Economy

How Banks Help the Super-Rich Hide Over $20 Trillion in Offshore Accounts (Video)

Author says Swiss banks facilitate offshore accounts and buy millions of dollars worth of influence in D.C.

SHARMINI PERIES, EXEC. PRODUCER, TRNN: Welcome to The Real News Network. I'm Sharmini Peries, coming to you from Baltimore.

Last week we did an interview with James Henry titled "Over 100 Billion in Assets Stashed in Offshore Accounts by HSBC Clients". The interview was about the latest revelations of HSBC's involvement in establishing offshore accounts by whistleblower Hervé Falciani. In the interview, James Henry referred to John Podesta, an outgoing counselor to the president, as a lobbyist paid by Credit Suisse while at the White House. White House Principal Deputy Press Secretary Eric Scholz wrote to The Real News stating that John Podesta did not work as a lobbyist while he was at the White House. So we decided to take the story down while we fact-checked the reference. We found that Podesta cofounded the lobbying firm Podesta Group in 1988 with his brother Tony Podesta, who is in fact a lobbyist on behalf of Credit Suisse, according to the financial statements revealed by OpenSecrets.com. According to press reports, John Podesta left the firm in 1998 before the Credit Suisse contracts in question.

To discuss all of this further we are joined by James Henry. James is a leading economist, attorney, and investigative journalist who has written extensively. James served as chief economist at the International Consultancy firm McKinsey & Co. And as an investigative journalist, his work has appeared in numerous publications, like Forbes magazine, The Nation, and The New York Times. He was a lead researcher of the recently released report titled The Price of Offshore Revisited. He's a senior adviser at the Tax Justice Network. He was featured in the documentary We're Not Broke in 2012. And in the soon-to-be released documentary The Price We Pay. He's the author of Blood Bankers and Pirate Bankers.

James, thank you so much for joining us today.

JAMES S. HENRY, SENIOR ECONOMIST, TAX JUSTICE NETWORK: Thank you.

PERIES: James, you specifically named John Podesta, who is counsel to the president as a lobbyist for Credit Suisse. What did you mean to say?

HENRY: Well, what we do know is that they hired John Podesta's brother and Podesta Group to lobby for them from 2009 on. I think it's not surprising that the White House is a little bit sensitive right now about HSBC. I mean, their attorney general nominee is up before Congress, and her nomination's being held up over her handling of this matter.

We don't know what John Podesta's connection to Credit Suisse really is while he was counselor. We do know that his brother Tony was hired by Credit Suisse, his lobbying firm, called Podesta Group, which John Podesta founded. But it may well be that John has no financial interest in that firm, and we do know only that Credit Suisse hired Podesta group in 2009, 2010.

PERIES: Podesta Group that is now being run by his brother Tony Podesta.

HENRY: As far as we know. And they have quite a few corporate clients. They have about $25 million a year of lobbying income. Credit Suisse has paid them about 1.4 million. But we really don't want to get distracted by this Credit Suisse story. I mean, all of these Swiss Banks have lots of other channels of influence beside their particular lobbyists. Credit Suisse, HSBC, and UBS have spent $103 million in the last ten years on U.S. lobbying and political contributions. So they're not without alternatives.

PERIES: Okay. So just to put this all behind us, I just want to clarify, as far as The Real News Network knows, John Podesta has not registered as a lobbyist in Washington since 2006.

So let me get back to the story at hand, James. James, HSBC whistleblower Hervé Falciani unraveled a list last week of people that has offshore accounts. And this was the breaking news story that we intended to cover. And so tell us more about what you know about that unraveling.

HENRY: Well, the interesting thing is that Falciani came forward with his list of clients actually on a CD that he had been working at HSBC's Geneva branch (he left there in 2007), offered that to the French authorities, to U.K. authorities, and to the United States, Germany. He ended up being chased to Spain by the Swiss, who were using the Interpol as a way of pursuing him for data theft. And he ended up in France, where he's been working with prosecutors there.

But U.S. Justice Department has known about HSBC's list of more than 130,000 clients around the world since 2010. And it did not figure into the prosecution--deferred prosecution agreement that was signed by HSBC in 2012. They paid a $1.9 billion fine at that point, negotiated by the current attorney general nominee, Lynch, when she was at the U.S. attorney's office in the Southern District of New York, and that agreement only pertained to money laundering and to sanctions busting, trading with enemies like Iran and Sudan. And they were also caught for laundering money with the Mexican cartel at that point.

So the big scandal here--I think it's not only in the United States, but also in the U.K., there's an enormous uproar about how much the authorities knew about the Falciani list and why they didn't go after these folks more aggressively.

