natural gas answers both at powerincooperation.com. [watch ticking] >> bradley birkenfeld spent most of the last decade living in switzerland helping wealthy americans hide their money. you'll hear how he did it and how he touched off an investigation that would shake 300 years of banking secrecy to the foundation of its underground vaults. how unusual is it for a swiss banker to come forward and say, "this is how it works"? >> it's never happened before in history. i'm the first one. [watch ticking] >> many of the deals that helped create the current financial crisis would have been illegal during most of the 20th century, in violation of gaming laws. but in 2000, congress gave wall street an exemption that's turned out to be a very bad idea. >> it's legalized gambling.

it was illegal gambling, and we made it legal gambling. >> with no regulatory controls. >> with absolutely no regulatory controls. zero, as far as i can tell. >> i mean, it sounds a little like a bookie operation. >> yes. [watch ticking] >> i don't to die. i shouldn't have to die. >> helen sharp, suffering from lymphoma, just got the letter that says her county hospital is cutting charity care to cancer patients. it's a symptom of the recession: public hospitals forced to cut vital services just when people need them the most. when you read this letter, what did you think it meant to you? >> a death sentence. >> welcome to 60 minutes on cnbc. i'm steve kroft. in this episode we'll meet some big winners and some big losers in the high stakes game of world finance. up first, the secret vaults of geneva and zurich, which have served as repositories for the wealth of dictators and despots, mobsters and arms

dealers, corrupt officials and tax cheats of all kinds. it's a world u.s. law enforcement has rarely been able to penetrate. so the idea the ubs, one of switzerland's largest banks, would agree to turn over information on thousands of american tax cheats would have once been unthinkable. but it happened in part because of a whistle-blower who i sat down with in 2010. for his efforts he's been rewarded with a federal prison term and the possibility of endless riches. though he was born and raised in the boston area, bradley birkenfeld spent most of the last decade living in switzerland, helping wealthy americans hide their money. he was based in geneva, where he says there may be more money-counting machines than parking meters, in a country that once bragged it had more banks than dentists. >> it's not swiss money in those banks. it's foreigners'. you have a culture there that has been ingrained in society

about managing people's money, protected by swiss bank secrecy. >> and who has a right to that information under swiss law? >> only the banker and the bank itself. >> how unusual is it for a swiss banker to come forward and say, "this is how it works"? >> it's never happened before in history. i'm the first one. >> when birkenfeld, a mid-level banker with an undistinguished employment history, knocked on the door of the u.s. justice department in the spring of 2007, he touched off an investigation that would threaten one of the world's largest banks with extinction and shake 300 years of swiss banking secrecy to the foundations of its underground vaults. he did it by providing inside information and documentation that his former employer, banking giant ubs, was actively involved in helping its american clients defraud the u.s. treasury out of billions of dollars in unpaid taxes. >> what do you think was most valuable thing that you

gave to the u.s. government? >> the amount of clients and the amount of assets managed by ubs in the united states out of switzerland. >> and that was how much? >> that was 19,000 clients and around 20 billion swiss francs, which is about $19 billion. >> of the percentage of american accounts that you represented, how many would you say were trying to evade taxes? >> my own clients? >> mm-hmm. >> i would say about 90%. >> did people tell you this was their intention when they opened an account? >> it was the unwritten rule. you didn't have to discuss it. people wouldn't fly all the way to switzerland to open accounts just because they wanted to declare their money. >> and as a private banker for ubs, birkenfeld would help his clients invest, spend, and move their money. one example he told us about involved withdrawing cash from a customer's account, buying some diamonds in geneva, and then smuggling them into the u.s. for the client inside a toothpaste tube. birkenfeld claimed it was legal, because the diamonds, he said, were worth less than $10,000

