Leaked files implicate over 6,000 Israelis in massive bank scandal

Banking giant HSBC faced damaging claims Monday that its Swiss division helped wealthy customers dodge millions of dollars in taxes after a “SwissLeaks” cache of secret files emerged online. Among their clients are over 6,200 Israelis, with holdings totaling some $10 billion.

The documents published over the weekend claim the bank helped clients in more than 200 countries evade taxes on accounts containing $119 billion.

The huge cache of files, which were stolen by an IT worker in 2007 and passed to French authorities, has sparked criminal probes in several countries and attempts to claw back the cash.

Israel was ranked sixth on the list of countries with the most money in the hidden Swiss accounts, with an estimated $10 billion overall.

The funds were distributed among over six thousands clients and 9,769 accounts.

One Israeli client alone had $1.5 billion in his account. The documents noted that while over six thousand people were associated with Israel, only half of them are Israeli citizens.

Brazil-born banker Edmond J. Safra was listed as holding a Swiss account with up to $5.3 million, and Israeli-Canadian oil trader Jonathan Kollek was linked to accounts holding as much as $72 million.

Rabbi Pinto leads penitential selichot prayers at the graveside of the Peleh Yoe’etz in Silestria, Bulgaria (Photo credit: Courtesy)

Diamond dealer Beny Steinmetz, celebrity rabbi Yoshiyahu Pinto –– who is embroiled in an ongoing graft case — and businessman Zadik Bino were also named as account holders.

The International Consortium of Investigative Journalists (ICIJ) obtained the files via French newspaper Le Monde, and shared them with the BBC and The Guardian newspaper in Britain, US TV program “60 Minutes” and more than 45 other media organizations worldwide.

The documents showed that HSBC provided accounts to international criminals, businessmen, politicians and celebrities, according to the ICIJ.

The revelations are likely to stoke calls for a crackdown on sophisticated tax avoidance by the wealthy and by multinational companies, a key political issue across Europe.

Tax avoidance is legal, but tax evasion is not.

“HSBC profited from doing business with arms dealers who channeled mortar bombs to child soldiers in Africa, bag men for Third World dictators, traffickers in blood diamonds and other international outlaws,” ICIJ reported.

A range of former and current politicians from Russia, India and a range of African countries, as well as Saudi, Bahraini, Jordanian and Moroccan royalty, and the late Australian press magnate Kerry Packer were named in the files.

Following the bombshell disclosure, there were calls for a Swiss probe against the bank, which is already facing prosecution in France and Belgium.

“I am angry,” former Swiss foreign minister Micheline Calmy-Rey told public broadcaster RTS, claiming the scandal had seriously damaged Switzerland’s reputation.

HSBC shares were up 1.24 percent to 621.00 pence in late morning trade in London.

Switzerland has to date only launched an investigation against HSBC employee-turned-whistleblower Herve Falciani who stole the files at the heart of the scandal.

The files were used by the French government to track down tax evaders and shared with other states in 2010, leading to a series of prosecutions.

HSBC’s Swiss banking arm insisted it has since undergone a “radical transformation.”

“HSBC’s Swiss Private Bank began a radical transformation in 2008 to prevent its services from being used to evade taxes or launder money,” Franco Morra, the head of HSBC’s Swiss unit, told AFP in an email.

He said the bank had closed “the accounts of clients who did not meet our high standards and ensuring we have strong compliance controls in place.”

“We have no appetite for business with clients or potential clients who do not meet our financial crime compliance standards.

“These disclosures about historical business practices are a reminder that the old business model of Swiss private banking is no longer acceptable,” he said.

The Swiss Banking Association said the country’s banks had worked hard in recent years to clean up the shop and ensure conformity with tax laws.

But it warned that banks “must always respect existing laws… (both) in their own country and the laws in the countries where they operate.”

If they don’t follow the law “they have to take the consequences,” it said in a statement to AFP.

Notes in the leaked files indicate HSBC workers were aware of clients’ intentions to keep money hidden from national authorities.

Of one Danish account holder collecting cash bundles of kroner, an employee wrote: “All contacts through one of her 3 daughters living in London. Account holder living in Denmark, ie critical as it is a criminal act having an account abroad non declared.”

In another memo, an HSBC manager discusses how a London-based financier codenamed “Painter” and his partner could avoid Italian tax.

Names in the files include people sanctioned by the United States, including Turkish businessman Selim Alguadis and Gennady Timchenko, an associate of Russian President Vladimir Putin targeted by sanctions over Ukraine.

Alguadis told the ICIJ it was prudent to keep savings offshore, while a spokesman for Timchenko said he was fully compliant with tax matters.

Former Egyptian trade minister Rachid Mohamed Rachid, who fled Cairo during the 2011 uprising against former president Hosni Mubarak, is listed as having power of attorney over an account worth $31 million, according to the files.

Other individuals named include the late Frantz Merceron, an associate of former Haitian president Jean Claude “Baby Doc” Duvalier, and Rami Makhlouf, cousin of Syrian President Bashar Assad.

Also named were designer Diane von Furstenberg, who told the ICIJ the accounts were inherited from her parents, and model Elle Macpherson, whose lawyers told the ICIJ she was fully in compliance with UK tax law.

Motorcycle racer Valentino Rossi, listed as having $23.9 million in two accounts, said he had regularized his tax situation with Italian authorities.

Formula One businessman Flavio Briatore is connected to 38 bank accounts that held as much as $73 million from 2006-2007, according to the ICIJ. His lawyer told the ICIJ the accounts were legal and complied with tax laws.