Thursday, December 18, 2008

Guest blogger: Letter from a whistleblower

Rudolf Elmer is one of the most well-known recent whistleblowers of the offshore world, and he has paid a heavy personal price. Read more about him here, for example, and look at the Rudolf Elmer collection on the whistleblowers' website Wikileaks.

We are delighted to host him as a guest blogger on the tax justice blog, drawn from his painful personal experiences in Switzerland and elsewhere:

The dilemma of an ethical and moral offshore employee


It goes without saying that many honest and upright offshore employees harbour vague suspicions that something fishy is going on with their client trusts, companies, hedge and private equity funds or even private accounts. Such suspicions arise even if the employees see only a small part of what is actually going on since the full picture is only clear to the top advisers: in particular the lawyers, bankers and accountants who create the structures in the first place.

However, when management instructs staff to review and “clean the organisational data bases” in order to protect the company from any legal claims - because for instance people can be jailed for unnecessary secrecy and for using password/false names and so on – at that stage staff might start to suspect that something is not quite right!

For example, the offshore employees might be instructed by the management to “clean the records” and remove from the data base instructions such as:
• Do not contact the Settlor in America!
• Client is highly sensitive regarding telephone security and always confirm identity of Settlor before disclosing information;
• The secret code is “Rainbow”;
• Use only his mobile number (xx xxx xxx xxx);
• No communication with client on work address or email;
• Change of trust name from “Sugar Spoon” to “Coffee Cup”;
• When making distribution to the Settlor do not say “Distribution” say donation;
• This Trust has a “Dummy Settlor”;
• The trust should be treated for US tax purposes only as owned by another person;
• And many more!

As a reasonable employee this gets you thinking, and I believe it is fair to say that all those remarks point in a direction where an ethical and moral person is in a conflict and has reasonable grounds to believe that the employer is not complying with the law.

However, what would you (and I mean you!) do when you are confronted with such a request from management?

I tell you! And I tell you straight: 99 % of all employees would do as instructed by the management. Why does this happen even though it goes against the employee’s moral and ethical standards?

It is simple: any employee who speaks up faces instant job loss; and when employees go public and become whistleblowers they place their own (and their family’s) future in serious jeopardy.

Offshore banks and tax havens have a huge arsenal of weapons to silence such an employee. This includes private investigators; stalkers; compliant newspapers prepared to engage in witch hunts; highly paid lawyers able to pressurise the employee even to the point of bankruptcy; unprofessional police investigators; manipulated prosecutors; delaying tactics; corrupt media and even politicians up to the Federal Counsel willing to cover up any wrong doing covered by secrecy regulations.

This is all considered to be legal because in my case a vital part of the Swiss industry is at stake. It is the Private Banking industry which attracts a tremendous amount of money using dubious methods such as marketing the protection of tax evasion. However, this money inflow is vital for the country to provide low interest loans to the industry, to keep the standard of living and even to pay ridiculous salaries and bonuses to management. This system must be protected even if other countries and individuals suffer terribly. "This does not matter at all - we, the powerful in Switzerland, act within the laws and therefore we have to protect the laws."

There is not only the Banking Secrecy Law; there is also Tax Secrecy and Professional Secrecy, in order to protect wrongdoing and abuse, and to go after whistleblowers. This is easy because the whistleblower has no legal protection at all in Switzerland and therefore has to become an outlaw to defend the family and himself. He is forced to do this, due to all the pressure that results from his opponent having lost (or never having had a moral backbone!)

In reality the whistleblower becomes a leper within the small, insular cocoon of the offshore financial centre and is forced to leave to find work elsewhere. There are striking examples in Swiss society such as Christoph Meili (Holocaust Funds 1997) and Rudolf Elmer (myself) who challenged the world champion of Secrecy, namely Switzerland, and the Cayman Confidentiality Law. Another example is Professor Dr. Jean Ziegler who was put under severe pressure and stalked after having published a book that was critical of the Swiss banking industry.

Faced with such intimidation, a typical offshore employee will go ahead and “clean the data base” as instructed by management. This is the main explanation for why so few offshore employees become whistleblowers , which makes offshore abuse so much harder to fight. It is all about the atmosphere of intimidation which forces employees to keep their heads down in places like Switzerland and the Cayman Islands.

Finally, the more corrupt elements in the Swiss media will go along with the intimidation process by publishing articles along the lines of “We do not want any whistleblowers in our country and if you step out of line this is what will happen to you” accompanied by text describing how difficult life becomes for the whistleblower and possible some pitiful description of how the whistleblower cries, or is morally down.

I have been through these media witch hunts and know them for what they are: nothing less than propaganda to protect criminal actions perpetrated within an outwardly democratic society!

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