and didn't have to be declared at customs. if it was legal, why did you put them in a toothpaste tube? that's why i'm having trouble with that. >> oh, it was just a way of carrying them so i wouldn't lose them. where would you put two diamonds? >> i think i'd put them in a money belt or i think i'd put them in a case. >> it was a one-time event. that's not my business. i just put them in a toothpaste tube. >> you weren't trying to hide them from customs? >> no, not at all. >> buying diamonds and other valuables is just one way of hiding and transporting assets, and birkenfeld insists that he was just providing a service to his clients, which is what swiss banking is all about. >> people would ask you to make purchases for them, possibly maybe a car or a chalet, possibly a nice watch. so you would also cater to the client in that regard and then deliver it to them upon their choosing. >> and what would be their choosing? >> it could be in their hotel room. it could be in maybe another country. could be there in geneva. >> so you were sort of not

just a banker but also a personal shopper? >> if you will, at a concierge level. >> birkenfeld claims his motives in going to the justice department were mostly altruistic. he offered to wear a wire to gather evidence against high-level ubs executives in exchange for full immunity for his transgressions, but the negotiations broke down. and birkenfeld neglected to tell them about his dealings with this man, california real estate developer igor olenicoff, who was his biggest client. birkenfeld helped olenicoff hide $200 million by introducing him to a consultant who specialized in creating shell companies and sham entities that concealed the ownership of the ubs accounts. >> i don't sign people's tax return, so what they do with their taxes is not my business. i'm a banker. >> so you would steer them to somebody who would help them hide their money? >> i would them to these service providers. >> that's correct. >> you must have known deep down that it was illegal. >> when you came into the u.s. you felt uncomfortable. that's correct.

>> but as a gesture of good will, birkenfeld did give the justice department, senate investigators, irs agents, and the s.e.c. lots of information about ubs and its secret activities. >> any transaction that happened on an account was held deep in the vault and sealed until the client came to pick it up personally. then they would either take it with them, which was generally not the case, or they would tell you to shred it, which we would do on behalf of the client. >> people didn't have online accounts. >> it was forbidden. e-banking was forbidden. >> they didn't get statements in the mail. >> no. >> so if somebody wanted to know how much money they had in the bank and how their investments were doing, they had to go to switzerland? >> or maybe see their banker when they came to the u.s. >> it was those visits to the u.s. which birkenfeld told the government about that ultimately got ubs in so much trouble. the bank would sponsor lavish events like yacht races in newport and the art basel modern art festival in miami beach to attract wealthy americans. then it flew in its bankers from switzerland to mingle and

to try and drum up new clients and conduct business with existing ones. because the swiss bankers weren't licensed to conduct business in the united states, it was a clear violation of american banking laws on u.s. soil, and birkenfeld provided internal documents that proved the length that ubs would go to in order to avoid detection. >> call it a vacation rather than a business trip. rather than saying, "oh, yes, i'm coming to see my private clients here in the united states. and i'm coming in from zurich, switzerland." >> did you bring records into the country with you when you came in? >> generally, no. i did not. my colleagues brought in encrypted laptops. >> encrypted laptops. >> yes, so that even if they were discovered, you couldn't see what was inside the computers, which were portfolios of the clients, and they were product offerings for the clients. [watch ticking] >> up next, bradley birkenfeld pays a price after going to the government. >> i gave them the biggest tax fraud case in the world. i exposed 19,000 international criminals.

and i'm going to jail for that? >> the day he walks into prison is the day you will lose a generation of tax whistle-blowers. >> when 60 minutes on cnbc returns. [watch ticking] atch ticking]

>> thomas perrelli, the associate attorney general of the united states, says bradley birkenfeld was not the only person who provided

valuable information to the investigation of ubs. but he says his evidence that executives encouraged illegal behavior was the bank's achilles' heel. >> they were going out of their way to cover their tracks. they would bring checks or sometimes they would actually carry money from one client to the next, all with the purpose of disguising and avoiding detection of large transfers of money. >> what did that information tell you? >> it was certainly surprising that there would be a unit within a major bank that would be behaving in that way. >> and there was? >> and there was. and we subsequently learned that senior officials knew about this. they knew it was wrong. they called it "toxic waste." but it was very profitable, and they didn't stop doing it. >> based on information provided by birkenfeld, the justice department and the irs obtained a court order demanding that ubs turn over records on the 19,000 americans believed to have secret swiss accounts. ubs then enlisted the help of the swiss government to try and negotiate a settlement, finally

