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Rudolf Elmer's speech November 3 at Cannes during anti-G20 protests. Please distribute widely.

 

Judicial conflicts of interest
in the Swiss secrecy jurisdiction or any secrecy jurisdiction

 

Justitia, the Roman Goddess of justice, an allegorical personification of the moral force in judicial systems, is known to be honest and impossible to manipulate. She once held an olive branch, but since the middle ages, the olive branch was replaced by a sword to symbolize fair punishment. She wears a blindfold because she does her work without looking at other people, and she carries scales to symbolize conscientiousness, truth and fairness. She is independent, she cannot be bribed and she is obliged only to the constitution, the law and the truth.

This is the type of justice we expect to have in a democracy – as well as in a secrecy jurisdiction.

But all this becomes lip service if the financial industry of a secrecy jurisdiction is at stake!

Take the example of a whistleblower who comes up with the truth, who exposes abusive trusts and company structures on WikiLeaks. In these circumstances, justice gets a totally different flavor in a tax haven. Suddenly the matter is of national interest. Governmental interests are at risk, and priority for law enforcement and judicial servicesgoes to protecting the interest of a nation. It seems that the judicial services lose their independence and no longer stick to their methodology. The money-making machine is at risk. It is a political issue.

A former Swiss judge told me that what I am doing is highly political in Switzerland and that I might be more dangerous to Swiss bank secrecy than anyone else because:

    I do not use violence.
    I can prove the truth.
    My voice is heard (through WikiLeaks).
    I am a highly qualified and experienced offshore expert who knows its day to day business, having worked in eight secrecy jurisdictions.

So my conclusion is straightforward:

    Bank secrecy (or call it confidentiality laws) represent official government policy.
    The Swiss Bank Secrecy Law or the Confidentiality Law of Cayman are crucial for the well being of nations such as Switzerland and Cayman.
    If bank secrecy is government policy or state matter, accusations of espionage are possible. Whistleblowers in the financial industry are treated like spies –as if they work for foreign nations.

So there is then no option but to think about the matter in terms of economic warfare: A fight against secrecy protecting those benefitting and sheltering financial assets – undermines the sovereignty of other democratic nations.

Reasoning used to justify this fight, from a legal point of view, is about protection of privacy - better protection for all kinds of businesses.

The “privacy” argument is the driver that justifies hiding assets related to the banking business. The protector of privacy is Swiss bank secrecy, linked to criminal law.

Privacy therefore not only protects privacy of a person but also of financial institutions, multinational conglomerates and high net worth individuals and their abusive offshore structures (here referred to as FI-MNC-HNWI – financial institutions, multinational conglomerates and high net worth individuals). The term “privacy” is excessively used and society is made to believe that financial institutions and multinational conglomerates are like humans and that they need the same protection. So violating Swiss bank secrecy is not a civil offense, but a criminal offense.

Nonsense.

If someone violates the secrecy laws, then they become an enemy of the state and government. Their constitutional rights are overridden, and the principle of legality often is not applied by investigators and prosecutors.

The whistleblower will be prosecuted, and wrongdoing of the financial institutions and all others criminal coompliant will be ignored. I know this from experience. Law enforcement and the judiciary are the most important tools for keeping the system of secrecy protected, even if arbitrary decisions have to be taken. I also know this from experience, since the Federal Court of Switzerland confirmed that Zurich`s High Court performed an arbitrary act by not listening to victims and witnesses in respect to my complaint about harassment.

The purpose of this particular judicial process is:

  • to maintain the reputation of a secrecy jurisdiction by strict verdicts in courts in particularly in favor of FI-MNC-HNWI (abusive offshore structures)
  • to avoid investigating matters thoroughly and selectively ignore evidence of crimes and wrongdoing by financial institutions
  • to categorically turn down any complaints against financial institutions like UBS, Credit Suisse or Julius Baer since they are influential, major taxpayers, covering with other financial institutions up to 30% of taxable income in the state of Zurich.

Key players in the financial industry are in many ways above the law because prosecutors and judges have plenty of discretion to bend and stretch the law in their favor. Striking examples are:

  • UBS management has not been investigated by the Zurich prosecutor’s office for crimes committed in the USA (assisting in tax evasion).
  • No one was held responsible when Swiss bank secrecy was violated by handing over 4,450 client names to the American IRS after strong U.S. pressure,
  • UBS management was not investigated for its role in the financial crisis.

