We've been critical of Wikileaks recent actions due to its
almost singular focus on U.S. "wrongdoing" (+95 percent of leaked documents pertain to the
U.S.), the nature of recent leaks (such as a list of terrorism targets, which was
damaging but provided little to no evidence of "wrongdoing"), and its
founder's self-proclaimed anarchistic views.
However, as we indicated in our analysis of rival site OpenLeaks,
the premise of a web-based whistleblowing site is a sound one, if there's no
hidden agenda involved.
Perhaps there's hope yet for Wikileaks, as the site and its
founder, Julian Assange have turned their attention from attacking the U.S. to
targeting wrongdoing in the financial world.
I. Guilty of Exposing Corruption
Anyone who suffered through The International knows that
fiction often portrays banks as corrupt. And famed sports gambler Billy
Walters on an episode of CBS's 60 Minutes [video] which aired over the weekend claimed
that there was more swindlers on Wall Street than in Vegas. However, are
such claims hyperbole?
Rudolf M. Elmer, the former head of the Cayman Islands office of the
prominent Swiss bank Julius Baer, says he sat by and witnessed corruption until
he could stand it no more.
Now he's spilling secrets he seized with the world -- and risking
going to prison for it.
Mr. Elmer is working with Swiss and German authorities, exposing how
Julius Baer purposefully helped clients commit tax evasion and other crimes.
He's also begun working with the U.S. Internal Revenue Service and
Justice Department. Mr. Elmer writes to The New York Times, "It
is a global problem, and I am only the messenger who provides the bad news, or
even better, the truth. Offshore tax evasion is the biggest theft among
societies and neighbor states in this world."
From 1994 to 2002 Mr. Elmer worked as the head of finances at the
Julius Baer Bank and Trust -- the company's Cayman Island branch -- a swank
position earned by a strong 15-year campaign at the bank's Switzerland offices
prior to 1994. He claims he had no idea of the massive tax evasion and
fraud being committed until about eight years into the job. He states,
"I didn’t realize what was going on."
Julius Baer tells a far different story, stating, "Shortly after
leaving the employment of the Julius Baer Group in 2002, Cayman-based Elmer,
clearly annoyed at having been dismissed and unable to secure a financial
settlement to his satisfaction, engaged in a campaign to seek to discredit the
Julius Baer group and certain of its clients."
"This campaign has included threats against individuals and the
use of documents inappropriately obtained and/or retained by Elmer following
the termination of his employment, many of which were altered to create a
distorted fact pattern or supplemented by forged documents, the creation of
which Elmer has since admitted."
The bank has accused Mr. Elmer of forging a letter indicating
wrongdoing and of mailing the bank a suspicious white powder. Neither
claim has been substantiated.
Regardless if Mr. Elmer's tale of betrayed innocence is the full
reality, it appears that the bank is indeed in trouble. Mr. Elmer,
according to his attorney, has evidence showing illegal transactions between
Julius Baer and 100 trusts, dozens of companies and hedge funds and more
than 1,300 individuals, from 1997 through 2002.
According to Mr. Elmer's account, that bombshell evidence has earned
him some dangerous enemies. He reportedly was told by his former employer
that "it might be a good idea to go for a deep dive in the sea" and
was reportedly trailed by private investigators in Zurich, Switzerland.
Mr. Elmer was also held in a Swiss prison for 30 days on charges that
he stole the information leaked to authorities. He was subsequently
released and while Julius Baer is still trying to charge him, it appears that whistle-blowing
laws may protect him.
A new trial will start this Wednesday, examining accusations
that Mr. Elmer stole data from the bank. Mr. Elmer has declined to say
how he obtained the data on his two CDs that exposes the bank's criminal
Initially after leaking the information, Mr. Elmer moved to the
Mauritius Islands, but he has since returned home to Zorbas, a small village
outside of Zurich, Switzerland.
II. Wikileaks is Brought in
Mr. Elmer has long passed information to Wikileaks as a
secondary means of exposing the bank and its clients, in addition to
cooperating directly with authorities.
In 2008, long before the Manning incident, Wikileaks drew
international attention when Julius Baer sued to try to take down the site.
The attempt was unsuccessful, though the site was briefly taken offline.
In the suit Julius Baer accidentally exposed some of those involved in
the fraud -- Jonathan Lampitt, the president and chief executive of the
Jupiter Investment Group, in Rancho Santa Fe, Calif.; Winston B. Layne, a
wealthy resident of New York; and Anna Kanellakis, an owner of a shipping
company, Alpha Tankers and Freighters, based in Athens.
But the leaks are far from over. Mr. Elmer has passed new
information to Wikileaks, which will reportedly detail more than 2,000 individuals'
roles in the criminal scheme. Included among those individuals
are 40 politicians and "pillars of society".
Wikileaks motives in pursuing action against the banks may not exactly be
pure and objective -- site founder Julian Assange expressed outrage that credit
card companies like Visa and MasterCard denied his site funding in the wake of the
Manning leaks, citing his site as engaging in criminal activity. Still
the net result in this case at least satisfies the site's purported mission --
whistleblowing on criminal misconduct.
Mr. Assange commented to The New York Times from London
that banks "operate outside the rule of law."
A great unknown is how the site will handle the Julius Baer leaks and
previously announced leaks concerning a "major American bank"
-- reportedly a hard drive showing misconduct gleaned from the Bank of America.
Wikileaks is currently pseudo-operational, having lost its domain name, some of its hosting, and most of its financing. It is still
managing to funnel news to top news sites around the world -- which appears to
be its plan with the latest round of financial leaks. Mr. Assange
acknowledges that the site is not yet fully "open for public
III. Julius Baer and the Aftermath
Ironically Julius Baer has escaped the incident largely unscathed thus
far, though new charges may change that.
In H1 2009 the company made a record $245M USD in profits and swelled
its portfolio of investments to $200B USD worldwide.
It sold its American wealth management business (including the Cayman
Island operation) to Swiss banking giant UBS AG in 2004. That acquisition
put UBS in an uncomfortable spot after information shared by Mr. Elmer and
fellow whistleblower Bradley Birkenfeld exposed the operation. In the end
UBS AG, rather than Julius Baer, was forced to pay a $780M USD fine and close
the Cayman Islands branch.
Mr. Birkenfeld was forced to spend three years in prison for his role
in the scheme, a reduced sentence owing to his cooperation feeding information
to international authorities.
If Wikileaks can fully execute its release of information
exposing 2,000 Julius Baer clients and the bank engaging in criminal
wrongdoing, the bank's fair fortunes may finally shift, though. That kind
of information could lead to serious fines, and the loss of business, for fear
of the bank's tainted image.
Julius Baer thus will likely stop at nothing to silence Wikileaks and
Mr. Elmer. While some of Wikileaks' recent actions have been
questionable to say the least, it is certainly hoped that they succeed in
appropriately revealing the pertinent parts of this data treasure chest and air
the bank's dirty laundry at last.
Mr. Elmer also pursues other avenues, such as OpenLeaks, in case the Wikileaks release