agreeing to pay a $780 million fine, cease its offshore banking activities with americans, and for the first time in history, turn over the names of more than 4,000 u.s. citizens suspected of tax fraud. >> i think they knew we had a very strong case. >> right, and they did that because the u.s. government said that, "if you don't cooperate, we're going to take away your license to do business in the united states." >> well, we certainly told them that we had a strong case for criminal prosecution, and that if we couldn't find another way to resolved that, that that's where this was headed. >> ubs realized that the justice department was holding all the cards. it had a major presence in the u.s. and 30,000 employees here. and it could not survive as a global banking power without access to the u.s. market. if you had such a strong case, why didn't you get the names and numbers of every american account holder in switzerland? >> we got the accounts that really are the core of the fraud, the largest accounts, the accounts that are most clearly, likely to be associated with fraud. >> after the scandal broke,

nervous clients withdrew $160 billion from ubs' wealth management operation. and 14,700 americans notified the irs that they had offshore bank accounts, taking advantage of a program that allows them to pay back taxes and penalties and escape prosecution, which should provide a windfall for the u.s. treasury. how much in tax revenue do you think you will have gained from this? >> i've heard, certainly, the commissioner of the irs say in the billions of dollars. >> is it the end of the swiss banking system as it used to be? >> i don't think it's the end of the swiss banking system. but i think we are moving into an era where countries will be able to get more information to enforce their tax laws, and it will be fair for all americans, because most americans know how to pay their taxes and do it every single year. and the unfairness is people who hide their money overseas and avoid paying taxes. >> with the government claiming victory and ubs breathing a sigh of relief, the only person with grounds to be really unhappy is bradley birkenfeld,

who the last time we saw him, was wearing an electronic ankle bracelet. and the federal government had restricted his movements to the commonwealth of massachusetts. >> i gave them the biggest tax fraud case in the world. i exposed 19,000 international criminals. and i'm going to jail for that? >> as it turns out, while the u.s. government was using birkenfeld's information to go after ubs, the justice department was closing in on his biggest client, igor olenicoff, for tax evasion. olenicoff cooperated with the investigation and paid $52 million in fines and back taxes and got off with no jail time. but because birkenfeld hadn't prosecutors told about his relationship with olenicoff, birkenfeld was arrested and charged with conspiracy to commit tax fraud. he pled guilty and was sentenced to 40 months in prison. and he was not happy about it. >> and you think that you should not be going to jail? >> i think i shouldn't. >> even though you violated the law, and you were an enabler.

i mean, you were the person who were implementing these policies. >> and i'm the only one going to prison out of 19,000 accounts, and no swiss bankers. >> did your investigators believe that birkenfeld was telling them everything he knew? >> we were certain that he wasn't telling us everything that he knew. in fact, he told us that it wasn't everything that he knew. and at his sentencing hearing, his lawyer admitted that he wasn't forthcoming with us. and in particular, he didn't tell us about his own involvement at all. if he had come forward and told us everything he knew, a complete and accurate picture, in the summer of 2007, we think it's likely he wouldn't have been prosecuted. >> mr. birkenfeld says the federal government admits that the prosecution would not have been successful without his participation in this. and yet, he is the only one that is going to jail. is that fair? >> it is not uncommon for someone to engage in criminal activity and to provide us information, but to also go to jail. >> the day he walks into prison is the day you will lose a

generation of tax whistle-blowers. >> why do you say that? >> because no one will blow the whistle. steven kohn is one of birkenfeld's civil attorneys and the head of the national whistle-blowers center. he believes there may be one final twist in the case that could give his client the last laugh. that's because birkenfeld may well be entitled to collect tens of millions of dollars under a federal law that rewards whistle blowers with up to 30 percent of the money that is recovered as a result of the information they provide, even if they end up going to jail. >> mr. birkenfeld has saved the taxpayers billions of dollars, brought thousands of people to justice. they should blow up his check. the attorney general should shake his hand and look into the camera. and he should say, "i want a message to every international banker that works to money launder against america. you come here to america. you'll be protected, and you'll be rewarded." get 20, get 30 birkenfelds.

