Wednesday, August 29, 2012

Whistleblower with Liechtenstein Bank Data Nails Australian for Australian Tax (8/29/12)

$21m tax case against Brisbane millionaire Harold Murray (Herald Sun 8/29/12), here.  Here's a cut and paste from some introductory paragraphs as a teaser to link to the whole article:
A WHISTLEBLOWER who leaked sensitive client details from a secretive bank in Liechtenstein supplied critical evidence in a successful $21 million tax case against a Brisbane millionaire. 
The former bank staffer of LGT Bank in Liechtenstein, who cannot be named because of a suppression order, copied hundreds of names of clients in November 2002, giving three CD's filled with names to the Australian Taxation Office in October 2006. 
Seven months later the ATO raided the Brisbane home of former expat businessman Harold Murray and a massive tax audit began. 
The leaked details have been used in the Administrative Appeals Tribunal in Brisbane to successfully fight attempts by Mr Murray to avoid paying his tax between 1999 and 2007. 
AAT Deputy President Philip Hack SC ruled this week that the 70 year old from Pullenvale in Brisbane's west, must pay the $11 million in penalties and tax on $25 million in extra income he stashed in an LGT Bank account in Liechtenstein.
The massive investment returns were possible thanks to successful investment in international hedge funds. 
Mr Murray's name was secret until the publication of the decision on August 24. 
The ATO argued Mr Murray tried to evade paying tax on his money by using a complex net of trusts and companies and in a Liechtenstein bank in an account with the name of the San Simeon Foundation, set up by Mr Murray in October 1995. 
Mr Murray denied ``receiving a benefit'' from the foundation, but Mr Hack SC ruled this was wrong and that Mr Murray was entitled to the income of the foundation.
And there is more.  Read the article.


  1. Great find Jack!

    We may glean from this that the tax whistleblower was paid handsomely for his information and assume the era of bank secrecy is pretty much on life support. Any bank employee with access to client data may be sitting on a treasure trove, and view that treasure with a piratical eye! Some U.S. bank employees surely must be considering what say the French, German, Australian taxing authorities might be willing to pay for the information in U.S. bank accounts under his or her fingertips.

    The Australian Tax Office received the information in 2006 and despite Mr. Murray's determined efforts to stonewall and obstruct, it obtained final judgement in 2012. Participants in the I.R.S. whistleblower program concerned about the speed of the I.R.S. tax whistleblower program should take comfort that (perhaps) the I.R.S. timelines for processing I.R.S. tax whistleblower cases are consistent with those of other developed countries.

    I wonder can Australia terminate Mr. Murray's Australian passport, which I suspect would cause Mr. Murray to take a closer look at his situation. We can assume that course of action is on the agenda in Australia, and rightly so.

    Again, great find.


  2. I think two words in the article are probably wrong. One Is "whistleblower" and the other is "giving" as in "giving three CDs." I seriously doubt that this person had the idealistic motives of a true whistleblower. Apparently the motivation was simply to sell stolen information, no different than selling a mailing list, product formula, or other confidential information to a competitor, or buying/selling stock based on inside information, or military secrets to another government.
    I don't know how many Europeans have secret US bank accounts, but apparently quite a few Latin Americans do in Miami banks. Will the US press refer to "whistleblowers" "giving" information to the governments of Mexico, Brazil, Argentina and Venezuela?

  3. The story of the LGT staffer was one big story in Europe when it hit the world in 2008. There is a film about him: Data Thief - Heinrich Kieber. It has been aired on Swiss, German and Austrian television, and is available on DVD at I am one of the film makers (and have also written a book about his incredible life). If you want to discuss the case with me, you are very welcome on my facebook page:

    The film blurb:
    It was the worst catastrophe imaginable for the discreet Liechtenstein
    trustees and their international clientele: Heinrich Kieber, an employee
    of the Princely trust company LGT, illegally copied the firm’s entire
    client database and in 2008 sold the stolen data to the German
    intelligence agency BND, the US Internal Revenue Service, the Australian
    Taxation Office, and British authorities. In return he was paid several
    million euro, as well as a new identity, new passports, and a safe
    haven by Australia. For the finance ministers
    of the world, Heinrich Kieber is a hero – for the wealthy
    Liechtensteiners, a traitor. But who is Heinrich Kieber really? Since
    his earliest childhood, Heinrich led an eventful double life: the
    outsider from a children’s home, his youth as a runaway, his cons and
    frauds in Germany, New Zealand and Australia, his kidnapping in South
    America, his crimes in Spain. Finally, Heinrich uses the stolen bank
    data to blackmail the Reigning Prince of Liechtenstein.

    Thief – Heinrich Kieber” is the story of the man blowing the whistle on
    tax evaders worldwide and cracking bank secrecy in Liechtenstein and

  4. Any opinion on the use of evidence obtained through criminal means? It seems to be getting popular.

  5. Your question raises two interesting issues, I think.

    First, you assume the information was "evidence obtained through criminal means." I do not know whether the law of Liechenstein would make it a crime to access information, but the contract in this case would likely be governed by Australian law, where clearly the receipt of information was not criminal. If the copying of the information was a crime under Liechenstein law (interesting question that), a well advised whistleblower would no longer find him or herself within Liechenstein's borders (not difficult to accomplish I suggest-I once drove through those borders without appreciating I had crossed in from Switzerland and out again). And the LGT whistleblower obviously knew the information was criminal (and we may assume LGT did too by implication), so it puts Liechtenstein prosecutors on the horns of a dilemma-- to prosecute the whistleblower would raise many difficult questions, and not to do so allows other employees to attack the system.

    Personally, I hope Liechenstein prosecutes or try to prosecutes the whistleblower, as it will open up another Pandora's Box for the U.S. and put another nail in the coffin of tax havens vis a viz U.S. taxpayers. (I have wondered is Liechenstein, given its geographic location, is the tax haven of choice for Swiss residents--ironic that!).

    Assuming for the sake of responding to Curious' question that the information in issue was obtained through "criminal means," the use of the information is not proscribed in most common law countries if the government did not orchestrate the taking of the information. Clearly, Australia welcomed the information and obtained a significant conviction using it.

    From the U.S. perspective, the U.S. may obtain and use information however obtained if it obtained the information passively, according to a long line of cases from the U.S. Supreme Court. Burdeau v. McDowell, 256 U.S. 465 (1921). The U.S. I.R.S. recently reiterated that view in Notice 2008-011 (Feb 27, 2008), in the context of information obtained by the I.R.S. whistleblower reward program. (The "one-bite" rule has since been relaxed, but most prudent whistleblowers will ensure it is complied with nonetheless, if the information has an "obscure" provenance.)

    So, whistleblowers providing information to the U.S. I.R.S. whistleblower reward program need not fear that that information will be viewed as tainted by the I.R.S., nor to the Australian Tax Office either it seems. That said, whistleblowers need to be careful that the information provided does not result in their being prosecuted themselves for tax crimes associated with the information provided.

    The larger implication of this is, of course, that bank secrecy is dead. When the reward for reporting a corrupt practice (so to speak) outweighs the risk of doing so, the rationale individual will choose the former course.


  6. Thanks Patrick.

    Readers might want also to consider in the U.S. context the Supreme Court case of United States v. Payner, 447 U.S. 727 (1980),

    And its Wikipedia entry here:

    Jack Townsend

  7. It was:


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