$104 Million Awarded to Whistleblower by the IRS

A recent article in Reuters reveals that the Internal Revenue Service (IRS) acknowledged that information provided by Bradley Birkenfeld was so helpful in revealing the secrets of the Swiss banking system that he would receive a $104 million whistle-blower award. Mr. Birkenfeld, a former banker at UBS, recently served two and a half year prison sentence for conspiring with a wealthy California developer to evade United States income taxes.

"Birkenfeld knew the inner workings of UBS and spilled many secrets about his former employer's dealings with U.S. clients. But he was jailed after the government said that he withheld other information and he spent 30 months in prison.

He is scheduled to be freed from home confinement in late November and he is continuing to help government tax authorities with their investigations, said his lawyers, Stephen Kohn and Dean Zerbe, who would not discuss their cut of the award.

The sum paid by the IRS to Birkenfeld is "the largest whistleblower reward issued to a single individual," Kohn said."

The IRS's Whistleblower program offers informants rewards of up to 30 percent of any fines and unpaid taxes recouped by the government. The Whistleblower program was revamped in 2006, offering higher rewards and more incentives for citizens to report tax dodgers, in an effort by the IRS to help recover more of the estimated $100 billion a year in underpaid taxes. The program, however, has unsurprisingly been plagued by bureaucratic delays and institutional resistance within the IRS. Some in Congress have openly complained that the IRS has undermined their efforts. This recent award will certainly be a shot in the arm to the program.

By divulging UBS schemes used to encourage American citizens to dodge their taxes, Mr. Birkenfeld helped the IRS downgrade Switzerland's status as a secret haven for many wealthy American and allowed the Treasury to recover billions in unpaid taxes.

In addition to paying $780 million in 2009 to avoid criminal prosecution, UBS has turned over account information regarding more than 4,500 American taxpayers.

The disclosure of Swiss banking information caused a panic among wealthy Americans that more than 14,000 of them joined a tax amnesty program. IRS officials say the Voluntary Disclosure program has helped recover more than $5 billion in unpaid taxes.

To read the Reuters article, click here.

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