US: Ex-UBS Banker Seeks Billions for Blowing Whistle

Publisher Name: 
New York Times

Bradley C. Birkenfeld was sentenced to 40 months in prison for
helping rich Americans dodge their taxes. Now he is hoping for a bit
more - a few billion dollars more.

Associated Press


Bradley C. Birkenfeld was sentenced to 40 months in prison for helping rich Americans dodge their taxes.

Now, as thousands of wealthy Americans seek amnesty for keeping illicit, offshore bank
accounts, Mr. Birkenfeld and his lawyers hope to use a new federal
whistle-blower law to claim a multibillion-dollar reward from the
American government. If they succeed - and legal experts say the odds
are pretty good - it would be the largest reward of its kind.

Mr.
Birkenfeld, who is to begin his prison term as soon as January, is
being represented by the executive director of the National
Whistleblowers Center, Stephen M. Kohn. Mr. Kohn successfully
represented Linda Tripp, who helped expose the Monica Lewinsky scandal of the Clinton years.

"We are seeking at least several billion dollars," Mr. Kohn said.

It
might seem outlandish that Mr. Birkenfeld, who pleaded guilty in June
2008 to conspiring to defraud the United States government, would seek
any reward at all. But experts in whistle-blower cases - who,
admittedly, have an interest in fostering such claims - say he has a
persuasive case.

"I do think he has a serious claim," said
Erika A. Kelton, a partner at Phillips & Cohen, a law firm that
specializes in large whistle-blower claims. "It was very credible, very
useful information from inside UBS that he provided. The law is pretty
clean on this."

Mr. Kohn stands to reap a fortune if Mr. Birkenfeld wins his case.

The
United States Treasury loses an estimated $100 billion a year to
offshore tax cheats, but finding tax dodgers is difficult. The best
information, the authorities acknowledge, often comes from insiders. In
recent years, the Internal Revenue Service has quietly embraced whistle-blowers like Mr. Birkenfeld to help root out tax cheats.

Federal
whistle-blower laws date back to the Civil War, when the government
sought to detect wrongdoing by suppliers to Union soldiers. But under a
2006 whistle-blower law, the I.R.S. has sought to further encourage tax
informants to come forward, arguing that sometimes it takes a rogue to
catch a rogue. Informants now stand to collect 15 to 30 percent of the
taxes, fines, penalties and interest ultimately collected by the I.R.S.
- billions of dollars, in the case of UBS.

Informants who are
convicted of "planning" and "initiating" the schemes are not entitled
to bounties. But Mr. Birkenfeld, a 44-year-old American, is not seeking
rewards for money collected from his own clients. Instead, his lawyers
are arguing that he is entitled to a reward stemming from the thousands
of others who have come forward in recent months about hidden, offshore
bank accounts.

Mr. Birkenfeld's lawyers also assert that UBS
executives, not Mr. Birkenfeld, planned the schemes. Mr. Kohn argues
that Mr. Birkenfeld is entitled to a portion of the money recovered
from 52,000 offshore UBS clients whose existence, but generally not
names and account details, he described to the I.R.S. and Justice
Department.

The names and account details of about 4,450 UBS
clients are being turned over the I.R.S. under a settlement with the
bank. These people will pay billions of dollars in back taxes,
penalties and interest. Scores more are coming forward independently to
disclose their assets. More than 14,700 offshore tax evaders emerged
under an I.R.S. amnesty program, and while the I.R.S. does not yet know
how many are from UBS, it presumes that the majority are. Douglas
Shulman, the I.R.S. commissioner, has said that he expects "billions"
of dollars to roll in from the amnesty program.

Mr.
Birkenfeld's disclosures, the Justice Department has acknowledged in
court filings, were also the crucial factor leading to the criminal
investigation of UBS. In February 2008, the bank admitted that it
engaged in criminal wrongdoing and enabled tax evasion by selling its
offshore banking services to wealthy Americans; it agreed to pay a $780
million fine. Mr. Kohn argued that Mr. Birkenfeld was also entitled to
a portion of that settlement.

The Justice Department
acknowledges Mr. Birkenfeld's role in the case. "Without Mr. Birkenfeld
walking into the door of the Department of Justice in summer of 2007, I
doubt this massive fraud scheme would have been discovered by the
United States government," Kevin M. Downing, the Justice Department
prosecutor who handled the UBS investigation, wrote in court papers
filed in Mr. Birkenfeld's case.

But the agency, which did not
grant Mr. Birkenfeld immunity from prosecution when he came forward,
considers Mr. Birkenfeld more of a tipster or an informant than a
formal whistle-blower, in part because while he described the bank's
dealings, he provided few details on actual clients, according to a
senior Justice Department official, who spoke on the condition he not
be named, given the sensitivity of the matter.

Mr. Kohn contends
that Mr. Birkenfeld is entitled to his rewards. "If it's serious about
stopping offshore tax evasion, it will reward Mr. Birkenfeld," he said.

The I.R.S. declined to comment on Mr. Birkenfeld's case.

Even
if Mr. Birkenfeld wins his case, it is unlikely he will be able to
claim any reward until he is freed in 2013. But he could leave jail a
rich man - a prospect that troubles some officials involved in the
case.

"It creates a pretty unseemly situation," the senior Justice Department official said.

AMP Section Name:Corruption
  • 104 Globalization
  • 208 Regulation