transfer all my holdings, in order to not be hit by
this tax.”
Like many Swiss banks,
H.S.B.C. offered “hold mail” accounts, refraining from sending any
statements or other mail to clients. One might suppose that the
inconvenience of such an arrangement would make it attractive only to
the rare client who fetishized privacy, but nearly fifteen thousand
clients chose this method—roughly half of the account holders at
H.S.B.C.’s Swiss bank. Another client questioned in the subsequent
investigation recalled that when he wanted to make a deposit he would
meet his account manager in a public place. “I would give him an
envelope holding my money, in cash,” he explained. “And a few days later
he would tell me by phone that the funds had been credited to my
account in Switzerland.” H.S.B.C. has numerous offices in Paris, but,
according to the French investigation, when the Swiss bankers visited
clients there they preferred to meet in cafés; in a similar spirit of
concealment, account holders used pay phones when making calls to
Switzerland. One client pointed out that the furtive face-to-face
meetings offered “a bit of reassurance about the money I had in
Switzerland, since I had no documents or anything that attested to my
having an account.”
Although the
conduct that Falciani witnessed may have been illegal, it was fairly
standard practice for Swiss banks at the time. A 2014 U.S. Senate report
describes a Credit Suisse banker travelling to America to meet a client
for breakfast at a Mandarin Oriental hotel, and passing along an issue
of Sports Illustrated in which account statements were concealed between the pages.
Swiss
banks routinely dispatched emissaries to cultivate new clients at art
shows and regattas, and the illegality of the service was implicit in
the pitch: if you bank with us, your fortune will not be taxed. It is
not illegal for a person or a corporation to hold a Swiss bank account,
or to engage in tax “avoidance”—skirting tax requirements through
gymnastic accounting and the exploitation of loopholes. But tax evasion,
in which wealth is actively concealed from authorities, is illegal, and
the behavior of Swiss bankers often suggested that they knew they were
crossing the line. According to testimony in a 2014 criminal trial in
Florida, representatives of the Swiss bank U.B.S. who travelled to such
events as Art Basel to recruit clients carried encrypted laptops that
were configured with an emergency password, so that they could erase the
hard drive with a few keystrokes. An unnamed Swiss banker, speaking to
the Times, recalled telling colleagues, “We all have one foot
in prison.” He observed to the paper, “Maybe that’s why we were all paid
so much.”
Most Swiss banks had
compliance procedures designed to prevent tax evasion, money laundering,
and other financial crimes. But Sue Shelley, who until 2013 was an
H.S.B.C. executive vice-president in charge of compliance in Luxembourg,
and who worked closely with the Geneva bank, told me that “compliance
really took a back seat” to making profits. Shelley found that when
compliance officers raised too many questions about large deposits with
dodgy origins they risked being sidelined. Compliance was often
perceived as “a business-prevention department,” and as a result the
division was chronically understaffed. “We kept finding more and more
red flags that we didn’t have the resources to address,” she said.
When
I asked Falciani about compliance at the bank, he said, “They just do a
few checks.” He said that he tried to sound the alarm internally and
was ignored—a claim that the bank disputes. To Falciani, the bankers at
H.S.B.C. were little more than crooks in pinstripes. “I spent too many
years waiting for something to change,” he told me. Eventually, he took
matters into his own hands.
It started with the gradual accumulation
of client data. In theory, this should have been impossible: one
principle of security at Swiss banks is that client information is
distributed in “cellular” fashion, so that no individual has access to
too much data. The bank’s computer system was “subdivided into airtight
compartments,” Falciani maintains, and each employee was instructed not
to wonder about what was happening beyond his own computer screen. In
order to preserve the anonymity of accounts, only a few employees knew
the identity behind any account number.
But,
like Edward Snowden, with whom he claims a strong affinity, Falciani
was a systems guy. His technical expertise allowed him to outmaneuver
the bank’s security software. In Geneva, he was working on a new
customer-relations management system. One day, as he harvested data from
the bank’s internal network, he says, he stumbled upon information to
which he should not have had access: not just the names and account
numbers of customers but also the confidential notes that H.S.B.C.
bankers maintained about their meetings with clients. “I’d never heard
about this sort of flaw in the computer system,” Falciani later told the
investigators. The data were being updated in real time—it seemed that
he had stumbled into a wormhole that held the bank’s deepest secrets. He
even came across the details of his own account with the bank. At this
point, another computer technician might have hastened to inform his
superiors about the vulnerability. Falciani did not.
Nobody
knows exactly how Falciani purloined such a staggering volume of
sensitive data. Alexandre Zeller, who at the time was the head of
H.S.B.C.’s Swiss operations, has spoken of the theft as if it were a
magic trick. In a deposition provided to French investigators, Thibaut
Lestrade, a technician with the French tax administration, praised
Falciani’s wizardry: “It wouldn’t have been enough to just press a
button and copy a whole grouping of data. There were data that came from
several different systems which, I suspect, were not made to be
connected to one another.” A confidential investigative file compiled by
Swiss authorities notes that Falciani has “a certain talent for
computing” and describes him as “an autodidact” who is “passionate about
the exploration of data and the establishment of links within them.”
When
I asked Falciani how he had avoided triggering digital alarms, he
explained that he had help from a shadowy league of like-minded
professionals. “We started to work out a strategy,” he said.
“Who is ‘we’?” I asked.
“The Network,” he replied.
“How many people are in the Network?”
He smiled cryptically. “I don’t want to give too much detail.”
