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Julius Baer and its clients' illegal activities may be soon exposed, thanks to an ex-employee, international authorities, and Wikileaks.  (Source: Adrian Moser/Bloomberg News)

The bank and its clients reportedly executed a tax evasion scheme, funneling money illegally to the Cayman Islands.  (Source: Planet Ware)

Whistleblower Rudolf M. Elmer was trailed by bank thugs and told "it might be a good idea to go for a deep dive in the sea" after he began to expose the bank's dirty secrets.  (Source: The New York Times)
Data was passed to Wikileaks and international governments

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 wrongdoing.

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 business."

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.

Hopefully Mr. Elmer also pursues other avenues, such as OpenLeaks, in case the Wikileaks release is thwarted.

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RE: Gotta give these people a modicum of respect
By superPC on 1/17/2011 11:07:55 PM , Rating: 4
i think one way of making a cleaner government is if the non voters got a seat in senate or house of representative. what i mean is this: the US has a high number of non voters each election. how about instead of those voice going to waste, the government can vacant some seat (the same percentage as the percentage of non voters) in the senate and the house of representative. fill those seats with regular joes chosen through the same method of choosing someone for jury duty. those temporary senator/representative just have to cast vote. they don't make bill or policy just cast vote. see how those politician like it when regular people put a dent in their plan...

RE: Gotta give these people a modicum of respect
By erple2 on 1/17/2011 11:52:17 PM , Rating: 2
That sounds like a good idea. But hell if I'm voting for that!

RE: Gotta give these people a modicum of respect
By superPC on 1/18/2011 3:20:17 AM , Rating: 1
why wouldn't you vote for it? are you one of those senator or representative?

incidentally i just though of other ways of making a cleaner country:

1. make a company stock option for all employee (10% of take home pay per annum maybe for each employee maybe) mandatory for all company. that way worker from janitor and office boy all the way up to CEO can be represented in the annual general meeting (so labor union can have real power in the annual general meeting in planning the company future including wages, who sits in the boards of director, who's the next CEO, R&D, cutbacks, layoff and stuff). that way every worker would have a pension or fall back funds if any accident happened. that way, every worker will feel a sense of belonging to the company they work for and work harder. if someone quits, that person can still sell the stock from the former employer (so when someone quits, a company not only loose manpower, it also loose money).

2. made it illegal to invest in something without the explicit agreement of the person who owns the money. so banks, investment firm, insurance company, or other institution that hold our money can't invest in stuff that their account don't agree to. if they do invest in things the account holder don’t agree to, then when things go south, they must compensate all money in the account plus interest. that way a financial instrument (like derivatives, future trading) can truly be a safety net instead of a means for banks to make quick buck while putting our economy in jeopardy.

if we do all those things than we'll be living in a truly democratic society because all of our lives from employment to economy would be democratic (governing power in everyone hands).

RE: Gotta give these people a modicum of respect
By nafhan on 1/18/2011 7:12:50 AM , Rating: 2
-- Randomly chosen political representative - the people who get elected are at least worried about their political careers and therefore try to look good (if nothing else). Representing non-voters is a laudable goal, but I don't see why a randomly chosen non-voter would be interested in the needs of other non-voters (or anyone other than themselves, potentially leaving them more open to corruption than elected reps). Plus this would likely encourage people not to vote.

-- Mandatory employee stock options - Not everyone wants stock options instead of money. People would find ways around this (like working as long term contractors, etc.), it would end up just adding an extra layer of red tape. I'm one of those crazy people would rather just get 10% more money to use/invest as I like...

-- Illegal to invest without explicit agreement - Taken at face value this would basically kill off a lot of investments like mutual funds (e.g. my 401K couldn't exist as it does), and therefore a lot of investment period. Things like investment firms and money managers don't exist merely to swindle money from people. They exist because not everyone has the time or inclination to put their money in the best place possible. If you're talking about the current financial crisis, that was mostly caused by banks investing money that no one had...

Certainly not saying everything is perfect, but adding layers of complexity on top of already complex systems can lead to unforeseen or distasteful results.

RE: Gotta give these people a modicum of respect
By superPC on 1/18/2011 8:00:44 AM , Rating: 1
-- the great thing about bribery is that it's illegal. and like all illegal activities it tries to leave as little paper trail as possible. so if someone bribe a randomly chosen political representative the representative can just take the money and vote to his heart content. what can the person giving bribe do? sue the representative? can't happened no paper trail and if proven they both go to jail. kill the representative? i think a spike of ex chosen political representative murder rate would raise a lot of red flags and be dealt with quickly.

-- then don't be an employee. work as freelance contractors like you said. i want a chance to plot my company future and i'm sure the people that lost their job to the chinese would want the same thing.

