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.

"We can't expect users to use common sense. That would eliminate the need for all sorts of legislation, committees, oversight and lawyers." -- Christopher Jennings

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