According
to Falciani, the Network was a loose confederation of “anti-tax-evasion
crusaders,” consisting of law-enforcement officers, lawyers, and spies.
He told me that the Network not only helped him to steal the data; it
facilitated his escape to France. H.S.B.C., which conducted an internal
investigation after Falciani became a fugitive, maintains that his story
about the Network is a ruse, and that he had only one co-conspirator: a
thirty-four-year-old Lebanese woman named Georgina Mikhael, who had
become a technical administrator at H.S.B.C. in September, 2006.
Mikhael, who has since returned to Beirut, has a throaty voice, large
dark eyes, and caramel-colored hair. She and Falciani worked in adjacent
offices, and they became close. They would leave the building to get
coffee or to exercise at the gym. Mikhael knew that Falciani was
married, but she sensed that he was unhappy in his marriage, and he
looked at her, she later said, as if he could “devour me with his eyes.”
Before long, they had embarked on an affair.
The
prosecutor in Nice, Éric de Montgolfier, discovered that the files on
Falciani’s hard drive were encrypted—an unintelligible compost of names,
nationalities, account numbers, and deposit amounts. French authorities
established a task force to decode the information, calling it
Operation Chocolate. (“A dumb name,” a French official acknowledged.
“But we weren’t going to call it Operation H.S.B.C.”) In February, 2009,
twenty specialists assembled at a hotel in Nice and set to work, in
close consultation with Falciani, who provided passwords to decrypt the
information and advice on how to organize it. By the end of the summer,
they had extracted a list of a hundred thousand names that were
connected to H.S.B.C. accounts. Éric Woerth, the French budget minister
at the time, announced that the French government had recovered the
names of three thousand taxpayers who held undeclared accounts in
Switzerland, remarking, “This is the first time we have this kind of
information: accurate, with names, account numbers, and amounts on
deposit. This is exceptional.”
Swiss
officials threatened to halt a series of unrelated intergovernmental
initiatives if the French refused to return the data. The Swiss
newspaper Le Temps characterized the clash over Falciani’s
files as “a diplomatic earthquake.” One Swiss justice official sent
Montgolfier an intemperate letter saying that Falciani had not merely
damaged the bank; he had attacked the Swiss state. “It was
extraordinary,” Montgolfier said. “To harm H.S.B.C. was to harm
Switzerland.”
The agitation of the
Swiss should not have been surprising. By the time Falciani handed the
H.S.B.C. data to the French, the Swiss tradition of financial secrecy
was coming under assault. In 2007, an American banker who had worked for
U.B.S. in Geneva, Bradley Birkenfeld, approached U.S. authorities with
information about how the bank had helped thousands of Americans evade
taxes. Birkenfeld himself had provided a variety of “concierge”
tax-evasion services: he once bought diamonds for an American client,
then smuggled them into the U.S. inside a toothpaste tube. “This was an
orchestrated money-laundering, tax-evasion machine,” Birkenfeld told me.
“In Switzerland, you can do whatever you want. You want to walk in the
door with a hundred million dollars? You can deposit it. Have a nice
day. Never pay taxes again.” Although the European Central Bank plans to
eliminate the five-hundred-euro note, given that high-denomination
bills are perhaps most useful to criminals, Switzerland still has a
thousand-franc note (roughly, a thousand dollars). “They have the
largest currency denomination in the world—what does that tell you?”
Birkenfeld said. “One time, in Geneva, I took a thousand-Swiss-franc
note and bought a pack of gum. The guy behind the counter didn’t blink
an eye.”
As a result of
Birkenfeld’s leak, U.B.S. was forced to turn over to the I.R.S. the
details of more than forty-five hundred clients with undeclared
accounts, and the bank eventually paid a fine of seven hundred and
eighty million dollars. In 2008, Switzerland’s finance minister,
Hans-Rudolf Merz, warned other countries that if the world tried to
crack down on Swiss bank secrecy it was liable “to break its teeth.”
When the Group of 20 met in London in 2009, offshore accounts and tax
evasion were high on the agenda for the first time, under the rubric
“The End of Bank Secrecy.” Neutrality is another cherished Swiss
tradition, but now Switzerland’s closest neighbors were tabulating the
ways in which bank secrecy had enriched the country at the expense of
others. As Nicholas Shaxson suggests in his book “Treasure Islands:
Uncovering the Damage of Offshore Banking and Tax Havens,” the Swiss
banking industry was predicated on the idea that “it is perfectly O.K.
for one jurisdiction to exercise its sovereign right to get rich by
undermining the sovereign laws and rules of other places.”
In this political context, the
Falciani list posed an existential threat to the Swiss economy. The
files had ended up in the possession of the French, but they contained
incriminating details related to H.S.B.C. clients around the world. It
was not long before other governments began asking the French to share
information. Early in 2010, tax authorities in the United Kingdom asked
if British taxpayers were on the list, and officials in Paris turned
over several thousand names. That May, police in Italy announced that
they had received details about Italian account holders. The scandal
unfolded while Italy’s Prime Minister at the time, Silvio Berlusconi,
was being investigated for tax fraud, and leaks to the press revealed
that many prominent Italians were on the list, from a Roman princess to
the jeweller Gianni Bulgari. The Italian press called it the elenco della vergogna—the list of shame.
French
authorities also shared portions of the list with Argentina, Russia,
Canada, Australia, Sweden, Belgium, Spain, Germany, and India (where the
hidden funds were described as “black money”). Scandals erupted in each
country, but the biggest aftershock was felt in Greece, which was
already suffering from the global economic crisis. In 2010, Christine
Lagarde, then the French finance minister, shared two thousand names on
Falciani’s list with her Greek counterpart, George Papaconstantinou.