let's fix this problem. let's lower everybody's taxes. >> the irs will ultimately decide whether birkenfeld qualifies for the reward. if he does, they may have to mail the check to federal prison, where birkenfeld is now serving time. but it couldn't be worse than returning to switzerland, where he is regarded by as a criminal and a traitor. do you think you'll ever return to switzerland again? >> i don't believe i will. >> in 2011, federal officials had more than 150 people under criminal investigation in connection with the ubs case. but as of early 2011, no one had received more prison time than bradley birkenfeld, who has petitioned president obama for clemency. when we return, american banks get legal permission to enter a high stakes, highly risky form of gambling, one that helped push the nation to the brink of financial collapse. [watch ticking]

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[watch ticking] >> the great recession was in part ignited by the collapse of the housing market in the u.s. and intensified worldwide by the sale of complicated investments that warren buffet once labeled "financial weapons of mass destruction." they're called credit derivatives or credit default swaps, and as we first reported in 2008, they're essentially side bets on the performance of u.s. mortgage markets and some of the biggest financial institutions in the world, a form of legalized gambling that allows you to wager on financial outcomes without ever having to actually buy the stocks and the bonds and

the mortgages. it would have been illegal during most of the 20th century under the gaming laws. but in 2000, congress gave wall street an exemption, and it turned out to be a very bad idea. >> the term "derivative" is almost becoming a household word. >> the cat's kind of out the bag here. >> this is not the american dream. it's an american nightmare. >> while congress and the rest of the country scratched their heads trying to figure out how we got into this mess, we decided to go to frank partnoy, a law professor at the university of san diego who has written a couple of books on the subject. >> can you explain to me what a derivative is? >> yes, a derivative is a financial instrument whose value is based on something else. it's basically a side bet. >> think of it for a moment as a football game. every week, the new york giants take the field with hopes of getting back to the super bowl. if they do, they will get more money and glory for the team and its owners. they have a direct investment in the game. but the people in the stands

may also have a financial stake in the outcome in the form of a bet with a friend or a bookie. >> we could call that a derivative. it's a side bet. we don't own the teams, but we have a bet based on the outcome. and a lot of derivatives are bets based on the outcome of games of a sort. not football games, but games in the markets. >> whether interest rates are going to go up or down? >> yes, and the new bet that arose over the last several years is a bet based on whether people will default on their mortgages. >> and that was the bet that blew up wall street. the tnt was the collapse of the housing market and the failure of complicated mortgage securities that the big investment houses created and sold around the world. [electronic noises] but the rocket fuel was the trillions of dollars in side bets on those mortgage securities called credit default swaps. they were essentially private insurance contracts that paid off if the investment went bad, but you didn't have to actually

own the investment to collect on the insurance. if i thought certain mortgage securities were going to fail, i could go out and buy insurance on them without actually owning them? >> yeah, the irony is, though, you're not really buying insurance at that point. you're just placing a bet. >> eric dinallo is the insurance superintendent for the state of new york. he says that credit default swaps were totally unregulated and the big banks and investment houses that sold them didn't have to set aside any money to cover their potential losses and pay off their bets. >> as the market began to seize up and as the market for the underlying obligations began to perform poorly, everybody wanted to get paid, had a right to get paid on those credit default swaps. and there was no "there" there. there was no money behind the commitments. and people came up short. and so that's to a large extent what happened to bear sterns, lehman brothers, and the holding company of aig. >> in other words, three of the nation's largest financial institutions had made more bad

