This story first appeared in Worldwide Tax Daily on April 22, 2016.
LuxLeaks whistleblower Antoine Deltour returns to Luxembourg April 26 to stand trial in Judiciary City for the theft of the PwC documents behind the scandal.
Deltour will be tried, along with journalist Edouard Perrin and an unnamed codefendant, for illegally obtaining private rulings tax documents from his former employer. In addition to vol domestique (theft from employer), he is charged with violation of professional secrets, theft of business secrets, illegal access to a computer network, and money laundering.
If the maximum penalty were imposed for all the charges, Deltour could receive a 10-year prison sentence and be fined nearly €1.3 million, and that doesn't consider potential damages and interest, Philippe Penning, Deltour's attorney in Luxembourg, told Tax Analysts.
There will be four stages in the trial: witness testimony, testimony by the accused, pleadings by the civil lawyers and the defense lawyers, and, finally, the indictment by the prosecutor. The verdict will be announced some weeks after the end of the trial. Deltour's legal team is planning for the eventuality of an appeal.
An appeal process would require a reexamination of the case, with a review of the fundamental law by a court of appeals, recourse to the Luxembourg Court of Cassation (similar to the U.S. Supreme Court), and possibly a referral to the European Court of Human Rights, Penning said. If Deltour were convicted and his sentence upheld, his sentence might be served in France, near his home, or he might be allowed to wear an electronic bracelet, which is occasionally offered to first-time offenders with sentences under two years, Penning said.
Deltour has made no financial gain from his whistleblower activities, nor does he expect to. His lawyers say the case has put considerable strain on his personal and professional life. Deltour was awarded the European Parliament's 2015 European Citizen's Prize for significant contributions to the common values of the European Union. However, neither the EU nor France will provide any significant assistance with the costs of his legal defense. Deltour's support for legal costs and information distribution on his case has grown from friends and neighbors in his hometown, and help early on from the French civil society Plateforme Paradis Fiscaux et Judiciaires, to include the global organization Transparency International.
An Epochal Change
LuxLeaks caused immense difficulty for the Grand Duchy and its former prime minister and finance minister, European Commission President Jean-Claude Juncker. The scandal brought to light a long list of multinational enterprises that had quietly paid much lower corporate income rates through Luxembourg's private rulings than would have been levied in the European countries in which their sales had occurred. The revelations shook the EU, forever altering the landscape of international taxation.
Deltour and Perrin are both French citizens. France has announced plans to help whistleblowers with legal costs as part of its next budget legislation, but its prime minister, Manuel Valls, said during a recent visit to Luxembourg that the country would take no action to support Deltour.
"The whole affair is a matter for the Luxembourg justice system," Valls told the Luxembourg press April 11 after demonstrators supporting Deltour and Perrin urged him to speak directly to Luxembourg Prime Minister Xavier Bettel about the upcoming trial.
"Antoine Deltour is at the epicenter of a tremendous contradiction between the celebration of whistleblowers coming from politicians, sometimes hypocritically, and the intense lobbying to gag them, which is proportional to the risk they represent," said William Bourdon, Deltour's French lawyer and whistleblower advocate. "This is the sense of the directive on the protection of trade secrets adopted on April 14 by the European Parliament. The financial oligarchy's obsession is to silence them."
French Finance Minister Michel Sapin recently told his country's legislators that whistleblowers deserve financial assistance with legal costs. Sapin mentioned Stéphanie Gibaud, a French marketing professional who worked for UBS until she was asked to destroy documents. The documents implicated her employer in the illegal canvassing of French clients seeking to place their money in Swiss accounts to avoid taxes. Her refusal led to her dismissal, and she has since acted as a key witness in the ongoing criminal investigation of the bank.
Deltour did not disclose information that implicated activities in France, and his name was not mentioned in Sapin's statement. The publicity surrounding the hundreds of Luxembourg private rulings has, however, created a public furor and dramatically affected the country's tax administration. The government is pushing hard for MNEs, such as Google and McDonald's, to make up for billions in tax revenue lost during the years covered by the Luxembourg rulings. One question recently raised by EU Competition Commissioner Margrethe Vestager was whether the MNEs took illegal advantage of tax treaties that were meant to protect companies from paying taxes in both the EU and the United States. The agreements were not designed to allow double nontaxation, she has said.
"Of course we knew that Luxembourg offered lower tax rates than we had in France, but at the time I was budget minister of France, we thought the difference was perhaps 10 percent -- something in the 20s, whereas our rate at the time was in the 30s," Alain Lamassoure, a French member of the European Parliament (MEP) from the European People's Party (Christian Democrats), told Tax Analysts. Lamassoure is chair of the EP's TAXE II special committee on tax rulings established after LuxLeaks. He said the true state of affairs, with many MNEs enjoying tax rates from Luxembourg as low as 1 percent, came as a complete shock to him and other member state ministers.
After the conclusion of her recent visit with American legislators, Vestager confirmed Lamassoure's statement that finance ministers in other EU countries were unaware of Luxembourg's true tax rates. Vestager has led the commission investigations into Luxembourg's tax deal with Fiat, which recently resulted in a finding that Luxembourg had provided the Italian car company with illegal state aid.
None of these actions would have likely occurred had it not been for Deltour's decision to quit his job as a PwC auditor and take with him documents stored in the company's database, according to MEPs who are trying to upgrade the EU's minimalist whistleblower protections. The EP has pushed hard to get better support for Deltour and other whistleblowers, but under EU law, all legal initiatives must start with the commission. Measures to create strong whistleblower protection have been taken under advisement by the commission, but a proposed directive is considerably weaker than what MEPs had hoped for.
Deltour has stated that he doesn't regret what he did, but that he would arrange for the release of the information differently if given a second chance. He maintains that he was not involved in the information being obtained by the International Consortium of Investigative Journalists, which distributed the information to the press.
"My first initiative was to offer it to some [nongovernmental organizations] to share my experience about harmful tax practices, at least to validate my interpretation," Deltour told Tax Analysts.