On the other hand:

    • In my case the Zurich judge extended Swiss bank secrecy to protect Cayman Island banking data.
    • My filing of a 15-page complaint (listing criminal clients and tax fraud, money laundering, criminal organization) at the Swiss federal prosecution office in 2009 provided data on Julius Baer and the Caymans – but it was turned down within a fortnight without questioning me. The reason given was that there was no connection to Switzerland. Yet I was still prosecuted for violating Swiss bank secrecy based on the very same data two years later.

Knowing that this is judicial policy is essential for any criminal deciding to send assets to a secrecy jurisdiction. Prosecuting the whistleblower and not investigating the Cayman data is a clear message to the world that the criminal procedure is protected in the state of Zurich. This is even worse when a whistleblower wants to disclose criminality or offshore abuses to demonstrate abusive practices by a Swiss bank. In return, prosecution offices demonstrate their power.

It happened in my case when I was found guilty by a judge January 19, 2011. I was jailed immediately after the trial, and my home was searched again. It was a demonstration of power and should have scared bank employees. It also should have sent a message to the world that "We go after every whistleblower even if we have to perform fishing expeditions." A fishing expedition it was, because I never mentioned Switzerland when I handed over the data CD to Julian Assange in the Frontline Club of London on January 17, 2011.

Sorry for my cynicism, but you might share it!

In this speech I try to cover:

  • how to fight law enforcement and the judiciary in a tax haven
  • who should support a truth-teller in a secrecy jurisdiction
  • how to fight it from the outside of a tax haven
  • how tax havens respond to such attacks
How to fight law enforcement and the judiciary in a tax haven

In my view law enforcement/judicial services have four simple mechanisms to protect the financial industry in a secrecy jurisdiction:

  • willful blindness
  • if you cannot destroy the evidence, attack the witness or whistleblower
  • attack the whistleblower’s credibility
  • delay, turn down or ignore complaints that a whistleblower files

A truth-teller will be heavily exposed to all four if his findings are valid and have substance. The toughest challenge for truth-tellers is attacks on their credibility and personality and even against their family members when the system runs a legal campaign against them.

I call it an “anti whistleblower program” which targets the whistleblower and avoids targeting wrongdoings by FT-MNC-HNWI.

The methodology is simple:

    • build a damaging record against the whistleblower
    • criminalize and isolate the whistleblower
    • spread rumors (for instance, that he or she is mentally ill),
    • set the whistleblower up for failure and physically and psychologically attack him or her and their family
    • destroy his or her job and career
    • blacklisting

Law enforcement and the judicial system play crucial roles in this because their willful blindness and ignorance of facts allow such conduct to be protected by authorities for years. Secrecy jurisdictions do not have any whistleblower protection law, and they know why! My family was exposed to pressure for more than six years.

Who supports truth-tellers in secrecy jurisdictions against these powerful players of law enforcement and judicial services?

My experience shows that hardly anyone in a secrecy jurisdiction can provide effective support. It turns out to be a lonely fight.

I knocked on doors with little, if any, success. Let’s look at Swiss entities.

