In the largest individual federal payout in our nation’s history, the Internal Revenue Service has awarded ex-UBS AG (UBSN) Bradley Birkenfeld $104 million for acting as a whistleblower and exposing wide scale tax evasion involving the Swiss Bank. Birkenfeld, who was released from prison last month after serving 2.5 years in prison for fraud conspiracy related to this matter, is the one who revealed to the IRS how the Swiss bank helped thousands of Americans evade paying their taxes. He reported that in handling $20 billion in undeclared assets annually, UBS made $200 million a year.
The information that he provided led to UBS paying a $780 million fine so that it wouldn’t be prosecuted over the allegations. The Swiss bank also consented to an unprecedented agreement for it to give over the names of thousands of US citizens suspected of tax evasion and admitted that it fostered tax evasion between 2000 and 2007. UBS would eventually hand over information on 4,700 of its accounts.
At least 33,000 Americans have since voluntary disclosed to the IRS that they have offshore accounts. This resulted in over $5 billion.
Birkenfeld, who is from Massachusetts, had worked in Swiss banking for 15 years. He is one of the UBS bankers who traveled the US seeking out wealthy clients. He informed the IRS that UBS trained its bankers to avoid detection by regulators. They were told to use encrypted laptop computers and make false statements claiming they were coming to the country for pleasure on travel forms. (USB has admitted that it assisted clients in avoiding US securities restrictions by having them work with outside advisors with fake companies in Panama, the British Virgin Islands, and other tax havens.)
Although Birkenfeld blew the whistle on UBS to US investigators in 2007, prosecutors went ahead and charged him with committing a crime because at first he refused to describe his own involvement in the tax evasion fraud and did not reveal that he had worked with billionaire real estate developer Igor Olenicoff, who pleaded guilty to filing a false tax return that year. Birkenfeld was indicted by a federal grand jury and arrested in 2008.
Since the UBS case, it has become harder for rich Americans to avoid the IRS by going to a Swiss bank. The federal government is currently conducting a criminal investigation on at least 11 banks. Already, reports Bloomberg.com, two dozen offshore bankers, advisers and lawyers, and 50 US taxpayers have been hit with criminal charges.
Under the IRS whistleblower program, whistleblowers that bring in information about high income tax evaders are guaranteed a reward if the company involved owes at least $2 million in unpaid interest, taxes, and penalties. “Our law firm is involved in other actions, advising and representing whistleblowers,” said Shepherd Smith Edwards and Kantas, Ltd. LLP founder and securities attorney William Shepherd. “As we all see, there can be substantial rewards for those with valuable information about law and rule breakers. These can include securities related claims as well.”
UBS Whistle-Blower Secures $104 Million Award From IRS, Bloomberg, September 11, 2012
IRS pays whistleblower $104 million, Reuters/AP, September 11, 2012
Whistleblower Gets $104 Million, The Wall Street Journal, September 11, 2012
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CFTC Director Says Corporate Compliance Employees Should Have Comprehension of Dodd-Frank Whistleblower Requirements’Anti-Retaliation Provisions, Institutional Investor Securities Blog, June 14, 2012
SEC’s Office of the Whistleblower In Early Phase of Evaluating Reward Claims, Institutional Investor Securities Blog, March 23, 2012
Plaintiff Says Morgan Stanley Fired Him for Calling out Investment Adviser Who Was Churning Accounts and Bilking Investors, Stockbroker Fraud Blog, August 7, 2012
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