PERIES: So, James, tell us how much of our tax dollars that we should be realizing in our public treasury to address many problems that we have is really squandered away by these offshore accounts.

HENRY: Well, we've estimated at Tax Justice Network $21-$32 trillion offshore. About a third of that is from developing countries. That's just financial assets owned by individuals. We assume that more than 95 percent of that is not being reported to the home authorities.

In addition to that, there's an enormous amount of corporate tax dodging that goes on using offshore havens, companies like Apple and Google and Microsoft parking intellectual property offshore. And if you add all this up, it's at least a couple of billion dollars a year of tax revenue that should be paid to the home countries. How that's distributed exactly between developing countries and the rich countries like the United States is something that needs more work. But it's a big number. The United States estimate for quite a long time has been $100 billion per year of lost tax revenue due to the offshore segment.

PERIES: James, last week, when the story broke, Elizabeth Warren had raised this issue. She asked if we have known about this whistleblower, referring to Falciani, many years ago, at least she says three years now, why haven't we tapped into that source to unravel this problem and bring about prosecutions?

HENRY: That's [incompr.] question. That's a great one to address to the attorney general nominee. But you can hypothesize that these big banks are basically getting away with fines, as opposed to spending any time having senior executives go to jail. And in the 1980s financial crisis, more than 880 bankers were actually sent to prison for their behavior during that period and that financial crisis was one-seventieth the size of the current one.

This time around, since 1998, the top 22 banks in the world have paid about $246.1 billion of fines and private lawsuit settlements. But those kinds of penalties are--actually, they come along very late in the process, years after the infractions were committed, and they can be passed on to shareholders or to customers. And the banks' senior executives don't pay those fines directly and they don't go to jail, not doing any jail time under this administration. So we need a whole new system for regulating banks, not only for the kind of tax dodging that HSBC and Suisse Suisse have been involved in, but also for all of the other kinds of financial crimes--money laundering, mortgage fraud, rigging LIBOR, and foreign exchange rates. The list just goes on and on. We have a corporate crime wave here. And this White House, I think, has got to take some responsibility for it.

PERIES: Right. And part of the problem is this kind of behavior on the part of big banks and tax service organizations has been normalized. It's an industry-wide problem to give and receive tax evasion advice under the auspices of tax advice. How do you begin to counter this stuff?

HENRY: I think you need regulations that actually put off limits, this kind of business enterprise, private banking on the part of financial institutions on a global scale, where they're moving assets for clients across borders should be really be restricted. If they're going to manage money, it should be for domestic clients, and they should be focusing on those clients.

Secondly, we need tougher enforcement of the existing tax laws and the enablers, not only banks, but also accounting firms and law firms that are engaged in facilitating these arrangements. You know, nobody with $1 billion--in the case of one major Swiss billionaire, $5.4 billion in a Swiss account--nobody does that kind of investing on their own. They have sophisticated arrangements, companies, and trusts, and expert legal advice, accountants get involved. So this is a sophisticated industry. And the global haven industry is really the problem. This is not only just about one bank or two banks or one jurisdiction like Switzerland; it is about a whole industry that basically has been too big to jail.

PERIES: So, James, now we have a very weak Dodd-Frank bill that is being chipped away day by day. And we also have a Republican-controlled House. And we're in a situation that very little might actually be done about this problem. So if you're an ordinary person who's obviously going to be affected by this--because if the rich aren't paying their fair share of the taxes, we certainly are--what can be done about it if you're a normal person on the street?

HENRY: Well, these are problems that we've known about for decades, actually. I wrote a first piece about it in April 1986, talking about how much U.S. banks had taken out of Latin America and hidden abroad tax-free. This is going to take a while to solve. It isn't an instant remedy.

The first stage, though, I think, is for ordinary citizens to understand just how much their own tax bills are being inflated by this unacceptable behavior by corporations and wealthy individuals, who just happened to have big bankers as their friends. So I think the first stage of this is education. Citizens have to get involved in this. We're in a period here which is very much like the Gilded Age of the 1890s, when wealth inequality was soaring, when both political parties are inundated with corporate money. And we need to have a kind of progressive movement that revives the demand for transparency in government and for cleaning up this kind of really unacceptable behavior on the part of the elites.

PERIES: Well, James, thank you so much for joining us today and exposing what's going on in the HSBC and the wider banking world.

HENRY: You're quite welcome.

PERIES: And thank you for joining us on The Real News Network.

Stay Ahead of the Rest
Sign Up for AlterNet's Daily Newsletter
+ sign up for additional lists
[x]
Select additional lists by selecting the checkboxes below before clicking Subscribe:
Rights & Liberties
Education
Drugs
Economy
Environment
Labor
Food
World
Politics
Investigation
Personal Health
Water
Media