The former UBS AG banker who blew the whistle on widespread tax evasion by United States citizens using the Swiss bank’s accounts will receive a $104 million reward from the Internal Revenue Service.
Bradley Birkenfeld’s lawyers said that they believe the $104 million is the largest-ever whistleblower award from the U.S. government. Their assertion could not immediately be confirmed, because data from IRS whistleblower programs is confidential.
The IRS said in statement that it can confirm the $104 million award to Birkenfeld because the agency obtained a signed disclosure waiver. Other than the confirmation, the tax agency had little more than boilerplate to say: “The IRS believes that the whistleblower statute provides a valuable tool to combat tax non-compliance, and this award reflects our commitment to the law,” the statement from IRS spokeswoman Michelle Eldridge said.
Sen. Charles Grassely (R-Iowa) authored 2006 legislation to strengthen the IRS whistleblower program, under which the Birkenfeld award was made. “[B]illions of dollars in taxes owed will be collected that otherwise would not have been paid as a result of the whistleblower information,” Grassley said in a statement.
“Unfortunately it has taken the IRS nearly four years to settle this whistleblower case. If the IRS is serious about encouraging future whistleblowers, it needs to continue to honor the spirit and intent of the law and issue awards in a timely manner.”
Erika Kelton, a lawyer with whistleblower law firm Phillips & Cohen LLP in Washington, D.C., said the award quells concerns that the IRS whistleblower program isn’t working. “It’s a huge award for somebody who brought information that was hugely important,” she said. “I think it’s a credit to the IRS that they were not distracted by Mr. Birkenfeld serving time in prison and they just applied the law objectively.”
Birkenfeld served 30 months in prison for failing to disclose his client relationship with California real estate developer Igor Olenicoff, who with Birkenfeld’s assistance stashed $200 million in shell corporations and other entitites that hid his ownership of the assets from the IRS.
Birkenfeld complained to 60 Minutes in 2010 that he shouldn’t be going to prison after handing the Justice Department and IRS a precedent-setting tax evasion case, in which UBS was eventually forced to turn over the identities of 4,000 Americans hiding assets in Swiss bank accounts. UBS also paid a $780 million fine after the Swiss government, protective of its bank secrecy laws, became involved in the negotiations.
“I gave them the biggest tax fraud case in the world. I exposed 19,000 international criminals. And I’m going to jail for that?” Birkenfeld asked on the program.
Whistleblowers under the False Claims Act also have received very large awards. In 2010, Cheryl Eckard was awarded $96 million from the federal government for exposing contamination at a GlaxoSmithKline pharmaceutical plant in Puerto Rico. She also received awards from state governments, but those amounts couldn’t be immediately confirmed.