According to a study by scholars at the University of Chicago and
Virginia Tech, in 2009 Greek taxpayers failed to declare as much as
twenty-eight billion euros—roughly twelve per cent of the country’s
gross domestic product. Greece had amassed a giant debt, and to reduce
it Papaconstantinou had enacted severe austerity measures, cutting
pensions and wages and raising taxes, even though many Greeks were in
desperate financial straits. Yet, when Papaconstantinou learned the
names of wealthy Greeks who were hiding their fortunes offshore, the
government took no action.
In 2012, the Greek magazine Hot Doc
published a version of the list. Papaconstantinou’s successor,
Evangelos Venizelos, initially claimed ignorance. Then he announced that
he had discovered a memory stick containing Falciani’s data in an
office drawer, and had given it to authorities. When prosecutors
requested a fresh copy of the Greek list, from Paris, and compared it
with the data provided by Venizelos, they found that three names were
missing from the memory stick. All were relatives of Papaconstantinou,
who was convicted of tampering with the list and given a suspended
sentence.
Although the Swiss
government appears to have quickly understood the possible repercussions
of the Falciani list, the management at H.S.B.C. was slow to comprehend
the extent of its predicament. Alexandre Zeller, the head of the
private bank in Switzerland, downplayed the data loss, claiming that
only ten or so clients were affected. Zeller did not understand that the
breach was of historic dimensions until December, 2009, when the French
finally shared the complete list with the Swiss. H.S.B.C. executives
were shocked when Falciani was subsequently hailed across Europe as the
“Edward Snowden of banking,” in part because they had become convinced
that he was something decidedly more sinister.
The
Swiss Bankers Association, an industry group, maintains an
international alert system that allows participating banks to issue
security bulletins to other banks. The system is monitored by Swiss
police, and in February, 2008, an officer noticed a posting from a woman
named Samira Harb, who worked at Bank Audi, in Lebanon. Harb explained
that she had recently met with a man who was looking to sell a database
containing what appeared to be private-client information from a Swiss
bank. In a subsequent interview with Swiss authorities, Harb said that
she had been taken aback by the man’s presentation, and had pointed out
to him that “my name could have been on the list if I had an account.”
The man was aggressive. Opening a Mac laptop, he showed her a
spreadsheet containing account numbers, addresses, and job titles. When
Harb asked him how he had obtained this information, he was evasive,
saying that he had used “I.T. techniques.” Harb declined the man’s
offer, but held on to his business card. It identified him as Ruben
al-Chidiak. He was travelling with an associate—a Lebanese woman named
Georgina Mikhael.
In Bern, a Swiss
federal prosecutor named Laurence Boillat opened an investigation.
There was no record of a Ruben al-Chidiak in Switzerland, and the name
had a fictitious ring. But Georgina Mikhael was working at H.S.B.C. in
Geneva. Boillat placed Mikhael under surveillance, including a wiretap
on her cell phone. She did not appear to be communicating with Chidiak,
but Boillat determined that she was having an affair with a married
colleague—Hervé Falciani. Mikhael exchanged more than five hundred phone
calls and text messages with Falciani. During an instant-message chat
on Skype, she seemed to be asking about the transfer of client
information onto a memory stick. “Have you committed a sin?” she wrote.
“You have to be careful baby.”
Toward
the end of 2008, the surveillance revealed that Mikhael was planning to
leave her job and return to Beirut. Boillat and a team of investigators
confronted Mikhael at her office. She immediately confirmed that
Chidiak was actually Falciani, and pledged to coöperate.
Mikhael
told the investigators that Falciani had intended to use his database
not to expose tax evasion but to make money. They were in love, she
explained. He told her that he wanted to leave Simona. “I thought that
Hervé was serious, and that we could imagine a future together,” she
said. But Falciani told her that he needed to raise money in order to
finance a divorce. (Simona was aware of the relationship, Mikhael told
the investigators, adding, “I don’t know if she knows the story of the
data.”)
Private banks routinely
attempt to poach wealthy clients. Mikhael told the investigators that
she and Falciani had travelled to Beirut to sell the data on H.S.B.C.
customers to another bank. Before departing, they had created a company,
based in Hong Kong, named Palorva—a mashup of “Palomino,” which was
Mikhael’s nickname, and “Hervé.” They set up a Web site and posted a
motto: “Business is the art of extracting money from another man’s
pocket without resorting to violence.” The Web site said that Palorva
could help banks recruit new customers by scouring public databases for
information.
Falciani felt that he
should have an alias, Mikhael said. Wanting “a name that would be
familiar to his Lebanese interlocutors,” he decided that Ruben
al-Chidiak sounded plausibly Arab. They printed business cards—Chidiak
was identified as Palorva’s “sales manager”—and in February, 2008, they
flew to Lebanon, using Simona Falciani’s H.S.B.C. credit card to buy
tickets. In addition to Bank Audi, they met with four other banks, but
made no sales. According to Mikhael, Falciani travelled at all times
with a can of mace and a knife. (He denies this, saying, “That’s not my
style.”)
When I asked Falciani if
he had an affair with Mikhael, he said yes, but added, “It was nothing
special.” In Beirut, the couple strolled along the Corniche, and Mikhael
introduced Falciani to her family. “Georgina thought we were going to
settle in Lebanon,” Falciani subsequently testified in a deposition in
France. “I let her think I had the same idea.” But once they returned to
Switzerland the relationship soured. Mikhael noticed that each time a
new young woman started working at the bank Falciani followed her around
“exactly like he did with me.” Eventually, she told Swiss
investigators, she “realized that he wasn’t ready to leave his wife.” At
one point, she sent him an e-mail: “The deal we made doesn’t say that
you should never call me!! Apparently you’ve been having great
weekends.”
