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UBS Whistleblower Going to Jail

October 9, 2009

Former UBS banker Bradley Birkenfeld played a crucial role in helping the U.S. government pry loose the names of U.S. account holders with money in the Swiss bank, but he’s nevertheless getting sentenced to 40 months in prison.

The IRS's whistleblower program has been drawing more tips ever since a change in the law in 2006 that will allow the whistleblowers to collect up to 30 percent of the proceeds recovered, double the 15 percent before the law change (see Informant Program Spurs IRS Whistleblower Tips).

However, that doesn’t mean the whistleblowers are collecting the money. The Treasury Inspector General for Tax Administration found in a recent report that it could take an average of seven-and-a-half years to pay the claims under the old law, and even now there are problems with timely processing of claims that lead to long delays (see Tax Whistleblowers Encounter Obstacles at IRS).

In Birkenfeld’s case, the Justice Department seems to have gone after him because it believes he held back information from them and advised one of UBS’s clients to move his money to another tax haven, Liechtenstein. However, Birkenfeld apparently came forward voluntarily and provided crucial information to the IRS and the Justice Department about UBS’s practices. He still could potentially collect a seven-figure payout from the IRS when he gets out of jail, or maybe even while he’s still inside, according to a fascinating article on the case on Time’s Web site. But some are wondering why he is even going to jail in the first place.

The TIGTA report on the current IRS whistleblower program faults the 2006 legislation for not containing specific provisions to protect employees against retaliation by their employers. Seems the legislation also should have contained a provision to protect whistleblowers from retaliation by prosecutors.

Comments (2)
Mr. Birkenfeld on his own initiative blew the whistle on UBS, Switzerland's largest bank. His disclosure and cooperation with U.S. authorities provided inside information into the bank's conduct and began the dismantling of the historic secrecy of Swiss banks. In fact by blowing the whistle, Mr. Birkenfeld's disclosure directly led to a ground-breaking legal settlement in which UBS agreed to pay $780 million in fines and UBS and the Swiss Government have agreed to turn over the names of thousands of Americans suspected of tax evasion. He deserves the reward. Get the facts here:
Posted by dcatty | Tuesday, October 13 2009 at 9:55AM ET
If the whistle blower is going to go to jail, then he should not collect on the money. I do not believe he should be awarded anything due to the fact he only came forward after thought he was in the clear.
Posted by vbpoutsourcing | Monday, October 12 2009 at 5:37PM ET
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