    1. Swiss NGOs: These have little influence to the point of uselessness in a secrecy jurisdiction when it comes to supporting such a fight. They depend partly on donations of offshore FI-MNC-HNWI's. Transparency International in Switzerland, the Declaration of Bern and experts from Tax Justice based in Switzerland provided me with hardly any support. My requests yielded no results, no monetary support, not even basic advice on how to handle negative media coverage. My publications were not supported.
    2. Swiss local and federal tax authorities: These organizations should have arranged a witness protection program. They are supposed to go after anyone evading Swiss taxes – yet it was the Zurich state Tax Commission that decided that the data from Julius Baer in the Caymans could not be used to go after evaders. So no actions were taken; on the contrary, they protected tax evaders. Information I provided tax authorities was used only as evidence that I violated Swiss bank secrecy. Hundreds of millions could have been collected, but protecting the offshore FI-MNC-HNWI had higher priority. The simply reality is: It is NOT EFFECTIVE to try to cooperate with or provide assistance to tax authorities in a secrecy jurisdiction.
    3. Swiss investigative journalism/federal newspaper coverage: Media like the federal TV stations and major Swiss newspapers are dependent on FI-MNC and therefore, the media protects any judicial verdict.They did not want to lose advertising and financial backup. Only a few small newspapers with independent journalists reported about the case in a positive way. In general, Swiss newspapers are INEFFECTIVE!
    4. Swiss television: Swiss federal TV and local TV stations seem to have a clear policy to spoil the reputation of a Swiss whistleblower by unfair and unbalanced reporting denying wrongdoing by financial institutions. Federal TV performed a witch hunt against me – not only because of a lack of understanding, but I believe more due to their financial dependence on FI-MNC-HNWI. These supposed checks and balances are NOT EFFECTIVE in Switzerland.
    5. Swiss lawyers and universities: Even when they agree with a whistleblower, disclosing abusive practices of key industries could have negative impact on career paths (due to their financial dependence on key players in the system). NO HELP HERE!
    6. Swiss politicians and parliament: They should have acted on petitions in parliament based on the whistleblower letter I published on WikiLeaks in January, 2008. The petition was discussed in parliament but filed away rationalizing that going into details would interfere with pending investigations – and in any case it relates to bank and tax secrecy laws. Silence. NOT EFFECTIVE.
    7. Swiss Human Rights Watch, Zurich. After six weeks of delay, they came up with excuses why Human Rights Watch could not be involved. Obviously, they depend on donations. More or less the same happened with other organizations dealing with related victim support and child protection. NOT EFFECTIVE!
    8. Swiss court trials: I filed complaints against law enforcement and judicial services about decisions made during the investigation and trial. Most of my complaints were turned down. This attracted public attention, fostered some transparency and put the spotlight on contradictions in and abuse of the system. One example was that Cayman data is protected by Swiss bank secrecy based on a two-year Swiss employment agreement I had in the Cayman Islands. Judges had to take positions in public. However, when international media do not report about it, it doesn't help. Consider the fact that Geneva Chief Prosecutor Daniel Zappelli administers two Panama companies (see Le Temps newspaper, May 30, 2011), one wonders if judicial services are as independent as society is led to believe.
    9. Political movements such as Occupy Wall Street (called Occupy Paradeplatz in Switzerland). I am positive that focus on the financial pain which middle and lower classes are exposed to and the way Swiss banks have damaged Switzerland’s reputation can be helpful. People are standing together for the same reasons. It does not feel like David against Goliath any more. Could this movement turn out to be an effective way to confront the system? WE SHALL SEE.

The bottom line is that in a secrecy jurisdiction, a truth-teller fights alone against law enforcement and the judicial system. In this fight, the only way to success is to (1) clearly identify wrongdoing by law enforcement and the judiciary and (2) make it public – nationally and more importantly, internationally.

A whistleblower or truth-teller in a secrecy jurisdiction needs to prepare a strategy based on the assumption that it will be a lonely fight to expose abusive practices.

Basic points are:

    • prepare the case (identify patterns, put them in the context of the bigger picture and collect evidence)
    • strategize (define success, know when to play which role (victim, leader, politician)
    • control emotions, aggression and stress
    • build a network of national (and, more importantly, international) support
    • manage your information (make multiple copies, disseminate it)
    • build alliances
    • take the risk of going public (e.g. WikiLeaks)
    • rely on your OWN courage and conviction.

Conclusion: If you want to have a chance of success, you must think strategically and manage your resources because you will be fighting as David against Goliath for several years. My fight is now in its 10th year.

How to fight law enforcement/judicial services from outside a tax haven

This seems to be much easier, but it requires even more resources and lots of political thinking. It requires a highly strategic approach (when, what and how things should happen), endurance and, most importantly, luck (e.g. WikiLeaks).

Who do you need to approach?

    1. Foreign international NGOs such as Tax Justice UK and US but also Global Financial Integrity have started to disclose abusive practices in respect to law enforcement/ the judiciary e.g. in Switzerland and globally. However, those organizations have to focus primarily on global issues. This is definitely correct and local matters – such as the way law enforcement/judicial systems work in Switzerland or Cayman – cannot be their main focus. IT IS SEMI-EFFECTIVE.
    2. WikiLeaks or any other similar platform is an effective tool which allows law or judicial abusive practices to be revealed to society. These platforms support transparency because evidence can be made public and not remain hidden. Then the public can decide about the truth. In a criminal trai,l as I learned, even though there is wrongdoing by a financial institution, it may not disclosed and if it were in Swiss courts, the judge has discretion to exclude it to the public – for instance, in the matter of a violation of Swiss bank secrecy. EXTREMELY EFFECTIVE BECAUSE OF BROAD PUBLIC ATTENTION.

    3. International media are a powerful tool when an investigative journalist takes an objective position on the case. He needs to investigate both sides, needs to report fairly and without prejudice. Not an easy task. Every legal proceeding incorporates a “Barbara Streisand effect”. (The Hollywood star filed a complaint against a photographer who published pictures of her home on the Internet. The effect was that everyone wanted to view the picture which was precisely what Barbara Streisand wanted to avoid.) Therefore, every legal proceeding will put the spotlight not only on the wrongdoings of the prosecution office but also on the wrongdoings of all parties involved. EXTREMELY EFFECTIVE.

