Birkenfeld’s $104 Million IRS Bounty

The Internal Revenue Service (IRS) awarded former UBS banker Bradley Birkenfeld $104 million for his contributions in providing the federal government with insider information on UBS’ illegal offshore banking scheme.

The award is believed to be the largest reward ever given to an individual whistleblower in the United States and the first major reward issued under the IRS tax whistleblower law.

“Birkenfeld provided information on taxpayer behavior that the IRS had been unable to detect, provided exceptional cooperation identified [and] identified connections between parties to transactions,” the IRS said. “The comprehensive information provided by the whistleblower was exceptional in both its breadth and depth. While the IRS was aware of tax compliance issues related to secret bank accounts in Switzerland and elsewhere, the information provided by the whistleblower formed the basis for unprecedented actions against UBS.”

“The IRS today sent 104 million messages to whistleblowers around the world – that there is now a safe and secure way to report tax fraud and that the IRS is now paying awards,  said  Birkenfeld’s attorneys, Stephen M. Kohn and Dean A. Zerbe. “The IRS also sent 104 million messages to banks around the world – stop enabling tax cheats or you will get caught.”

Patrick Burns of Taxpayers Against Fraud said that “getting a case out of the IRS whistleblower office is a bit like giving birth to an elephant – the gestation period is incredibly long and the birthing process is not pretty, but in the end you may be very pleased with the results.”

“The good news is that the IRS seems to have finally gotten its head around the idea that it’s supposed to be paying whistleblower awards,” Burns said. “I think when this program really gets going, it has the potential to dwarf recoveries under the False Claims Act, a law which will recover over $8 billion back to America’s taxpayers this year.”

“The bottom line is that there is an enormous amount of tax cheating in this country, and that’s one of the reasons this country is going broke,” Burns told Corporate Crime Reporter.  “The tax gap – the gap between taxes legally owed and what is actually paid – is over $400 billion a year, or $4 trillion dollars a decade. A lot of this is money squirreled away in offshore accounts by wealthy individuals engaged in private banking in Switzerland and the Caymans. Other massive tax cheats come in the form of illegal manipulations of legal loopholes like the Double Irish and the Dutch Sandwich tax schemes by which fake and contrived expenses are ginned up so that American companies can park their profits offshore and largely tax free.”

In 2007, Birkenfeld blew the whistle on UBS — Switzerland’s largest bank.

As a result, UBS was forced to admit that it helped 17,000 clients evade their taxes through the use of offshore accounts.

In February 2009, UBS entered into a deferred prosecution agreement with the government and paid $780 million in fines.

Prosecutors said that they could not have pieced together their case against UBS without Birkenfeld’s information, but he was nonetheless criminally charged for his involvement in the case and sentenced in 2009 to 40 months in prison. He was released from prison August 1, 2012.

A number of UBS executives were charged in the matter, but Birkenfeld — a lower level banker — was the only UBS employee who served time in prison for the wrongdoing.

Kohn said that Birkenfeld is seeking a pardon from President Barack Obama.





Copyright © Corporate Crime Reporter
In Print 48 Weeks A Year

Built on Notes Blog Core
Powered by WordPress