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IRS Whistleblower Decision a Powerful Message

Posted in Whistleblowers

Yesterday, the IRS announced its second-ever whistleblower award to date – and it is one of the largest ever paid by any US government agency. It comes from an interesting tale to be sure. Former UBS banker Bradley Birkenfeld, the recipient of the $104 million reward, provided the IRS with information about UBS AG, a Swiss bank, that was encouraging wealthy Americans to open secret offshore accounts to avoid taxes (shocking I know).

In 2009, the IRS settled a criminal case with UBS for $780 million and the information of more than 4,000 secret account holders—who owed a combined $5 billion in back taxes, fines, and penalties.  The worst part is that UBS didn’t just harbor the illegal accounts of America’s wealthy—it encouraged wealthy Americans to open these accounts in the first place. 

More than 35,000 Americans using their Swiss accounts as tax-havens participated in a voluntary amnesty program, requiring them to repatriate their accounts and pay taxes and fines while avoiding criminal prosecution.  The National Whistleblowers’ Center announced in a press conference Wednesday morning that the IRS might be starting an investigation into the entire Swiss banking system and warned holders of illegal accounts that the banks would not protect them.  “To banks around the world,” Mr. Birkenfeld’s attorney boldly stated at the press conference, “stop enabling tax cheats or you will get caught.”

 The IRS decision is an important milestone for whistleblowers and for all Americans. Mr. Birkenfeld’s attorney stated Wednesday that the IRS had just sent:

 “104 million messages to whistleblowers around the world — that there is now a safe and secure way to report tax fraud.”

And what an interesting case in which to act so definitively.  Mr. Birkenfeld is a convicted criminal who was sentenced to 40 months in jail. Yes, jail – for his participation in the very same tax-avoidance conspiracy which he provided information to the IRS about. He served most of his sentence: he was released this past Aug. 1st.  His prosecution was controversial because of his cooperation; this award should go a long way to soften the time he spent in prison. It works out to ~$46,000 (after Mr. Birkenfeld pays taxes, and I’m sure he will make sure to pay every penny) per day spent in prison. When the IRS acts they sure are bold.

 To date the IRS Whistleblower program has been criticized, and rightfully so, for its inefficiency and slow processing of claims since 2006, when it was overhauled by congress. This award shows that perhaps at least some progress is being made.

 We’ve said it before, and we’ll say it again: The government needs whistleblowers. Whistleblowers help ensure that companies (and people) defrauding the government are caught and punished. They help regain what is rightfully taxpayer money.  It is an issue that should transcend partisanship.  Who among us is against returning money that is in effect stolen from taxpayers?

 If you know information about corporate wrongdoing, don’t wait. Contact us at 202-232-7550 or info@berklawdc.com to discuss your legal rights.