Birkenfeld was born in Brookline, Massaschusetts, just outside of Boston in 1965, the youngest of three boys of a neurosurgeon father.
He fell into the finance industry as a summer intern at State Street Bank in Boston, ultimately working as a trader for institutional pension plans.
It was there that Birkenfeld said he had his first brush with whistleblowing. Birkenfeld said he discovered irregularities in the procedures at the bank. "It was first errors, and then, knowingly, committing a cover-up of that, which is fraud," Birkenfeld said. He began to keep copies of relevant documents at home, as well as at work. "The problem was that they weren't willing to admit fault."
Executives at the bank, though, were able to find fault in Birkenfeld: They put him on probation, and then fired him, Birkenfeld said. He added that executives began circulating critical stories about him.
A spokeswoman for State Street confirmed Birkenfeld's employment at the firm, but was unable to substantiate his account of events decades ago.
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Next, Birkenfeld said he went to the FBI with what he knew. But he found the FBI agents didn't have a grasp of the intricacies of banking. "They were totally clueless," he said.
Frustrated, Birkenfeld headed to Switzerland.
He got an MBA at the American Graduate School of Business alongside Lake Geneva in La Tour-de-Peilz, Switzerland, and then began to look for work.
His first stop was Credit Suisse, then a couple of years later to Barclays where, for the first time, he worked directly with clients.
One of the clients he made contact with was billionaire American real estate developer Igor Olenicoff. When Birkenfeld switched jobs again, to UBS, Olenicoff, and what became a $200 million account, came with him. Birkenfeld's mission at UBS was business development for the United States. UBS wanted rich Americans as clients, and Birkenfeld was one of a team of bankers sent to lure them in. He became one of the very few Americans admitted to the inner sanctum of Swiss bank secrecy. Olenicoff pleaded guilty to a count of filing a false tax return, admitting tax evasion and paying a $52 million penalty
Olenicoff declined to comment through his lawyer.
Birkenfeld said he began to see clients coming into the bank with a million dollars in a suitcase. Specialized couriers bringing cash into Switzerland and turning it over to the bank's clients for deposit. He learned that $10,000 in bills was exactly a quarter-of-an-inch thick. And he learned that the best banknote for cash transactions was the 1,000 Swiss franc bill. "The largest note in the world," Birkenfeld said. "I mean, you could put a half a million dollars in your pocket, no problem."
They didn't ask too many questions about where the money came from. "It wasn't our business to know," Birkenfeld said. "We weren't policemen. We were bankers." He noticed that many clients tore up receipts of deposit on the spot.
It's not illegal for Americans to have bank accounts in Switzerland. But under the law, taxpayers must disclose all foreign accounts and pay tax on any earnings in them. Similarly, bankers must be registered with the SEC in the United States before providing investment advice here.
Inside UBS in Switzerland, though, thousands of American clients were ignoring the tax rules and scores of bankers were traveling back and forth to the U.S. to recruit clients without ever registering with the SEC.
UBS put an enormous effort into identifying and cozying up to the richest people in America. The firm targeted families with inherited wealth, entrepreneurs who'd cashed out of businesses, and even professionals with modest wealth such as doctors, architects and lawyers. To reach them all, UBS bankers hit the social circuit. UBS strove to put on the best events in the world and lure in billionaires: art festivals, music venues, yachting events. Former UBS employees say much of it was organized by a charismatic and smiling colleague they nicknamed "Captain Cocktail."
CNBC contacted several former UBS bankers and executives in Switzerland, as well as former consultants and advisors outside the bank. A number of them spoke candidly, if privately, about life inside the ultra-discreet world of Swiss banking.
"This (article) concerns a legacy issue for UBS that has been well documented and is many years behind the firm. UBS fully and finally resolved all of our U.S. cross border issues in November 2010," said a UBS spokeswoman.
"The business described has been closed since July 2008. UBS today is a different firm, with a different strategic focus and senior management team,," she continued. "Mr. Birkenfeld was convicted for aiding and abetting tax fraud and for lying to U.S. authorities about his own misconduct. Following 40 months of prison for conspiracy, he remains on supervised leave to this day."