Falciani, it seems, had
begun seeing other women. Later, when Swiss investigators analyzed his
cell phone, they found a contact listed as “Myriam government.” Was this
a liaison from a foreign-intelligence service? Was it someone from the
Network? When they looked up the number and summoned the woman for an
interview, they discovered that Myriam was a philosophy student and a
part-time secretary from Geneva—“a romantic conquest” of Falciani’s, as
one investigator put it. (Apparently, Falciani, mindful that his wife or
his mistress might inspect his contact list, had added “government” to
throw off suspicion.) Mikhael eventually concluded that Falciani was “a
liar, a born manipulator, a seducer, a pickup artist.”
Falciani told me that he never intended
to sell files in Beirut. On the contrary, he had known about the warning
system maintained by the Swiss Bankers Association, and had set up
meetings in Beirut with the express intention of triggering the alert
system, in order to lure Swiss authorities into exposing H.S.B.C.’s
criminality. “It was a trap,” he said.
Why
fabricate a false identity? Falciani told me that his friends in the
Network had developed suspicions about Georgina Mikhael and her sudden
appearance in Geneva. “This girl was maybe not there only for her,”
Falciani said. “She had no banking experience at all.”
“Whom did you think she was working for?” I asked.
Falciani cast a theatrical glance around Hippopotamus before leaning toward me and whispering, “It was Hezbollah.”
I
looked at him with bewilderment. There were times when Falciani
reminded me of Chuck Barris, the host of “The Gong Show,” who, in his
1984 memoir, “Confessions of a Dangerous Mind,” claimed that he had
secretly led a double life as a C.I.A. assassin. In order to determine
whether Mikhael was a Hezbollah spy, Falciani said, he tested her by
seeing if she had the means to secure him “a real fake identity”—a
Lebanese passport and an identity card with a pseudonym. His actions
sounded bizarre, Falciani allowed, but you had to understand that,
during this period, dangerous people were coming to Geneva and taking a
great interest in him. He said, “You have read about the kidnapping?”
One
night in August, 2007, Falciani was walking in Geneva’s Champel
district when a van suddenly pulled alongside him. Men inside the
vehicle “threw me in, holding a gun to my head,” he recalled. “I found
myself in the basement of a church, in front of two men. A big
red-headed guy that speaks impeccable French and a super-tough
brown-haired guy.” They were Mossad agents, and the Israeli government
needed his assistance. An Islamist mole had apparently infiltrated
H.S.B.C. Would he help expose the infiltrator? He accepted the mission.
At least, this is the version that Falciani told the French newspaper Nice Matin.
When I pressed him about the episode, his story shifted. “My friends
organized the kidnapping,” he said. It was staged by the Network.
So the kidnappers weren’t actually Mossad agents?
“It was real
fake,” Falciani replied. “Like a real fake identity.” He conceded that,
in the H.S.B.C. saga, “you have a lot of real fake things.” In 2010,
Swiss prosecutors asked Mikhael about the Mossad story. “I’m convinced
that this story is pure invention,” she said. She has initiated a
defamation suit against Falciani in Paris, insisting that she is neither
a terrorist nor a spy, and arguing that Falciani’s allegations are
“worthy of a crime novel.” (Through a lawyer, Mikhael declined to speak
with me, but the lawyer reiterated that she has never been a member of
Hezbollah, noting that she is Christian.)
In
Paris, I met with Christian Eckert, the French budget minister, who
wrote a report on Falciani and his revelations. The French government
has not only vaunted Falciani’s information; it has fought a significant
international battle to protect him from prosecution by the Swiss.
Eckert acknowledged that Falciani “has a tendency to romanticize his
stories a little.” But he insisted that financial authorities had
confirmed “the authenticity of the information that he gave.” Even if
Falciani wasn’t always a reliable narrator, the French government had no
buyer’s remorse. When I alluded to Georgina Mikhael’s contention that
Falciani is merely a con man and a common thief, Eckert grimaced as if
he’d swallowed a bad oyster, and muttered, “Salope”—the French word for “bitch.”
Until
recently, it seemed impossible to shame the Swiss into breaking their
tradition of banking secrecy. In the nineteen-nineties, when U.S.
investigators came looking for looted assets that had been stolen from
Jews during the Second World War, the Swiss government stonewalled. But
by 2012 Falciani’s revelations and other pressures threatened to
overwhelm the Swiss resistance to transparency. In 2010, the U.S.
Congress passed a law requiring banks overseas to submit to the I.R.S.
the names and account details of American clients. The Organisation for
Economic Co-operation and Development, meanwhile, amended a convention
on mutual administrative assistance in tax matters so that Swiss banks
could be obligated to divulge client information. In February, 2012,
prosecutors in New York indicted Wegelin & Company, the oldest bank
in Switzerland, for money laundering and abetting tax evasion. The bank
was effectively put out of business. Chancellor Angela Merkel infuriated
Swiss officials when she announced that the German government would
happily pay a Swiss bank employee who was offering to sell information
about secret accounts held by German taxpayers. “If these data are
relevant, we should aim to get hold of them,” she said. This established
a frightening precedent for Swiss banks. Oswald Grübel, the chief
executive of U.B.S., said, “If governments are in the market of buying
illegal data, that changes the world.”
