Nick Shaxson ■ Show trial of Swiss whistleblower Elmer now in 9th year
This month a Swiss court fought back against efforts by the United States to tackle criminal activity and tax its wealthy citizens properly. As Worldwide Tax Daily reports:
“A Swiss court on January 6 held that Switzerland’s Federal Tax Administration (FTA) “unlawfully granted” a U.S. request for client data from private banking group Julius Baer, saying it did not meet the requirements for an administrative assistance request under the Switzerland-U.S. income tax treaty.”
This is the latest episode in a long-running saga which began in 2008 when Swiss bankers were caught red-handed trying to flog tax evasion schemes to wealthy U.S. taxpayers – and the U.S. responded with a crackdown, As a result, the two countries began working on new information-sharing protocols between the two countries that have had the effect of penetrating Swiss banking secrecy – though only up to a point, and only for the U.S.
As this episode unfolds, it’s worth remembering the long-running and fascinating case of Rudolf Elmer, former Chief Operating Officer with the Cayman affilate of the high-society Swiss bank Julius Baer. Elmer became fed up with what he was seeing and was involved in – and blew the whistle, first in 2005. He began by telling the Swiss tax authorities of tax evasion by Swiss taxpayers, and later provided information to Wikileaks and the world’s media.
This is not just yet another story of human rights abuses by a secrecy jurisdiction against someone who would challenge the financial establishment. It touches on deep contradictions at the heart of the Swiss model of offshore finance. As tax expert (and TJN Senior Adviser) Professor Sol Picciotto says:
“His story casts fascinating light into the `offshore’ system, constructed by lawyers and other professionals, which has been central to the emergence of transnational corporate capitalism.”
The main legal charge against Elmer is that he breached Swiss banking secrecy laws which make it a criminal offence to reveal secrets obtained as an official of a bank. The main part of Elmer’s defence is that the information (which he admits he revealed) came from an affiliate of Julius Baer in the Cayman Islands, which is separate from its Swiss parent and therefore not governed by Swiss law.
Switzerland’s efforts to use Swiss laws to go after secrets revealed elsewhere contradicts the underpinnings of Switzerland’s own liberal use of offshore principles to help corporate and other tax cheats. For example, the Swiss tax authorities claim that profits earned by foreign affiliates (such as in the Cayman Islands) cannot be taxed in Switzerland, under the widely used ‘separate entity’ principle. As Picciotto notes:
“That is the essence of Elmer’s case, and is why the prosecutors are finding it hard to nail him.”
Since the first whistleblowing in 2005 he and his family have been hounded by the Swiss judicial authorities – which we would argue are ‘captured’ by the financial services industry: a classic feature of the so-called Finance Curse that afflicts finance-dependent economies. Of Elmer’s 28 encounters with the courts, 27 decisions have gone against him, and he has been imprisoned twice: once for 187 days, and once for 30 days, under an archaic Swiss law that allows lengthy spells of detention for police interrogation. In a twist reminiscent of the Soviet era, Elmer said Zurich prosecutors requested psychological evaluation of him in 2009 and in 2011 but he declined to cooperate – mainly to avoid the risk of ending up in a mental institution. Elmer’s long-suffering wife, would you believe it, is still under investigation for assisting in the breaking of Swiss banking secrecy.
Elmer also argues that the prosecution’s case is full of errors and inconsistencies. He told us, via separate emails, in the past a few days:
“At the moment the judges of the High Court of Zurich have to find me guilty. They have invested too much in the matter and cannot lose face! If I do not win – which is likely – I might have to take the entire case to the European Court of Human Rights.
. . .
We can demonstrate that the law has been bent and stretched, in order to serve the bank and not to lose face. This is about politics in the courtroom, and not about the law of a democratic society.
. . .
The case is an opportunity to show that a secrecy jurisdiction needs a morally corrupt judicial system in order to survive.”
Elmer’s whistleblowing is in its ninth year now, and they still haven’t dropped it. A truly independent judiciary, it seems, would have stopped trying to flog this horse long ago. But they haven’t: the campaign of intimidation continues, and there are still two cases pending against him.
As an aside, Switzerland’s decision to probe another Swiss banker who has provided information to U.S. tax authorities may be, as a recent article noted, designed as:
“a message to bankers: Keep quiet or else.”
It’s not just the Swiss authorities that seem to be in the pocket of the offshore banks. Much of the Swiss media seems substantially ‘captured’ too. While the rest of the world has focused on the big story: the exposure of large-scale criminality by wealthy élites around the world, much of the Swiss media has responded instead by focusing on questioning or smearing the whistleblower, with accusations (among many other things) that he is a ‘thief and a blackmailer“.
But it is the big story that interests us. Here’s the whistleblower support site Liberté Info, with some interesting questions posed in a recent letter to the Zurich High Court:
- Why has the prosecution not performed a criminal investigation of Julius Baer Bank & Co. AG, Zurich on the facts provided by Mr Elmer, information which has been widely published and is publicly available on the internet?
- Why have the judges of the High Court, who do have the lead in this matter, not requested that such a criminal investigation be performed in order to evaluate the entire case and to understand whether Mr Elmer had good reasons to make this information public?
- Why have the assets of (a Mexican drug lord) and other alleged criminals, which have been exposed in this case, not been investigated by Zurich’s authorities?
One can only wonder.
La victoria de Milei y su repercusión: December 2023 Spanish language tax justice podcast, Justicia ImPositiva
#56 Finance Climat: Le Monde ne peut continuer de payer pour les riches! The Tax Justice Network French podcast
Criminosos na Amazônia lavam dinheiro nos EUA: the Tax Justice Network Portuguese podcast #55
The People vs Microsoft: the Tax Justice Network podcast, the Taxcast
New Tax Justice Policy Tracker makes it easy to monitor progress towards a UN Tax Convention and beyond
20 años de la red de justicia fiscal: November 2023 Spanish language tax justice podcast, Justicia ImPositiva
Bahamas: Submission to the UN Independent Expert on the effects of foreign debt and human rights in support of the country visit to the Bahamas
7 November 2023
Submission to the UN Independent Expert on the effects of foreign debt and human rights’ call for inputs: “Fiscal legitimacy through human rights”
7 November 2023