UBS knew the billionaires had a lot of choices—invitations to anything and everything. They strove to make their events stand out. One easy way to do that: parties often had "two women for each gentleman," recalls one event attendee.
UBS's private wealth team wanted to forge an emotional connection to the clients, say former employees. The goal was to spend a week with a billionaire in St. Barths, and to be the only banker on the yacht. Don't worry about meeting the client at 9 a.m. in his office, but pin him down at 8 p.m. at Carnegie Hall.
One tactic that worked especially well, the event attendee said, was seeking out the oldest women in the room, charming them, and then asking for introductions to all the billionaires at the event.
As dazzling as the social swirl was, the day-to-day reality of Swiss banking in Zurich and Geneva could be grimly competitive for the rank and file.
Many bankers inside the secretive private wealth management unit arrived at their desks by 7 a.m., only to find a worksheet on their desks detailing the previous day's profits and losses. It listed every banker's results by name. "You had a hit parade that showed this guy was No. 1, this guy was No. 2, and this guy was No. 35," recalls one former banker. "Imagine what type of climate that was to work in."
The Swiss bankers saw themselves as carrying out a solemn duty to protect their clients' identities. For many, it was a point of pride: "Every client was treated the same," says one. "Numbered accounts, named accounts, they were under the same secrecy."
The bankers were given elaborate instructions on maintaining client privacy. To some of the bankers, it began to feel as if they were becoming undercover agents. Birkenfeld provided CNBC with a document he said was handed to bankers in the private wealth division during a training session, in order to role play various scenarios they might encounter as they traveled to the U.S. to recruit clients. The paper encourages UBS bankers to mail sensitive account documents ahead of time to trusted contacts so not to be caught carrying them through U.S. customs. It suggests they should not detail client names in their electronic devices, and to only note "very short remarks" about the topics for any meetings with American clients.
According to one former UBS banker, managers gave the private-wealth team specially encrypted laptops that could be easily deleted in case U.S. authorities barged in. "They told us about the computers, 'if ever you run into problems in the U.S. with the IRS, just push button X twice, and everything will be deleted,' " said the banker. "It was like James Bond."
But the elaborate efforts to keep the U.S. government in the dark began to worry the bankers. "When these computers came along, some of the people realized, 'My God, what we are doing may actually be illegal,' " the banker said. "We never were instructed on American law and what was allowed. We never had any lessons."
Also worrisome to some of the UBS employees were the identities of the American lawbreakers they were protecting: names that still have not been made public despite years of investigations.
"There are some very big names, and it would shock the establishment," said a former UBS insider. "Movie stars, upper East Coast establishment figures, people who trace their origins to the '20s, '30s and '40s. They're the walking history of the American economy."
Beyond that, Birkenfeld said there was an even more secret category of client: American political figures.
Under international banking law, banks are required to treat their political customers with a higher degree of scrutiny in an effort to root out international corruption. One set of international guidelines sets aside a separate category of client, known as a "politically exposed person," or PEP. They are defined as heads of state, heads of government ministries, senior judicial officials, high-ranking military officers, as well as senior officials of political parties and their close associates and families.
Birkenfeld said UBS had a specific banking desk to deal with PEP clients, and that desk had an American division. "It was another level of secrecy," Birkenfeld said. He does not know the names of any American political figures who had secret accounts in Switzerland, or how many there were, because he did not work on the desk. But he said it was widely discussed inside the bank: "My bosses used to tell us, 'If you ever have a PEP it goes to the PEP desk in Zurich,' " Birkenfeld said.
Other former UBS insiders back up Birkenfeld's account of politically connected Americans inside the bank.
"The so-called PEP clients? That's definitely true," said one.
"They existed, yeah," said another.
Birkenfeld said that he has given the names of all of the American clients he has—30 people—to the U.S. government. But, he said only one has been named publicly, and none have gone to jail.
According to a document compiled in 2013 by the legal team working for Beanie Baby billionaire Ty Warner—one of the few Swiss bank clients whose name has been made public—just under 50 American clients of offshore banks have been sentenced in the U.S. since the Birkenfeld revelations. One received a 19-month sentence. But Warner's team found that nearly 30 were given punishments that included no jail time at all. In the end, Warner was also sentenced to probation without jail time.
Birkenfeld served more time in prison than any of them.