On
June 30, 2012, Falciani travelled to the southern port of Sète, where
he boarded a Morocco-bound ferry that would make a stop in Spain. His
reasons for going to Spain have never been clear. I heard a rumor in
Paris that there was a woman there. But Falciani, characteristically,
offered me a more intriguing explanation. During the summer of 2012, the
U.S. Senate concluded the investigation revealing that H.S.B.C. had
engaged in money laundering and facilitated the operations of Mexican
drug cartels. According to Falciani, he had been an instrumental source
for this investigation, and he was advised by supporters in the U.S.
government to leave France. “There was a lot of risk in that period for
people to kill me,” Falciani told me. (A staff member who was involved
in the Senate inquiry told me that Falciani was not a source for the
investigation.)
Early the next
morning, the ferry arrived in Barcelona. When Falciani disembarked and
presented his passport to Spanish immigration officials, he was
arrested. He had been safe in Paris, because he had a French passport
and France rarely extradites its own citizens. But Switzerland had
issued a Red Notice—an international arrest warrant—with Interpol, and
the Spanish elected to honor it. This placed Spanish authorities in a
slightly awkward position, given that in 2010 they had requested
Falciani’s list from the French. Madrid tax inspectors had subsequently
conducted a series of investigations into prominent Spaniards who had
used H.S.B.C. to mask their wealth. Emilio Botín, the head of Banco
Santander, was exposed as an account holder and was obliged, along with
other members of his family, to pay nearly three hundred million dollars
in back taxes.
Falciani hired a
lawyer to challenge the extradition. Pending the resolution of his case,
he was sent to Valdemoro prison, south of Madrid. Falciani was cavalier
about this interlude, telling me, “It’s tough for my family, you know,
but I’m kind of Superman—for me, it’s O.K.” He passed the days playing
racquetball with members of ETA, the Basque terrorist group. A priest loaned him a book about Julian Assange, which he read with great interest.
At
an extradition hearing in April, 2013, Falciani appeared in thick
glasses and a preposterous brown wig. The disguise was for his own
safety, he explained in his memoir: “My only fear was that someone might
take me out before my arrival at the court.” In arguing that he should
not be returned to Switzerland, Falciani volunteered to assist the
Spanish government in its battle against tax fraud, saying, “The fight
for financial transparency is fundamental.” A month later, a Spanish
court ruled against extradition. Because the principle of bank secrecy
does not exist in Spanish law, the court argued, violating that secrecy
in Switzerland was not a crime in Spain.
Falciani
insists that the five and a half months he spent in the Spanish jail
was part of his grand design. “I knew I would be imprisoned,” he told
me. “But I had to flee the threats that I was exposed to and take up the
fight against financial secrecy.” But why would Spain be safer than
France? Visibly impatient with my failure to grasp his logic, he said,
“Because I would be in jail.”
Upon his release, Falciani returned to France, where he was given police protection. Montgolfier, the prosecutor in Nice, told Le Temps
that Swiss attempts to discredit Falciani should be dismissed. “No one
seems to doubt what we have in our hands,” he said. “We cannot question
the data.” Falciani told me that his house had been broken into and
that, as a consequence of his notoriety, Simona, who had remained in
Italy with Kim, was fired from her job as a clerk in a shoe store. In
interviews, he has adopted a tone of menace toward his antagonists. “I
have become more dangerous,” he told Le Monde, in 2013.
The
French government says that it has never paid Falciani for his
information, and he denies having been paid by any of the governments
that have used his data to pursue tax cheats. But, if Falciani had been
compensated, such a transaction would not be without precedent. In 2006,
a former employee of L.G.T. Group, a private bank in Liechtenstein,
offered the details of hundreds of accounts to German intelligence
services—and received a reported five million euros in return. Some
German officials voiced discomfort with the quid pro quo, and with
Angela Merkel’s endorsement of such deals. Kurt Lauk, the president of
the business council of the Christian Democrats, said, “We are
signalling to these data thieves: We will buy what you steal.”
Georgina
Mikhael has observed of Falciani, “He has an enormous imagination.
Overflowing.” His outlandish stories about secret agents and a network
of hackers opposed to tax evasion seem like the fantasies of a paranoiac
or the ramblings of a fabulist. But in March, 2008, before fleeing
Geneva, he had sent e-mails to British and German intelligence agencies,
announcing, “I have the whole list of clients of one of the world’s top
five private banks.” (The agencies did not pursue this opportunity.) He
also contacted a French revenue inspector named Jean-Patrick Martini.
During the summer of 2008, Falciani arranged a secret meeting with
Martini in a French village across the Swiss border. Martini brought
along a psychologist, who helped him come to the conclusion that
Falciani seemed credible about the provenance of his data.
In
a subsequent deposition, Martini testified, “He said there had been
fraud, that the bank was complicit in a fair number of irregularities,
and that it was important to put a stop to it. I always had the
conviction that he was acting out of pure civic duty.” After Falciani
crossed into France in December, 2008, he met Martini again, at a café
in the Nice airport, and turned over CDs containing the H.S.B.C. data.
When Montgolfier and his team raided the apartment of Falciani’s
parents, they did not realize that another French official already
possessed a copy of the list.
Georgina
Mikhael has said that Falciani’s overtures to foreign governments were
simply a hedge on his efforts to sell the data: if he failed to make a
deal with a bank, he would seek a buyer in the intelligence community.
He was aware that Germany had paid millions to the leaker from L.G.T.
