Banking secrecy : Billion-euro whistleblower
24 August 2012
Hervé Falciani is the 40-year-old computer technician who provided several European governments access to files listing the names of the thousands of their citizens evading taxes via bank accounts at HSBC's Swiss affiliate. Arrested in Barcelona in late July, he is awaiting extradition to Switzerland. Excerpts.
He did not have to look far to find them. They were there, on his computer screen, the one he worked at for six years at HSBC's Geneva headquarters.
Hervé Falciani was responsible for upgrading client databases in one of the world's largest banks and the information to which he had access in October 2006 was priceless. The data, protected by Switzerland's sacrosanct secrecy laws, concerned millionaire depositers' accounts left to blossom over the course of years thanks to covert transfers and financial flows of doubtful, but untraceable, origins.
Then 34-years-old, the computer programmer had before him the list of thousands of bank deposits of foreign businesses and private citizens, placed safely in Switzerland to evade the tax authorities in their respective countries. It was one of the most significant tax evasion cases ever uncovered.
The following scene took place nearly six years later, in the port of Barcelona. On July 1, 2012, Hervé Falciani went to Spain by boat and an alarm bell went off during an identity check.
Branded a thief
An international arrest warrant was issued for Falciani, who is a citizen of Monaco with dual French and Italian citizenship, is married and has a child. Despite the fact his actions revealed thousands of cases of tax evasion all over Europe and some €10 billion in lost taxes were recovered, Bern considers him a criminal, a thief.
He has been arrested and, now, the Bellinzona Federal Tribunal eagerly awaits his return in order to prosecute him for theft of private data as well as for violation of the commercial secrets and banking secrecy laws. But first of all, Spain has to decide to extradite him.
Six intense years have passed between Falciani's incredible discovery and his arrest in Barcelona. During this time the computer programmer became a fugitive whose worth is measured by the value of the information he has at his disposal. He is a criminal who must be tried and incarcerated, according to those who want to destroy the data. But he is seen a sort of hero, a Robin Hood needing protection, according to those who would like to obtain it. Here is what happened in those six years.
After his October 2006 discovery, Falciani spent part of each work day downloading the suspicious data onto his laptop computer. He did this systematically for two years, without exception.
Then on March 20, 2008, the Swiss Association of Bankers, a lobby group for Swiss financial interests, sent out a warning. On February 4, a man calling himself Ruben El-Chidiak, had gone to the Audi Bank in Beirut to negotiate the sale of data containing the names of clients of various Swiss banks. According to the Association, this information was obtained through theft. Banking secrecy laws, the pillar of Swiss identity, was under threat.
The police discovered that Ruben El-Chidiak was really Hervé Falciani. On December 20, 2008, Falciani and a colleague were arrested and questioned. Quickly released, Falciani settled the next day in Castellar, a village on the French Riviera near the Italian border. He was thus poised between the two countries of which he is a citizen. In this way he escaped Bern's clutches because neither France nor Italy will extradite one of their own citizens. Switzerland continued to request his return because it wanted to recover the data downloaded by Falciani, who, according to the prosecutor and HSBC, is guilty of theft.
Switzerland then issued an international arrest warrant for him. Yet, during this desperate pursuit, the Swiss authorities committed a serious error. They asked the French authorities to search Falciani's house, to seize his laptop computer and to send them his archives.
Tax treasure trove
On January 20, 2009 the French Nice assistant prosecutor called for a search of Falciani's family home. The routine operation turned into a remarkable find when 130,000 accounts of alleged tax evaders were discovered. The prosecutor opened an investigation, which is not aimed at the programmer but at the holders of the said accounts.
Word of the Falciani case got out and sparked a diplomatic crisis between France and Switzerland. Bern accused France of illegally keeping the stolen data. The government of [then-president Nicolas] Sarkozy for its part, threatened to have Switzerland added to the OECD Tax Haven Black List.
The media got hold of the case in August 2009. The French Budget Minister, Eric Woerth, announced that he had a list of 3,000 holders of Swiss bank accounts but without revealing the origin of the data. He asked that account holders make themselves known to the tax authorities in order to legalise their situation. This prompted 4,200 people to come forward to the tax authorities and France recuperated €1.2 billion in unpaid taxes.
The few names revealed in the French press led to a series of scandals, in particular the case of Patrice de Maistre – financial manager for Liliane Bettencourt, the main shareholder in cosmetics giant l'Oréal – as well as the cases of the heiress of Nina Ricci perfumes and of Jean-Charles Marchiani, a close associate of a former French Interior Minister, Charles Pasqua. Meanwhile, Switzerland continued to pressure France into handing over Falciani's laptop computer.
Caring is sharing
Paris finally agreed to the request in February 2010. However, before doing so, the prosecutor sent copies of the files, if they requested them, to all the countries with which Paris has tax cooperation agreements.
On May 24, 2010, the information communicated by France was already being studied at the headquarters of the Spanish tax office. The officials asked suspected tax evaders to turn themselves in and to pay their due, plus a fine. The amounts recovered in Spain thanks to the information downloaded by Falciani currently represents the most significant tax recovery operation in the history of the tax office. According to unofficial sources, more than €6 billion were recovered. The list contains powerful people such as Emilio Botín, CEO of the Santander Bank.
Other great names appear on the list sent to Italy. That list of 6,963 people includes fashion designers Valentino and Renato Balestra. In all, the Italian Treasury recovered some €570 million thanks to HSBC's Swiss accounts.
There is still one remaining mystery. What were Hervé Falciani's intentions in downloading the files to his laptop computer? Did he wish to see justice done and to blow the whistle on the fraudulent practices of his company, as he has claimed from the beginning, or did he simply want to sell the data for a considerable sum of money as the Swiss justice department maintains? One can also wonder if Falciani has additional information and if he can still be useful in investigating further wrong-doing.
Just two weeks after his arrest, the United States Senate Permanent Subcommittee on Investigations published a report on the lack of control at HSBC regarding money laundering.
The list of Hervé Falciani's enemies – which already includes the Swiss department of justice; HSBC, one of the most powerful banks in the world; and thousands of tax evaders – may have to be expanded to dangerous criminal groups such as Al-Qaeda and Mexican drug cartels. He is conscious of the value of the information he holds. He knows that a headlong rush is his only option.