bets than they could afford to pay off. bear stearns was sold to j.p. morgan for pennies on the dollar. lehman brothers was allowed to go belly up, and aig, considered too big to let fail, is on life support, thanks to a $123 billion investment by u.s. taxpayers. >> it's legalized gambling. >> it's legalized gambling. it was illegal gambling. and we made it legal gambling. >> with no regulatory controls. >> with absolutely no regulatory controls. zero, as far as i can tell. >> i mean, it sounds a little like a bookie operation. >> yes, and it used to be illegal. it was very illegal 100 years ago. >> in the early part of the 20th century, the streets of new york and other large cities were lined with gaming establishments called bucket shops, where people could place wagers on whether the price of stocks would go up or down without actually buying them. this unfettered speculation contributed to the panic and stock market crash of 1907, and state laws all over the country

were enacted to ban them. >> big headlines, huge type. this is the front page of the new york times. >> "no bucket shops for new law to hit." >> so they'd already closed up, 'cause the law was coming. here's a picture of one of them. and they were like parlors. see? >> betting parlors. >> betting parlors, yeah. >> it was a felony. well, it was a felony when a law came into effect, because it had brought down the market in 1907. and they said, "we're not gonna let this happen again." and then 100 years later in 2000, we rolled them all back. >> a bill to reauthorize and amend the commodity exchange act to promote... >> the vehicle for doing this was an obscure but critical piece of federal legislation called the commodity futures modernization act of 2000. and the bill was a big favorite of the financial industry it would eventually help destroy. it not only removed derivatives and credit default swaps from the purview of federal oversight; on page 262 of the legislation, congress pre-empted the states from enforcing existing gambling and

bucket shop laws against wall street. it makes it sound like they knew it was illegal. >> i would agree. they did know it was illegal, or they knew it was prosecutable. [watch ticking] >> some people strike it rich after the law passes. >> i know people personally who have taken away more than $1 billion from having been on the right side of these transactions. >> when 60 minutes on cnbc continues. [watch ticking] this is $100,000. we asked total strangers to watch it for us. thank you so much, i appreciate it, i'll be right back. they didn't take a dime. how much in fees does your bank take to watch your money ? if your bank takes more money than a stranger, you need an ally.

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en we got married. i had three kids. and she became the full time mother of three. it was soccer, and ballet, and cheerleading, and baseball. those years were crazy. so, as we go into this next phase, you know, a big part of it for us is that there isn't anything on the schedule.

[watch ticking] >> in retrospect, giving wall street immunity from state gambling laws and legalizing activity that had been banned for most of the 20th century should have given lawmakers

pause, but on the last day and the last vote of the lame duck 106th congress, wall street got what it wanted. the senate passed the bill unanimously. >> the senate stands adjourned sine die. >> there was an awful lot of, "trust us. leave it alone. we can do it better than government," without any realistic understanding of the dangers involved. >> columbia university law professor harvey goldschmid is a former commissioner and general counsel of the securities and exchange commission. he says passed at the height of wall street and washington's love affair with deregulation, an infatuation that was endorsed by president clinton at the white house and encouraged by federal reserve chairman alan greenspan. >> that was the wildest and silliest period, in many ways. now, again, that's with hindsight because the argument at the time was, "these are grownups. they're institutions with a

great deal of money. government will only get in the way. fears it will be taken overseas. leave it alone." but it was a wrong-headed argument and turned out to be, of course, extraordinarily unwise. >> what role did alan greenspan play in all of this? >> well, he made clear in his public speeches and book that a libertarian drive was part of the way he looked at the world. he's a very talented man. but that didn't take us where we had to be. >> he was--another former commissioner told us, hard to argue with at that point. >> alan was most powerful man in washington, in a real sense. certainly a rival to the president and had enormous influence on capitol hill. >> and he was at the height of his power. >> he was at the height of his power. >> within eight years, unregulated derivatives and

swaps helped produce the largest financial services economy the united states has ever had. estimates of the market for credit default swaps grew from $100 billion to more than $50 trillion, and you could bet on m the solvency olocal communitaf general motors. they also helped produce a huge transfer of private wealth to wall street traders and investment bankers, who collected billions of dollars in bonuses. a lot of the money was made financing what seemed to be a never-ending housing boom, selling mortgage securities they thought were safe and credit default swaps they believed would never have to be paid off. >> the credit default swaps was the key of what went wrong and what's created these enormous losses. >> is it your impression that people at the big wall street investment houses knew what was going on and knew the kind of risks that they were exposed to? >> no, my impression is to the contrary, that even at senior levels they only vaguely understood the risks.