Group, the Liechtenstein bank. In “Falciani’s Tax Bomb,” a 2015
documentary by the British filmmaker Ben Lewis, Mikhael says that it was
the Liechtenstein deal that “gave him the idea to sell the data to
secret services.” Of course, someone can have a desire to expose
wrongdoing and also want to be rewarded for his trouble. Government
agreements with whistle-blowers often look morally confused. In 2009,
Bradley Birkenfeld, the American banker who leaked documents about
illegal activity at U.B.S., was sent to prison for his role in the
conspiracy. He served two and a half years. (Though U.B.S. paid a fine,
no other executive went to jail for the misconduct that Birkenfeld
exposed.) Upon Birkenfeld’s release, he received a government reward of a
hundred and four million dollars—the largest ever paid by the I.R.S.
In
airport terminals around the world, H.S.B.C. posts advertisements that
emphasize its reach across continents and cultures. An image appears
twice, with different captions: a tattooed arm is labelled “trendy” in
one picture and “traditional” in the next, suggesting that the
cosmopolitan traveller needs a global bank that grasps differences in
cultural perception. As Falciani’s fortunes rose and fell, we kept in
touch through Skype, and I often thought of those ads. In France,
Falciani looked like a whistle-blower; in Switzerland, he looked like a
thief. “I was taken in by his charm,” Mikhael says in the documentary.
“But I am still amazed that the whole world has been charmed by him.” In
December, 2014, Swiss prosecutors indicted Falciani for industrial
espionage and data theft. After the charges were announced, he seemed
unruffled. He couldn’t understand why anyone questioned the purity of
his motives. “I did everything straight,” he told me.
One day in early 2014, someone dropped off a memory stick at the reception desk of Le Monde,
in Paris. It contained a copy of Falciani’s data. Until that point,
bits of the list had become public, but no media outlet possessed a
complete copy. Overwhelmed by the amount of information, the editors of Le Monde
joined with the International Consortium of Investigative Journalists
to comb through it. In February, 2015, the project, SwissLeaks, resulted
in dozens of articles in newspapers around the world.
The
novelty and importance of the list lay more in its magnitude than in
its confirmation of individual venality. Nevertheless, it was bracing to
put human faces—many of them famous—on the story. The Guardian
and other SwissLeaks participants revealed that the Falciani list
included politicians, arms dealers, and people linked to terrorist
financing and to the trade in blood diamonds. Stuart Gulliver, the
C.E.O. of H.S.B.C., acknowledged that the list had become “a source of
shame.”
Exposed
clients sometimes offered comical responses. The French chef Paul
Bocuse said that he had “forgotten” about an account containing 2.2
million euros. David Bowie explained to the Guardian that
although he lived in Manhattan, he had been a legal resident of
Switzerland since 1976. One person whose name ended up on the list, John
Malkovich, sued Le Monde, saying that he has never had an undeclared account at H.S.B.C.
There
were serious consequences for a few of the named clients. For example, a
French court sentenced Arlette Ricci, the seventy-three-year-old
heiress to the Nina Ricci fortune, to a year in prison for tax fraud.
But the vast majority of people identified as holding undeclared
accounts were not prosecuted. Instead, they appear to have settled with
their respective governments, in a series of quiet amnesties.
Nearly
three thousand accounts were held by U.S. taxpayers. When I met with
Christian Eckert, the French budget minister, he showed me official
documentation indicating that in early 2010 U.S. authorities had
requested French assistance in securing the American names on the list.
In May, 2012, four I.R.S. agents and a prosecutor from the Department of
Justice flew to Paris and interrogated Falciani about his database. “I
remain at your disposal,” he said, according to a transcript of the
meeting.
The Department of Justice declined to
comment on its questioning of Falciani, and the I.R.S. denied my
request, under the Freedom of Information Act, for details about its
possible use of the list to pursue tax violators. But, in 2009, the
I.R.S. introduced a plan allowing U.S. citizens with undeclared accounts
to volunteer the details to the government and pay outstanding taxes,
without fear of criminal penalties. I.R.S. officials maintain that they
have collected more than eight billion dollars through this program, and
it stands to reason that some people who settled in this fashion were
on Falciani’s list. Indeed, there is evidence that U.S. authorities have
used the list to pursue cases against American taxpayers.
According
to an affidavit in a federal case against a New Jersey couple, Eli and
Renee Chabot, the government received a CD in April, 2010, containing a
portion of Falciani’s list, and the data revealed that the Chabots had
several million dollars at H.S.B.C. Switzerland, in accounts associated
with a company called Pelsa Business, Inc. The Chabots refused to turn
over information to the I.R.S. about the accounts. Last year, an appeals
court held that this was not a permissible invocation of the Fifth
Amendment. But the case against them may face complications. In the
Falciani documentary, Victor Song, a former enforcement officer at the
I.R.S., says that a determination was made by the Department of Justice
that Falciani’s information would be inadmissible in U.S. courts,
because it had been “stolen from a bank in Europe.”
Last
November, at a federal court in Bellinzona, Switzerland, a prosecutor
named Carlo Bulletti argued that Falciani was no crusader. “The whole
construct of the White Knight is a tissue of lies,” he said. Falciani
was being tried in absentia, for industrial espionage and data theft. A
former supervisor of Falciani’s testified that he had grumbled about the
cost of living in Geneva and complained about his salary, which never
exceeded a hundred and thirty thousand dollars. Laurent Moreillon, a
lawyer for H.S.B.C., called Falciani a “data robber” and noted that the
breach had been devastating for the bank, had created embarrassment for
account holders, and had precipitated numerous divorces.