-- you're right. the current financial crisis was mostly caused by banks investing money that no one had. but people had money in that bank. if that bank goes under people could loose their money. therefore it should be illegal to invest without explicit agreement. the agreement can range from "hands off" like what happened right now to really detail blow by blow account of every transaction and micromanagement. the important thing is we SHOULD HAVE A CHOICE.

RE: Gotta give these people a modicum of respect
By nafhan on 1/18/2011 9:20:32 AM , Rating: 2
--Bribery usually works by giving the person money after they do what you want. Anyway, I still don't see how randomly appointed, politically apathetic representatives would help non-voters or anyone else.

--You wouldn't necessarily have a chance to be an employee at all. In countries with crazy labor laws, there's often a high incidence of contractors because the laws that are not advantageous to the employer can often be sidestepped by not hiring any employees. Also, how would this work for multinationals?

--Investing money is what banks do. How do you think they make money? If they had to get approval from everyone who has money in the bank every time they want to loan out money, they wouldn't exist or you'd have to pay them to keep your money there. Anyway, we already have choices: pick a bank that's good with money; don't use banks; put your money in bonds; Etc., etc.
If you pay attention to what's going on with your money a law like that isn't necessary. If you don't pay attention, a law like that won't help.

RE: Gotta give these people a modicum of respect
By superPC on 1/18/2011 9:53:29 AM , Rating: 2
-- see even we can't agree on how a bribe should be paid. and it's normal to be apprehensive about something new. thing is random representative is something never attempted before anywhere else in the world. it should be given a chance i think.

-- what you worry about can easily averted with ruling on how long a freelance contractors can work for a company before that company have to offer them permanent employment. and unfortunately it won't work for multinational (for the people abroad at least).

--that kind of law would make a difference. why? because financial services companies would be obligated to tell the whole story about their service and not just take our money (like what happened right now, we just have a blind faith in those financial service companies while they're doing who knows what with our money). that raises awareness and that would make people pay attention to what happened to their money. if i had known my current bank is giving loans to people with bad credit history i would move my money to other banks. right now i don't have that information do i?

RE: Gotta give these people a modicum of respect
By nafhan on 1/18/2011 12:55:51 PM , Rating: 2
--Why should it be given a chance? Never been done before isn't a very convincing reason.

--So, what happens if the only place you can get a job is a business that you know will fail in six months? That would suck...

--Unless you have the capability to analyze millions of financial transactions the data you're talking about would do you no good, at all (plus it would violate all kinds of privacy laws). You would need to have a third party analyze it for you, and at that point, you would be in the same position you are in now.

RE: Gotta give these people a modicum of respect
By superPC on 1/18/2011 4:48:25 PM , Rating: 2
--because it gives regular people chance to really plot their nation future. you know the feeling, seeing your representative voting for something you don’t want. Now you can do something about it.

--any company have a chance to fail. being able to control the company might make it less likely to fail. or it might not but it gives you more power.

--raising awareness always have a positive effect. look at heart disease or AIDS. if people weren’t aware of what causing it i bet you that more people would die because of it. and like i've said, you don't need to micromanage. just to arrange an agreement. like don't put my money in any financial instrument or don't loan my money to someone with bad credit history. stuff like that.

By nafhan on 1/19/2011 10:49:36 AM , Rating: 2
--Picking a non-politician through non-traditional methods might be good, it's your suggested method for selecting that person that doesn't make any sense. You'd have a person who doesn't care voting however they wanted.

--You have to have a certain amount of stock before you get voting rights, and how much say you have is proportional to stocks owned. So, the people making the most money would have the most say in the company. Therefore, those outside of upper management would essentially have no say at all.

--How would giving people the same information they already have raise awareness of anything?

RE: Gotta give these people a modicum of respect
By xkrakenx on 1/18/2011 8:58:45 AM , Rating: 2
the problem is that average joes expect a higher moral code than they can actually deliver, do not know how to play politics (yes that does matter), are not capable of rational discourse (troll the comments on any discussion board to see example), and are too easily led - which makes them less likely to lead and more likely to be a tool of evil interest.

By a1trips on 1/18/2011 12:13:10 PM , Rating: 2
elitist but true,? flamebait?. Much as i dislike averages.. they shift over time. so hmm

By theArchMichael on 1/18/2011 2:54:05 PM , Rating: 2
No offense, but you didn't really think this idea through did you?

What would be the requirements to be eligible?
- High school diploma (our K-12 educational system is trailing most industrialized nations).
- A bachelor's degree (Which would make people like that Facebook kid ineligible and others with a non-traditional education ineligible.)
-White collar workers mid-career (especially with families) probably would welcome such an opportunity as though it were Jury Duty, especially if they are really talented individuals and because the invite would be random and obligatory (meaning it's not really a feather in anyone's cap, your number got pulled).

Outcomes might be better if you had the congressman take chances guessing how many jelly beans were in a jar.

Or better yet, we need to start training...


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