they only vaguely followed what was going on. and when it tumbled, there was some genuine surprise not only at the board level where there wasn't enough oversight but at senior management level. >> they didn't know what was going on in part because credit default swaps were totally unregulated. no one knew how many there were or who owned them. and there was no central exchange or clearing house to keep track of all the bets and to hold the money to make sure they got paid off. eventually, savvy investors figured out that the cheapest, most effective way to bet against the entire housing market was to buy credit defaults swaps, in effect taking out inexpensive insurance policies that would pay off big when other people's mortgage investments went south. >> i know people personally who have taken away more than $1 billion from having been on the right side of these transactions. >> jim grant is the publisher of grant's interest rate observer and one of the country's foremost experts on

credit markets. >> if you can and you could lay down cents on the dollar to place a bet on the solvency of wall street, for example, as some did, when wall street became evidently insolvent, that cents on the dollar bet went up 30, 40, and 50 fold. not everyone who did that wants to get his name in the paper. but there are some spectacularly rich people who came out of this. >> who got richer. >> who got richer, who became, you know, fantastically richer. >> a lot of them were hedge fund managers. john paulson's credit opportunities fund returned almost 600% in 2007, with paulson pocketing a reported $3.7 billion. bill ackman of pershing square capital management said he plans to make hundreds of millions. both declined our request for an interview. >> it is a betting game, folks. it's a betting game.

>> congress now seemed shocked and outraged by the consequences of its decision eight years ago to effectively deregulate swaps and derivatives. >> this is casino capitalism. that's what it is. it's casino capitalism. >> and various members of the house and senate have hauled in the usual suspects to accept or share the blame. >> were you wrong? >> credit default swaps, i think, have serious problems associated with them. >> it appears to be the first step in a long process of restoring at least some of the regulations and safeguards that might have prevented or at least mitigated this disaster after the damage has already been done. >> where do we go from here? >> we need the most dramatic rethinking of the regulatory scheme for financial markets since the new deal. if anything has demonstrated that imperative, it's the economy right now and the tragic circumstances we're in. >> how much danger is still out there, do you think? >> we don't know. part of the problem of the lack

of transparency in these markets has been we don't really know. >> the financial reform law passed by congress in the summer of 2010 did take aim at derivatives. most standard derivatives must be traded on open exchanges with more transparent pricing. and banks can no longer trade in the riskiest default swaps. they have to spin those off to trading desks to prevent them from endangering the rest of the bank. [watch ticking] up next, some extremely vulnerable victims of the great recession. >> how can you do this to cancer patients? they're dying. if we don't provide them care, their outcome is guaranteed. they're going to die. >> 60 minutes on cnbc returns. [watch ticking] last season was's best tourism season in years.

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>> las vegas was one of the communities hardest hit by the great recession. but it wasn't just real estate and employment that was affected. as scott pelley found in 2009, thousands of patients who were being treated at the only public hospital in nevada were stunned to find out that its outpatient clinic for chemotherapy was closing. like many of the charity patients, helen sharp had no idea at the time why a crash on wall street was threatening her life. >> i don't want to die. i shouldn't have to die.