    4. International investigative journalists: If internationally accepted newspapers like the The Guardian UK, The New York Times, The Financial Times, Der Spiegel in Germany report and name and shame abusive banking practices and also report about the trials of the Swiss whistleblower, it would raise the bar far higher and the likelihood of a fair trial increases drastically. It may have a positive impact in the sense that the judges are made publically aware of the abusive banking practice. Secrecy jurisdictions like to keep a low profile in any international matter. If there are reports in the international media, it might force a secrecy jurisdiction to have its laws adjusted to meet international standards. International investigative journalism exposes the workings of the legal system – for example, that someone can be jailed for six months without charges under Swiss law, or a prosecutor can give permission for a house search without consulting a judge – something I had to go through. EXTREMELY EFFECTIVE.
    5. Take your case to the European Court of Human Rights or the United Nations at an early stage and make this fact public knowledge. My reasoning was that I should not appeal a decision made by the Highest Court of Switzerland but that I should challenge the Swiss bank secrecy law in the sense that it limits my free speech and my human rights. Swiss law states that I am allowed to release information only about a criminal if a judge exempts me from the Bank secrecy law. This only happens in court and in exceptional cases. The European Court of Human Rights made my case an international issue at an early stage and Swiss law enforcement and judicial services could not ignore this fact. EXTREMELY EFFECTIVE.
    6. European parliament recently adopted a resolution to protect whistleblowers to stop wrongdoing that places fellow human beings at risk as well as strengthen accountability and bolster the fight against corruption and mismanagement, both in public and private sectors. Unfortunately, it is always the same issue if it boils down to an individual case – protection does often not work particularly in secrecy jurisdictions. NOT EFFECTIVE.

The bottom line is to build up a powerful position. It is important that the matter escalates from national to international attention and relevance.

How tax havens respond to such attacks

    1. Silence and hope that the matter will disappear one way or the other, and by hoping there are more important issues will arise on the international agenda, such as the debt crisis, which wil take the attention away from exposing abusive practices in tax havens and closing down those secrecy jurisdictions.
    2. Delays, which are very effective. Secrecy jurisdictions are gifted procrastinators and I would say that Switzerland, in this respect, will soon be the world champion. The purpose is obvious: delaying is a time-buying technique which, for example, might allow for the rearrangement of the client’s offshore setup. This is nicely demonstrated in the case of the Swiss tax agreement with the UK and Germany coming into force on 1 January 2013.
    3. Agreements which have plenty of loopholes in order to reinstate the status quo. Striking examples are the withholding tax agreements with the UK and Germany and, soon, Greece. The agreements were worded by the Swiss Banking Association!
    4. Punishment was drastically increased for the violation of secrecy laws. Switzerland increased the penalties by six times in respect of violation of Swiss bank secrecy as of January 1, 2009.
    5. National directives. As of October 1, 2011 a Swiss national directive released by the parliament financial department requests extensive information on tax matters if there is any data exchange with other states. It is clearly a non-cooperation directive because there are so many conditions to be fulfilled to allow an information exchange, that it is easy to turn down most of the requests. Therefore, such a directive undermines international agreements with national regulations.

Let’s summarize:

The bottom line is that the fight against offshore abuse is still in its infancy because there is neither much of a global commitment nor of global action aimed at tackling the problem even from the G20.

Judicial services in regard to financial crime structures in place are still too frail, too thin on resources, too low in confidence, not to mention deficient in integrity and lacking public support. Public support is gaining momentum now due to the financial and debt crisis, but it is still optimistic to expect justice to be delivered in a secrecy jurisdiction.

Only Americans are about to have a serious go at Swiss banks, but there are plenty of other jurisdictions which need their attention. Judicial systems need to be challenged and strengthened; eighty secrecy jurisdictions are now known.

Finally, laws such as Swiss bank secrecy, confidentiality laws, whistleblower protection laws, regulation of the financial industry and rules for information exchange in tax matters simply represent existing power. Those laws were “designed” by the FI-MNC-HNWI to serve their own purposes. Real power is with the lawmakers and judiciary; that is where urgent change in favor of civil society is needed.

Thank you very much!

Further:
Rudolf Elmer's book is available in paper and electronic format.
Rudolf Elmer's website

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