Falciani’s
attorney, Marc Henzelin, denied that his client had attacked a
financial fortress. The data practically “fell into his pocket,” leaving
Falciani feeling “troubled” by the vulnerability of the bank’s internal
software. Henzelin acknowledged that the trip to Beirut wasn’t a “very
glorious episode,” but he suggested that Falciani had overplayed the
intrigue. “All this is part of a movie script, but not very serious,” he
insisted. Falciani had gone to Lebanon to sell data, Henzelin said, but
only with material harvested from the Internet. “There is no indication
that the data he wanted to sell in Beirut were precisely data from
H.S.B.C. Switzerland,” Henzelin argued.
The
prosecution claimed that the privacy of thousands of honorable clients
had been violated, but, as Henzelin pointed out, this was hard to
reconcile with the damning particulars of the list. Of six hundred and
twenty-eight Indian names on the list, only seventy-nine had declared
their assets to the Indian government. The proportion was similar for
Argentina and Greece. Gabriel Zucman, the economist, estimates that
eighty per cent of assets in offshore havens are undeclared. Tax evasion
wasn’t incidental to H.S.B.C.’s Swiss bank, Henzelin concluded; it was
the bank’s raison d’être.
Switzerland
has been hard on those who violate bank secrecy: Rudolf Elmer, a former
employee of the Swiss bank Julius Bär, was tried in 2011 for sharing
information about tax evasion and other improprieties with WikiLeaks.
Elmer was imprisoned for two hundred days, some of it in solitary
confinement; he says that his family was harassed by detectives working
for the bank. In Swiss society, to violate the covenant of secrecy is to
risk not just prison but also ostracism.
During
the trial, Falciani taunted prosecutors by speaking at a conference in
Divonne, a French spa town a mile from the Swiss border. The subject of
the conference was “Investigative Journalism in the Time of WikiLeaks.”
Falciani arrived unshaven, his dark hair slicked back, dressed in a
black blazer and jeans. He had a tan, and as flashbulbs popped he had
the self-conscious demeanor of a movie star at a première. “My action
continues to be fruitful,” Falciani declared. “I’m working with
administrations and investigators.” Although he had remained in France,
he had joined a new Spanish political party, Partido X, and stood for
election in the European Parliament, in 2014, on an
anticorruption-and-transparency platform. (The Party won no seats.) He
was also promoting “Earthquake on Planet Finance,” in which he related
his adventures and called for greater accountability in the
international financial system.
The
book is an extraordinary document. Falciani writes that the Network
consists of “about 100 people working toward the same objective.” He
claims that while he was fleeing Switzerland he was contacted by Network
operatives on a keyboardless phone, “white in color and the size of a
credit card, so slim that one could hide it in the pages of a book.” The
device sounds like something Apple will be selling a decade from now,
but Falciani describes it as proprietary Network technology. In Beirut,
he “was always running the risk of being kidnapped.” In Spain, powerful
enemies could have “faked an accident to eliminate me.” He describes
secret meetings on railway platforms and bodyguards who watch over him
so discreetly that nobody but Falciani ever seems to notice them.
At
a press conference, a reporter asked Falciani how Simona had coped with
his troubles. “She is courageous, she has never failed,” he said,
adding, “I never had any mistresses.” Noting that he no longer lived
with his family, he initially called it “a life-style choice,” then
explained that he was trying to protect their safety. “We communicate by
Skype,” he said. The hotel where the event took place was also a
casino, and Falciani seemed at ease there. A few days later, in
Bellinzona, the attorneys and the presiding judge spent the morning
debating whether, in light of Falciani’s decision to boycott his own
trial, his remarks in Divonne were admissible in lieu of testimony.
(They were not.)
On November 27,
2015, Falciani was convicted of aggravated industrial espionage, and
sentenced to five years in prison. H.S.B.C. released a statement
celebrating the verdict, and noted that the bank “has always maintained
that Falciani systematically stole clients’ information in order to sell
it.” It was the harshest sentence ever delivered in Switzerland for the
violation of bank secrecy, but the authorities were clearly waging a
rearguard battle. Marc Henzelin, Falciani’s attorney, noted that his
client was being prosecuted while Switzerland succumbed to international
pressure to dismantle bank secrecy altogether. “It is not Falciani who
is being judged,” Henzelin said. “It is Switzerland.” Eckert, the French
budget minister, told me, “I think the Swiss are now convinced that
secret banking doesn’t have much of a future.”
The
French are pursuing a criminal case against H.S.B.C. over the Falciani
revelations, and have indicted the bank for direct marketing to
nationals, money laundering, and facilitating tax fraud. But in
Switzerland authorities dropped an investigation of H.S.B.C. after the
bank agreed to apologize for “organizational deficiencies” and pay a
conspicuously manageable fine of forty-three million dollars. (Last
year, H.S.B.C.’s net profits exceeded thirteen billion dollars.) When I
asked Birkenfeld, the former U.B.S. banker, about the penalty H.S.B.C.
paid in Switzerland, he laughed. “I had friends who worked at H.S.B.C.
who handled accounts that were larger than that,” he said. The system is
rigged, Birkenfeld said: “The Swiss government can’t investigate the
bank. They would be investigating themselves!”
A
few days after Falciani’s sentencing, I visited Geneva. The city felt
scrubbed and prosperous. As dusk fell, neon signs bearing the logos of
Swiss banks and watch companies glowed over the lake, which looked as
clear as glass.