this is a county hospital. this is for people that, like me, many people have lost their insurance, have not any other resources. i mean, i was a responsible person. i bought my house. i put money away. i raised my two children. and now i have nothing. you know, my house isn't worth anything. i have no money. and i said, "what do i do? but what do all these other people do after me?" and they said, "we don't know." >> 63-year-old helen sharp has been fighting lymphoma since july. she's not working because of her illness and has no insurance. last year, she received charity care at the county hospital, university medical center. and she was one of 2,000 patients who got this letter. >> "dear patient, we regret to inform you that the nevada cancer institute will no longer provide contract oncology services at university medical

center." >> since december 31st, no chemotherapy for new outpatients. >> when you read this letter, what did you think it meant to you? >> a death sentence. [helicopter blades thudding] >> university medical center is the safety net for two million people. vegas bets its life on it. umc is a teaching hospital, the only fully equipped trauma center, the only burn unit, the only transplant unit, and the primary source of charity care in a city that has fallen on the hardest times it has ever seen. kathy silver signed that letter. she's the hospital's ceo. >> obviously, our gaming and tourism is tanking. the construction industry has been decimated. and all of those things cause big, gaping holes in the state budget. the hardest-hit area for us was the medicaid budget. >> you lost $21 million

overnight. >> overnight. and we were already scheduled or budgeted to lose $51 million. and so when you layered on $21 million on top of that, that brought our loss, or anticipated loss, to $72 million. >> the $21 million was cut by the legislature when tax revenues went bust. nevada is number one in foreclosures. unemployment is over 10% and climbing. silver told us she had to defend her unique services like the trauma center, so she chose to sacrifice services that are duplicated at private hospitals, even though patients may not be able to afford them. the services that you have closed include what? >> we no longer provide prenatal services. we closed the outpatient oncology program. we cancelled a contract for outpatient dialysis. we closed the dedicated high risk obstetrical unit that we had. and we stopped doing outpatient mammography.

>> we were there when the women's cancer clinic closed. >> it's like, you know, a sharp pain. i can't--i have to go, like, lay down. i can't move. >> dr. nick spiratos treats ovarian and uterine cancers. >> take care. it's been great working with you. >> when the hospital first informed you that the outpatient oncology clinic was going to close, what did you think? >> how can you do this to cancer patients? they're dying. if we don't provide them care, their outcome is guaranteed. they're going to die. [hissing] >> we spoke to several of those patients. roy scales, a laid off security guard with lung cancer, went to the hospital and got the news in person. >> i walked in. the lady looked down and said "well, i don't see anything down here for you." then she looked in the computer, and she said, "oh, you were supposed to have an oncology today, but it's been canceled. our oncology department is closed."

>> they turned you away at the door? >> they turned me away at the door without telling me anything. >> when you walked out of the hospital, what did you think? >> i mean, where am i going to find help? i mean, i'm messing with a disease that will kill you. and for every day that i don't get medical input, i mean, this advances on my body. >> cancer is advancing on livia ralphs, who was recently laid off from her job selling cosmetics. >> it goes from here to here. you can probably see it sticking out. >> so in terms of the cancerous growth in your neck, the doctors believe it's treatable. but you don't have a way to treat it? >> i have no funds. i have no insurance. nothing. >> patients who got the letter, like helen sharp, were sent a list of private chemotherapy centers, which leaves them in essence begging for care. >> i was wondering what care is available to me now that

oncology is closed. [phone beeps] i'm trying to see whether i'm gonna die or not. one drug is almost $50,000. one drug, rituxin. who can afford that? there's nobody that can afford that unless you're a billionaire. >> some of the patients we met are gravely ill. but all future patients are affected, including those with early, highly treatable cancers who would benefit the most. kathy silver showed us her closed chemotherapy unit, which had treated 40 patients a day for 20 years. >> well, i'm sad, because i know that there is room to serve patients and yet, financially, we can't afford to. >> you have the facility to save lives. you have people outside the hospital who need to have their lives saved. and you just can't put two and two together? >> the financial situation that we find ourselves in caused us to make some decisions that i think all of us, to a person would rather not have made.

