From Wikileaks

Grand Cayman News
Wednesday February 20, 2008

In the latest round of a saga that could have come from the pen of best-selling writer John Grisham’s novel, Bank Julius Baer (BJB) has succeeded in temporarily shutting down one outlet of Wikileaks, an international online transparency group.

According to internet reports, the Swiss banking giant has tried to silence their former Cayman Islands Chief Operating Officer, Rudolf Elmer, by using a court injunction to shut down the Wikileaks website, which contains what are alleged to be highly damaging documents about the bank’s offshore activities.

The Temporary Restraining Order, issued by the California Northern District Court in San Francisco, is aimed at a Domain Name Registrar, rather than just the actual publishers of controversial material, who are based outside US legal jurisdiction.

At the centre of the dispute are several hundred documents, purportedly showing offshore tax evasion and money laundering by extremely wealthy and, in some cases, politically sensitive BJB clients from the US, Europe, China and Peru, reportedly released by a Swiss whistleblower.

While the former Cayman Islands employee is apparently being targeted as the source of the material, he is not only reported to be emphatically denying releasing any documents but, according to all current reports, has not been connected with the leaks.

The original release of documents dates back to at least 2002/3 when secret BJB files relating to Cayman Islands accounts were sent to US tax authorities.

A further release of documents in 2005 targeted German account holders, whose details and account balances from US$5 million to over US$100 million, initiated a probe by the country’s authorities into possible tax evasion.

As a result, bank customers, who are understood to regard themselves as victims of a conflict between the bank and a former employee, may be forced to pay millions in taxes and in some cases could lose their entire investments.

While Mr Elmer is currently the target of BJB investigations, the whistleblower has apparently only ever been identified as ‘Teddy Baer’ or the ‘tax fraud revealer’.

Despite claims that the documents were “stolen” from the bank’s Grand Cayman office, there is no indication in any of the current reports that BJB filed any formal complaint with the Royal Cayman Islands Police Service (RCIPS), even though the removal of the documents certainly broke Swiss law and probably, according to one source, broke Cayman Islands’ law.

However, published reports suggest that BJB has conducted their own thorough, and sometimes robust, internal investigation into the leaks, including the use of private detectives.

One phase of this was subjecting Cayman-based employees to a polygraph, or lie detector test.

Mr Elmer has apparently, and without response, complained to the Cayman Islands government about the conduct of this test, which was, unlike in the USA where clear regulations exist for the conduct of polygraph tests, allegedly conducted without any statutory controls in place.

He also is reported to have claimed that his life was threatened and anonymous phone callers suggested the family should return to Switzerland “for their own good.”

Following the polygraph test, Mr Elmer was ‘laid off’ by BJB and returned to Zurich with his family. There, he claims to have been subjected to unrelenting pressure, including what he states was a half-million Swiss francs bribe, to stop doing something that he denies ever doing in the first place. In December 2007, he even took an unsuccessful anti-stalking case before the Swiss courts in an attempt to prevent BJB’s investigators following him.

Even though the documents and reports have been in the public domain for some time, BJB sought the California injunctions, stating the disclosures “constitute violation of trade secrets, conversion and stolen documents by former employee in violation of a written confidentiality agreement and copyright infringement, among other wrongful and tortuous conduct.”

Ironically, the move has not prevented access to the documents, and Cayman Net News had no problem reading the documents, along with Wikileaks’ comments on them, online.

Amongst the allegations Wikileaks makes against BJB are that the documents show evidence of deliberate tax evasion and, in one case, an account was allegedly used to handle bribery funds.

The latest high profile scandal comes at a time when the Cayman Islands, despite extensive work to ensure the offshore banking industry is properly regulated, is coming under renewed pressure from US legislators, who are claiming the islands represent an unacceptable haven for tax evaders. The revelation that bribe money may be flowing through accounts based in Grand Cayman will, although no official comment has so far been forthcoming, also be causing concern as the draft anti-corruption laws as still a long way from reaching the statute books. These laws, which are already in place in other offshore jurisdictions, would allow for the seizure of funds obtained by, or used for, bribery.

While this saga plays out in California, the RCIPS are currently investigating the death of another Swiss banker working in Grand Cayman. Frederic Bise was found dead in the back of his burning Mitsubishi Outlander on Friday, 8 February.

First appeared in the: Grand Cayman News