THE BLOG
04/03/2009 05:12 am ET Updated May 25, 2011

For Wealthy Tax Cheats, The Moment of Reckoning is Coming

In some of the great houses in Palm Beach and the penthouses of Manhattan's East Side, wealthy Americans are sleeping fitfully, their nights haunted by fear of exposure. In the Bush years, the IRS became so lax in its enforcement that cheating became routine and hidden Swiss bank accounts almost as much a status symbol as private jets.

Why not do it? Everyone else was doing it? You knew you would never be caught, and you were protected by accountants and lawyers to hide your tracks. Your deceit and betrayal of American laws was shrewd strategy. It's grossly unfair that after all these years you might have to take the perp walk. And doing it, you're not going to look as nonplussed as Bernie Madoff did either.

It was so simple. Say you had a women's clothing company importing dresses from China and you were purchasing $1 million in dresses. You had the Chinese manufacturer send you a bill for $2 million. You wired him the money and he immediately wired half into your Swiss account. And say you've got a half billion dollar company and you keep doing this for ten years. Figure it out. Nobody could ever catch you as long as the Swiss kept their accounts secret.

This is big business. A person I know decided to check out her account in Switzerland. She walked into a tiny bank that looked like a 19th century cuckoo clock and took the old elevator upstairs. It opened up to a modern trading floor as big as a city block.

And now in the early days of the Obama administration, the gig may be up and there is stark terror among the knowledgeable. The sheer amounts of money waiting to be discovered are staggering, billions upon billions of dollars. There is so much money out there that once the taxes and penalties are paid, it could have a significant impact on the budget. And it couldn't be happening to a greedier, more selfish lot, most of them faux patriots to the core.

The first moment of truth arrives Monday when Attorney General Eric Holder meets with Eveline Widmer-Schlumpf, Swiss councilor in charge of police and justice. In the wake of the UBS debacle, the American government is seeking information on 52,000 American customers. The Swiss are willing to give up 250 customers whose tax fraud is most obvious, but not the others.

The Swiss have a special gift in masking their hypocrisy and narrow self-interest in a veneer of morality and principle. The bankers of Zurich are not happy at this seeming attempt to abrogate treaties that allow thieves to hide their funds with impunity.

Faith Whittlesey, a former ambassador to Switzerland, is a brilliant woman and a dear friend of mine from whom I learn even when I disagree. And I've rarely disagreed more with her than I do on this one. I find her stern warnings in The Financial Times Monday hardly enough reason for the American government to back off. She writes that "one of the largest Swiss political parties is agitating for retaliation that would include discontinuing Swiss representation of US interests in countries such as Cuba and Iran, where the US does not have embassies" and warns of "more virulent anti-Americanism."

I don't know about you, but I'm not sitting here quaking. If it comes to it, I'm willing to give up Swiss chocolate. But as an American who pays his taxes, I want these wealthy tax cheats to be found and punished severely including serious prison time for the worst of them.