Whistleblower-initiated claims and recoveries under the IRS whistleblower program are growing faster than claims and recoveries first filed under the False Claims Act almost 30 years ago.

That’s according to Patrick Burns of Taxpayers Against Fraud in Washington, D.C.

Burns says that more whistleblower cases have been filed in the first four and a half years of the IRS whistleblower program than were filed during the first 10 years of the False Claims Act — 1,942 submissions covering 13,337 claims at the IRS, as compared to 1,674 cases filed in the first 10 years of the False Claims Act.

IRS recoveries have been substantial too – with $1.039 billion collected in the first 4.5 years of the new “B” program — individual claims of over $2 million in tax liability — and an additional $843 million under the old “A” program.

The $261 million awarded to whistleblowers during the first four and a half years of the IRS “B” program compares more than favorably with the $43.2 million awarded during the first five years of the False Claims Act, and is not too far off the mark from the $282 million awarded to FCA whistleblowers in the first decade of that program.

So why is the storyboard about the IRS whistleblower program so negative?

Burns says the storyboard for the program got off to a bad start right from the beginning.

“The IRS implemented a web-based system to report whistleblower claims to the Service, but they had no way to separate the wheat from the chaff. The result was that the IRS was inundated with cases that were not filed with legal representation, and the vast majority of those claims were not well presented or researched.”

With thousands of cases coming in, the IRS lost good submissions — a point which came to light when the first settled IRS case turned out to be one lost in the shuffle.

The whistleblower, who originally filed pro se — without a lawyer — had to then hire a private lawyer to find his case and have it sorted out.

“Things took another bad turn when the whistleblower in the first big IRS case was tossed in jail for two and a half years for a relatively minor violation – despite the fact that he provided massive amounts of information to the IRS that resulted in almost $800 million in direct fraud recoveries while illuminating over $5 billion in other Swiss-based tax frauds,” Burns said.

Burns says the storyboard took another negative turn when IRS General Counsel Donald Korb left to Sullivan & Cromwell to defend billion-dollar tax evasion cases filed against alleged tax cheats under the IRS Whistleblower Program.

Korb told Tax Notes, at that time:

‘The new whistleblower provisions Congress enacted a couple of years ago have the potential to be a real disaster for the tax system. I believe that it is unseemly in this country to encourage people to turn in their neighbors and employers to the IRS as contemplated by this particular program. The IRS didn’t ask for these rules — they were forced on it by the Congress.’

Burns says that “it did not help that IRS Commissioner Doug Shulman did nothing to correct the record.”

“In fact, he said nothing at all about the IRS Whistleblower Program during his entire tenure in office.”

Finally, the annual report of the IRS Whistleblower Office provided very discouraging numbers.

Of the 67,00 claims filed as of June of 2015, over 37,000 have been denied.

Of the 13,337 claims filed under the new 7623(b) program for whistleblower cases claiming over $2 million in tax liability, only 17 have been positively settled with an award to a whistleblower.

So why is Burns hopeful about the IRS Whistleblower program?

“Tax cases are a process, not an event,” says Burns, “It’s like growing apples – it’s 8 years before the first fruit sets.  I think we are going to see a slow, but steady, growth in in cases coming out in the next year or two.”

“I am reminded of the story of Thomas Edison who said he was making fabulous progress on the light bulb – he knew 10,000 things that did not work.”

“The IRS is a bit like that — they have gone through 37,000 claims they think have no merit – leaving 30,000 claims that are currently being evaluated, collected on, or are being appealed by the alleged fraudster.”

So what does Burns think the new head of the IRS Whistleblower office should do?

“The challenge is to get a handle on the process,” says Burns.

“IRS Commissioner John Koskinen has just put Lee Martin in charge of the Whistleblower Office, and I don’t think he was put there to fail,” Burns said. “That office has grown from a staff of two to over 60, even as the budget of the IRS has been slashed elsewhere.  Commissioner Koskinen and his enforcement chief, John Dalrymple clearly want the office to produce.  That’s an outcome that would be good for everyone: the agency, and everyone in it, as well as the American people.”

Burns has three recommendations for the IRS team.

Number one — Impose a point system so that cases get the proper priority coming in.

“Cases that have private lawyers attached to them are more likely to be well-developed than those filed without counsel, legal oversight, or substantial tax expertise. In the last 12 years, I have not seen a single successful False Claims Act case where the whistleblower was not represented by counsel. The same pattern is likely to be true in the IRS whistleblower arena, and an IRS points system, on intake, should reflect that.”

Number two — promote the whistleblower program from the top.

“Folks inside the IRS, on Capitol Hill, and on America’s editorial pages need to know the IRS Whistleblower Program is open for business, that there’s a new sheriff in town, and that the Commissioner and his head of enforcement are committed to seeing success in this arena. Folks are looking for positive communication from the top. it’s not crazy to think and talk about how to incentivize case movement within the bureaucracy. Commissioner Koskinen can should consider directing both recognition and personnel towards departments that move on big whistleblower cases.”

And number three — use the tools Congress gave you.

“When the IRS whistleblower law was written, Congress specifically created a way for the IRS to partner with whistleblowers and their attorneys in order to move complex cases forward, even when there were few resources.  So far, the IRS Whistleblower Office has never used this provision – 6103(n).  Good people can argue over how often this provision should be used, but never using it is clearly the wrong number.  The IRS needs to use this provision as an act of willingness.  Words matter, but actions always speak louder than words, and a little action in this arena is badly needed.”