White Collar Whistleblower Sentenced To Prison While The Criminals He Exposed Are Free

Alan Pyke Deputy Economic Policy Editor, Think Progress

White Collar Whistleblower Sentenced To Prison While The Criminals He Exposed Are Free

Over the holiday weekend, the man who’s done more to expose the financial crimes of the rich and powerful than almost anyone else in the 21st century was sentenced to five years in a Swiss prison. The harsh punishment to protect bank secrecy comes amid a comparatively lax pursuit of justice for in cases where the public has been wronged by banking industry actors.

Herve Falciani spent two years gathering data about how the bank HSBC handled and concealed the wealth of clients at its Swiss branches. The files he stole offered information about 30,000 separate accounts with HSBC, as well as internal correspondence revealing how the British bank’s Swiss branch did business. Falciani allegedly sought money from various international governments who would have used the data to prosecute citizens who used HSBC to duck taxes.

The trove still delivered a major shake-up for the opaque world of international money-hiding. Journalists eventually used Falciani’s data to illuminate HSBC’s willful and aggressive defiance of tax law on behalf of its wealthiest clients. The bank “aggressively marketed schemes likely to enable wealthy clients to avoid European taxes” and helped a cast of characters that include alleged blood diamond trader Emmanuel Shallop, Victoria’s Secret owner Les Wexner, and accused war profiteer firm Katex Mines.

Falciani’s actions also violated Switzerland’s notoriously strict bank secrecy laws, which have begun to loosen in recent years as American officials try to crack down on tax evasion. Swiss prosecutors wanted Falciani to serve six years, the harshest punishment they have ever sought over alleged theft of bank data.

The former HSBC employee refused to appear in court and was represented en absentia by a publicly-appointed lawyer with whom the former bank employee had no direct communication, according to New Delhi Television. He told that station he plans to appeal to the international legal system for human rights in hopes of negating the Swiss sentence.

Despite Falciani’s defeat en absentia, the French-Italian dual national is unlikely to ever actually serve his time. He cannot be extradited to Switzerland by his home governments, the Guardian notes.

But the Swiss’ aggressive pursuit of a conviction and efforts to make an example of Falciani for his whistleblowing are still revealing about how developed countries approach the powerful and their critics.

The obvious contemporary comparison is to American whistleblower Edward Snowden, who remains on the lam internationally after exposing the extent and pervasiveness of the U.S. government’s surveillance of its own citizens. Snowden’s been threatened with treason charges if he is brought back to American soil, despite both court rulings that the surveillance programs he exposed were illegal and a lack of hard evidence that his revelations damaged American military or intelligence activity.

Previous American whistleblowers critical of the Global War on Terror have found themselves under similar official pressure. U.S. Army Col. Lawrence Wilkerson revealed the Bush/Cheney administration’s vast “enhanced interrogation” program, and had his home raided by the FBI in return. John Kiriakou, the CIA whistleblower who helped detail the workings of that torture program to the public, is the only agency official to be jailed in relation to it. U.S. Army Private Chelsea Manning is serving a 35-year prison sentence for releasing a vast trove of data to Wikileaks that helped reveal killings of civilians in Iraq and a telling gap between what Americans were told about the war in Afghanistan and the reality on the ground there.

There’s a big difference between leakers who target deception and abuse by the national security apparatus and those who publicize white-collar crime. In theory, the U.S. government tries to encourage people like Falciani to come forward at the same time that it seeks to squelch leaks about its terror-fighting efforts. Experts have praised the Obama administration’s actions on white-collar whistleblowing even as they condemn its aggression against leakers like Manning and Kiriakou.

But in practice, people who try to expose American corporate malfeasance often have a hard time. Harry Markopolos tried to get the Securities and Exchange Commission to go after Bernie Madoff years before his gigantic Ponzi scheme fell apart, but says the SEC ignored him. The commission’s much-anticipated system for rewarding whistleblowers with a portion of the money recouped in relation to their actions is seriously backlogged just a few years into its existence.

Absent sufficient financial incentive, insiders have little reason to think even the most damaging evidence they might share will be used doggedly – or even brought to the public’s attention. The American government’s pursuit of white-collar crime in general has been slack for years. Indeed, the vigor of Switzerland’s pursuit of Falciani is almost exactly opposite to the energy and ambition that American prosecutors bring to Wall Street accountability.

Prosecutions for all crimes deemed “white collar” are at a 20-year low in the U.S. Criminal prosecutions against corporate defendants here are down almost a third since 2004. The Department of Justice has elected to seek cash settlements in lieu of criminal prosecutions in a number of high-profile cases involving Wall Street abuses. Those settlements have repeatedly proven to be less punitive than the government initially portrayed. Even when the government has forced companies to plead guilty to crimes as part of such deals, the companies have gotten waivers from the full consequences of those felony convictions.

Years of growing anger at the soft-touch approach to corporate crime finally produced some change earlier this year, though it’s unclear if the shift will make things easier or harder for whistleblowers. The DOJ updated its guidance to prosecutors in corporate misconduct cases in hopes of setting tougher standards for such casework. In theory, the new rules could make full accountability more likely in such cases. But they may instead encourage corporations under investigation to simply hand over junior employees as scapegoats — making sacrificial lambs out of the very kinds of people who American policy encourages to blow the whistle.


This has been reposted Think Progress.

Alan Pyke is the Deputy Economic Policy Editor for ThinkProgress.org. Before coming to ThinkProgress, he was a blogger and researcher with a focus on economic policy and political advertising at Media Matters for America, American Bridge 21st Century Foundation, and PoliticalCorrection.org. He previously worked as an organizer on various political campaigns from New Hampshire to Georgia to Missouri. His writing on music and film has appeared on TinyMixTapes, IndieWire’s Press Play, and TheGrio, among other sites.