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Wednesday, September 17, 2014         

NEW YORK TIMES


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A whistle-blower who can name names of Swiss bank account holders

By Doreen Carvajal and Raphael Minder

New York Times

POSTED:



PARIS » Hervi Falciani is a professed whistle-blower — the Edward Snowden of banking — who has been hunted by Swiss investigators, jailed by Spaniards and claims to have been kidnapped by Israeli Mossad agents eager for a glimpse of the client data he stole while working for a major financial institution in Geneva.

"I am weak and alone," Falciani said, as three round-the-clock bodyguards provided by the French government looked on with hard stares. The protection was needed, he insisted, because he faces constant risk as the sole key to decipher the encrypted data — five CD-ROMs containing a list of nearly 130,000 account holders that may be the biggest leak ever in the secretive world of Swiss banking.

But as he settled into a deserted bistro for a two-hour lunch, Falciani, a former computer technician who has been on the run since 2008, seemed oddly relaxed for a fugitive. And why not?

He is in high demand these days, having cast himself as a crusader against the murky world of Swiss banking and money laundering. Once dismissed by many European authorities, he and other whistle-blowers are now being courted as the region's governments struggle to fill their coffers and to stem a populist uprising against tax evasion and corruption.

"It's an economic war," said Falciani, an angular man of 41 with a dark goatee who sometimes dons disguises, although on a muggy summer afternoon favored an innocuous beige tie and short-sleeved dress shirt. "In Switzerland, the banks are so organized that they are able to circumvent new rules and laws to continue to enable tax evasion."

Critics, not least at his former employer HSBC, dismiss Falciani as a manipulator more dazzled by money than high ideals. The data he has leaked — some say sold — since 2008 has wreaked havoc within the banking world, as well as the moneyed and political classes of Europe.

Falciani's information formed the basis for the now famous "Lagarde list" that has roiled Greek politics with its revelations of oligarchs and politicians who avoided taxes by stashing millions in Switzerland. His data is also credited with helping Spain collect 260 million euros ($345 million) in taxes and identify more than 650 tax evaders, including the president of Banco Santander.

In 2012, Falciani passed his information to U.S. authorities. They, in turn, used the data to pursue an investigation into whether HSBC flouted controls on money laundering, eventually forcing a $1.92 billion settlement with the bank in December.

Since being released from jail this year after a Spanish judge denied a Swiss extradition request, Falciani, who is married and has a young daughter, has resurfaced in France. Authorities here have offered protection in exchange for Falciani giving testimony to local prosecutors who are investigating whether HSBC helped French clients dodge taxes.

"My main objective is to help authorities develop a defense," Falciani said.

"We are under attack and losing a lot of tax money," he said of the Swiss banking system. "If you have enemies who want to invade, laws are not enough and you need armies to build an economic defense."

A native of Monaco who was educated in the south of France, Falciani once worked in obscurity at HSBC. In 2005, he was promoted and transferred to Geneva. The following year, he said he raised concerns to his bosses about security flaws in the Swiss computer system that could violate the privacy of depositors.

Ignored by his superiors, Falciani said he started collecting the information methodically, in an effort to prove the system was vulnerable. The bank denies that he ever alerted them and believes that he amassed the information over a two-year period.

Early on, Falciani said he got the brushoff from German bureaucrats who weren't interested in his trove of data. His information was also shunned in France by the Sarkozy administration when "authorities tried to make evidence disappear and they didn't want to know," he said.

Then the European economy slumped and governments started to take notice.

In a report from the French National Assembly issued in July, the lawmaker Christian Eckert chided authorities for being slow to use Falciani's list. According to Eckert, the information included 127,311 clients, including 6,313 from France who were suspected of tax evasion.

HSBC dismisses Falciani's information as flawed, insisting that the small sample the bank has seen is filled with errors. At the time of his employment, the bank contends that it had only 100,000 customers and that the stolen data affected only 15,000 clients.

"To our knowledge it has always been Falciani's intention to sell the data," David Br 5/8gger, a bank spokesman, said in an email statement. "Only faced with the prospect of extradition and extended time behind bars, Falciani decided to cooperate with the Spanish authorities. A scheme he is now repeating with France and other countries."

That theory is echoed by Georgina Mikhael, a former HSBC computer consultant who worked with Falciani in Geneva.

Mikhael says she helped Falciani develop a Hong Kong based company, Palorva, to sell data to other banks, initially believing he had obtained the information through what he called "data mining" from the Internet. She said they went to Lebanon in 2008 to sell their services to four banks. She said she grew suspicious when Falciani insisted on using a false Arabic name, Ruben Al-Chidiack, for their business dealings.

"He never gives something for free," said Mikhael, who noted that after the Lebanon effort failed Falciani tried to approach German and French intelligence services, usually carrying a knife in his bag because he feared the risks. "Always he is asking. He is not Robin Hood."

Mikhael, who is currently unemployed and lives in her native Lebanon, says that she was Falciani's mistress, believing that he planned to divorce his wife. She is now pursuing a defamation lawsuit against him in France, stemming from his contention that he was kidnapped by Mossad secret agents in Geneva who were seeking bank information about people with Hezbollah ties, including her. Mikhael says she does not have Hezbollah ties and is Christian.

Falciani disputes that he is peddling his information for cash and the claims — pressed by Mikhael — "are part of moves that people are keen to play" to harm his reputation. "'Never have I or anyone close to me asked or accepted money for information," he said.

In 2012, Swiss authorities gave Falciani safe pass to meet in Switzerland to discuss a deal to plead guilty to data theft with a suspended sentence, provided that he stopped sharing the information. Falciani said he strung them along to protect his own safety, waiting for a new government in France that might take his claims more seriously.

Now that the political tide has turned, Falciani wants to continue working with authorities.

As the investigations play out, Falciani said he was holding down a day job, working for a European Union project as a computer researcher to develop algorithms to detect abnormal behavior. But he worries about his long-term safety, wondering whether he will live another year. He notes that his house has been broken into and that his wife was recently fired from a job at a shoe store because of his notoriety

"This business represents thousands of billions of euros," he said. "From my side, I'm frightened."






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