July 17, 2008— -- Secret informants, silent witnesses, code words: a Senate hearing on wealthy alleged tax cheats Thursday morning had all the trappings of a Mafia investigation.
One witness, fearing for his life, testified at the Permanent Subcommittee on Investigations hearing via videotape, his face a mere shadow on the screen. Three other witnesses refused to testify on the grounds they could incriminate themselves.
And the yarn that unraveled – of secret codes, snooping G-men and admonitions against using home phones or writing information down – sounded as much like background research for a "Sopranos" plotline as what it was: an expose of wealthy Americans allegedly trying to keep their riches beyond the reach of Uncle Sam.
Testifying on video was Heinrich Kieber, a former employee of the LGT Bank of Liechtenstein, the source of 12,000 pages of bank documents detailing secret, multi-million-dollar accounts held by "many, many, many" U.S. citizens for the alleged purpose of dodging taxes.
Kieber, declared a fugitive by Liechtenstein, is living in an undisclosed location, reportedly as part of a witness protection program, after providing information to government officials in England, Germany, the United States and other countries on their citizens who hid billions in wealth through the bank. The German government has admitted to paying him millions for the data.
In his videotaped testimony, Kieber described stumbling across the bank's secrecy schemes while working on a document conversion project several years ago.
"Going through thousands of documents. . . I got the very clear picture" of the "tricks" employed by the bank to help clients dodge tax collectors, creditors, even "international law enforcement agencies," he said.
Because of the bank's efforts to provide their clients with secrecy and anonymity, it "does not have a clue" of the sources of wealth for "the vast majority" of its clients, Kieber asserted, noting that its ignorance undermines its participation in anti-terror, anti-corruption and anti-crime agreements.
For clients seeking such protections, the bank gave explicit "recommendations" on how to keep their ties to their secret accounts from government investigators, Kieber said.
"Firstly," he explained, the bank told those customers "not to tell anybody concerning the legal entity", not even their lawyers or other family members. "Any human relationship can go wrong," Kieber explained.
Second, he said, the bank advised its clients "not to call. . . from home, not from work. Use public phones instead." In general, Kieber said, the bank told its clients only to call in an emergency, and to dial numbers for their bankers' Swiss or Austrian cell phones. That way they could avoid dialing a Liechtenstein country code, which could be noted by investigators.
Even then, Kieber said, clients were told to "always use the code words agreed and never state their own names or name of the legal entities."
To help wealthy Americans get access to the money they had squirreled away, LGT Bank would move their money into new trusts set up in the name of a dead or dying relative, Kieber told the Senate panel. The accountholder would then "inherit" the funds from the deceased individual's estate, he said.
Liechtenstein financiers took extra steps to insulate themselves from controversial clients whose money they nevertheless wished to manage, Kieber testified. For instance, a major arm of his bank declined to accept new accounts from wealthy Russians, but would send them to smaller companies the bank had set up Kieber said.
"In that way if the risky clients are exposed in a scandal overseas, the larger well-known banks. . . are out of trouble and the media spotlight," he explained.
Though present only in prerecorded shadow, Kieber proved chattier than the men whose secret accounts he revealed.
Shannon Marsh and William Wu, two of the four LGT clients slated to testify at today's hearing attended but said little, beyond invoking their Fifth Amendment right against self-incrimination. A third, Peter S. Lowy, left the country but has agreed to appear before the panel next week. A fourth, Steven Greenfield, ignored a subpoena to appear. The subcommittee has not decided what action it will take, if any, against Greenfield.
Another witness, Martin Liechti, also took the fifth rather than answer questions from the panel on his bank's practices. Liechti, head of wealth management for North and South American clients for Swiss bank UBS, was briefly detained in May by the U.S. Justice Department as part of its investigation into tax evasion.
In a statement, UBS said it "has been working diligently with US and Swiss authorities" to provide information to US investigators. At the hearing, a UBS executive said the bank will no longer provide "undeclared" accounts to US citizens and is "winding down" its business involving already existing accounts.