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to apply for state services. there's medicaid and clark county medical assistance. >> so if you're poor enough, you're okay? >> if you're poor enough, you're fine, because those patients are being taken care of. >> if you're rich enough, you're obviously fine. so who is falling through the cracks here? >> it's the patients who don't qualify for a social services type of program. what we're talking about here are people who are making $30,000, $40,000, $50,000 a year and have lost their jobs and therefore lost their insurance. >> that's correct. >> the middle class. that's correct. >> yolanda coleman is 45 years old, a single mother. her breast cancer has entered her bones. we found her at home, bedridden, with a broken hip. it's hard to know how much she could benefit from chemo. but when we met her, she was receiving almost no care at all. a few months ago there wouldn't have been any question about whether you could have your next round of chemotherapy. umc would have been available, and you could've gone there. >> yes, coleman replied.

what does it mean to you that that is gone now? >> it's devastating, you know? it's absolutely devastating. >> she worked her whole life as a maid in hotels and as a truck driver, which was better money to support her 9-year-old son and 16-year-old daughter in the next room. as we sit here at this moment, you don't know... >> i don't know. >> whether there will be another round of chemo for you? >> i don't know. i don't know. it's just so uncertain right now. i really don't know. i'm just trying to live it day by day and trying to keep my spirits up and trying to keep, you know, trying to get well so i can take of them two i got in there. you know, i got to take care of them. >> she had three rounds of chemotherapy under her insurance plan. then she became too sick to work and lost her insurance,

exactly the situation umc used to take care of. you know, yolanda, i think most people watching this interview think to themselves that if they get cancer and they don't have health insurance that somebody's going to take care of them. >> no, no, there's nobody gonna take care of you. >> is what's happening to this hospital in las vegas unique or is this kind of thing happening all about the country? >> i think this is happening to some degree to probably every public hospital across the country. i think it's happening to us to a greater degree because we are--we're sort of the epicenter of what's happening. we're a demonstration project, if you would, of all the things that can go wrong at once. >> nick spiritos, the doctor we met closing the women's clinic,

has not been able to leave his patients behind. >> we've taken care of these ladies for years. they've been our family. you're not gonna push them out in hard times. >> he took a storeroom in his private office and spent $100,000 turning it into a chemo clinic for ovarian and uterine cancers. >> and you told them they can come here to your clinic and receive free medical care? >> correct. we've asked those who can pay, pay. if they can pay $5 a month, they pay $5 a month. if they can pay $20 a month. we're asking them to do what they can. and those who can do nothing, that's our job to take care of. >> spiritos expects 10% of his patients won't be able to pay, so he and his partners will cover them. they've put collection boxes out at convenient stores around town. other private clinics are also providing free care. and charities, including the susan g. komen foundation, are stretching to help the desperate. but these are emergency

measures. [machinery beeping] after a month of uncertainty, helen sharp was treated at umc. with the outpatient clinic closed, the hospital admitted her as an inpatient. it says it made an exception because her heart disease and diabetes are life threatening complications. but livia ralphs is still searching for care. >> i'm going to die if i don't get treated. that's the bottom line here. >> yolanda coleman remains untreated. >> and after our visit, a medical supply company took away her bed and her wheelchair. >> you never know what god has for you down the road. but i know he has more for me than just to leave my children because i can't have medical insurance. >> roy scales has been calling the private doctors on that list university medical center

sent with its letter. he has been searching for someone who will accept payment from the county medical assistance for the poor, something he calls insurance. but it's been five months since he was diagnosed. how many doctors and oncology practices did you call? >> oh, man, it had to be at least 25. >> and they told you what? >> "what about your insurance?" i told them about the insurance, "well, we don't accept that insurance." >> what are you going to do if you can't find a doctor to take care of you? >> die peacefully. >> roy scales died shortly after this story first aired. for other cancer patients in las vegas, nevada cancer institute opened a new oncology clinic at umc in the fall of 2010 with the help of a $3 million grant. and the clark county supervisors also appointed an advisory board, including dr. nick spiritos, to help the hospital regain its financial footing. that's this edition of 60 minutes on cnbc.