H.S.B.C.
had recently relocated from an old lakeside palace that it inherited
from Edmond Safra to a row of handsome whitewashed buildings. No
executives would meet with me, but a beleaguered-seeming British press
spokesman escorted me through a series of sleek glass interiors to a
conference room on a high floor, and assured me that the bank has
changed. H.S.B.C. has nearly tripled its number of compliance officers,
to nine thousand, and has ceased operations in a dozen countries. “The
number of accounts has been managed down,” he said.
Where
will the profits that H.S.B.C. is forfeiting go? To other banks, he
said, or other countries. Money has a tendency to move, and Switzerland
is hardly the only tax haven. If it becomes impractical to hide fortunes
there, the money could migrate to Singapore, or, for that matter, to
America. Shruti Shah, the vice-president of Transparency International
U.S.A., recently found that in such states as Delaware and Nevada it is
easier to establish an anonymous shell company than it is to obtain a
library card. It seems unlikely that reforming the Swiss banking sector
will diminish the widespread practice of tax evasion, because wealthy
clients can simply transfer their money to a more lax jurisdiction or
convert their cash to art or gold or some other easily laundered asset.
The Times recently observed that fighting tax evasion by
striking deals with an individual banking haven is like “plugging one
hole in a colander.”
Whether the
culture at H.S.B.C. has actually changed is open to debate. After the
bank was implicated in servicing drug cartels and sanctioned regimes,
the U.S. Justice Department appointed an independent monitor to assess
H.S.B.C.’s efforts at reform. Last summer, the monitor reported that
employees continued to display a lack of coöperation with internal
audits. Managers maintained the same approach to in-house compliance:
“discredit, deny, deflect, and delay.”
Sue
Shelley, the former compliance chief in Luxembourg, began her career at
Midland Bank in Liverpool when she was a teen-ager, ripping up old
checkbooks. After Midland merged with H.S.B.C., in 1992, she created a
compliance department for H.S.B.C.’s operation in the Cayman Islands.
She arrived in Luxembourg in 2009, and was struck by the lax precautions
at the private bank—and by its reaction to the Falciani leak. “The
steps that I saw taken were more about protecting data, making it harder
for employees to take data out, than they were about the underlying
issue, which was tax evasion,” she told me. In a series of reports,
Shelley raised concerns to management and the board of directors about
suspicious clients and transactions, and about the permissive culture at
the bank. In response, Shelley said, she was “bullied, isolated, and
ignored.” By 2013, she had become consumed by stress, feeling that she
was both aggravating superiors with her warnings and failing to catch
other irregularities. Shelley had what she describes as “a bit of a
nervous breakdown.” While she was home recuperating, H.S.B.C. fired her,
without explanation. Shelley, who had been at the bank for thirty-six
years, believes that she was fired because she refused to ignore
compliance issues. In 2014, she won an improper-termination lawsuit. Her
story echoes that of Carolyn Wind, who oversaw compliance and
money-laundering prevention for H.S.B.C.’s U.S. operations, and was
fired in 2007. Wind told a Senate subcommittee that she lost her job
because she had pushed for “additional compliance resources.”
This
spring, the Falciani list was dwarfed by the Panama Papers leak. An
anonymous source released eleven and a half million documents relating
to the practices of Mossack Fonseca, exposing the financial dealings of a
dozen current and former heads of state, and underscoring how
extensively the global élite uses shell companies and tax havens to
obscure its wealth. The leak documented that H.S.B.C. and its
subsidiaries had created some twenty-three hundred shell companies that
had been registered by Mossack Fonseca. According to a Guardian
report, H.S.B.C. helped to keep open the Swiss bank accounts of Rami
Makhlouf, the financier cousin of the Syrian dictator, Bashar al-Assad,
after hostilities in Syria intensified. (Makhlouf’s family has been
blacklisted by the U.S. government since 2007.)
Last
winter, several senior H.S.B.C. executives were summoned to a committee
of the House of Commons, in London, to address improprieties. Asked why
no top executives had been fired after the recent string of scandals,
Douglas Flint, the group chairman, said that he was “a great supporter
of individual responsibility” but felt that, in this instance, it would
be inappropriate “for a single individual to be responsible.” Gulliver,
the C.E.O., said that since taking over, in 2011, he had implemented
“root and branch” reforms. But it was hard to see him as an agent of
change. When committee members inquired how he chose to receive his
personal compensation from the bank, Gulliver acknowledged that for many
years he was paid through an anonymous shell company that he had set up
in Panama—through Mossack Fonseca.
Gulliver
insisted that he had always paid his taxes, and that he employed the
Panamanian shell simply for “privacy.” But he admitted his “inability to
convince anyone that these arrangements were not put in place for
reasons of tax evasion.”
Falciani
remains in Paris, and the week the Panama Papers were released I spoke
with him over Skype. He welcomed the leak, he told me, but he was
dubious about the prospects of broader change. The banking industry, he
said, will make the minimum reforms necessary in order to quell outrage.
Then executives will figure out how to game the new regulatory
environment. Bankers, Falciani observed, have a great “ability to
adapt.”
He mentioned the huge sum
that Bradley Birkenfeld had been awarded for blowing the whistle on
U.B.S., and said that France needed to follow America’s lead and create
incentives for whistle-blowers. Falciani seemed a bit glum, and it
struck me that one problem with adopting the vestments of a transparency
advocate in order to stay out of a Swiss prison cell is that you are
obliged to keep wearing them. I asked Falciani if it had been worth it
to upend his life. He hesitated, then said yes. “It used to be that when
people thought of Switzerland it was chocolate, watches, and rich
people,” he said. “Now it is also corruption.” ♦
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