The Internal Revenue Service has issued a $104 million whistleblower award to Bradley Birkenfeld, a 47-year-old ex-banker who informed on UBS AG and how, for decades, the bank has allowed rich people to open accounts while they avoid paying taxes. Because of Birkenfeld’s information, the Swiss bank not only handed over the names of thousands Americans suspected of tax evasion between 2000 and 2007, but also, the bank paid a $780 million fine.
Birkenfeld, who is from Massachusetts, worked in Swiss banking for years.
He said that not only would he would travel in the US to look for rich
clients for UBS, but also he and fellow bankers were encouraged to use
laptops that were encrypted and declare on travel forms that they were
in the country for pleasure and not business. Birkenfeld also admitted
to helping clients hide their wealth through the purchase of art and jewelry.
He said that UBS earned $200 million annually by dealing with $20 billion
in assets that went undeclared each year.
According to The Wall Street Journal, Birkenfeld’s $104 million
payout is considered the largest ever awarded to an individual whistleblower.
This comes not long after his release from prison for a 40-month sentence
that was given to him for pleading guilty to one count of conspiracy to
defraud the US (He is currently at a halfway house and will be let out
in November when he will be put on probation). Birkenfeld was charged
by prosecutors after he refused to own up to his own role in the UBS tax
evasion fraud and failed to inform them of is business relationship to
Igor Olenicoff, a billionaire and real estate developer who would plead
guilty to submitting a false tax return in 2007–the same year that
Birkenfeld blew the whistle on UBS.
Per a 2006 law, the IRS can pay up to 30% of whatever is collected to
the whistleblower that exposed the fraud. A whistleblower is entitled
to an award, per the IRS whistleblower program, if the company that is
having the whistle blown on it owes at least $2 million in taxes, interest,
and penalties. As long as a convicted felon who is also a whistleblower
didn’t orchestrate or instigate the tax evasion, he/she is entitled
to this award. The award given to Birkenfeld is 26% of the $400 million
in tax that UBS paid to the IRS as part of its settlement.
Birkenfeld’s award, which was paid out earlier this month, could
inspire other whistleblowers to step forward–especially in the wake
of a corporate whistleblower rule that was modified in 2009 and 2010.
Already, large payments have been made per this statute.
Meantime, the crackdown by the US and other countries on tax evasion continues.
Since UBS’s practices were exposed, over 33,000 US taxpayers have
admitted to having overseas accounts that they hadn’t declared and
they have since paid over $5 billion in taxes and penalties. Right now,
our government is looking to see whether at least 11 banks have been involved
in suspect activity. Per Bloomberg.com, 50 taxpayers, at least 24 offshore
bankers, lawyers, and advisers have already been charged with committing
crimes. Several months ago, Wegelin AG, the oldest Swiss bank, stopped
doing business under that name here in the wake of the US’s decision
to indict it and a number of its employees. Meantime, German investigators
are looking in at whether thousands of Credit Suisse Group AG clients
purchased insurance polices to make tax-free interest on their savings.
Whistleblower Gets $104 Million, The Wall Street Journal, September 11, 2012
Whistleblower Gets $104 Million From IRS, ABC News, September 11, 2012