Tuesday, September 11, 2012

Would you spend 2 and a half years in jail to earn $104 million? The IRS hopes so

Whistle-Blower Awarded $104 Million by I.R.S.
New York Times
September 11, 2012

Sometimes, crime does pay.

Bradley Birkenfeld, a former banker at UBS, recently completed a 2.5-year prison sentence for conspiring with a wealthy California developer to evade United States income taxes.

But Mr. Birkenfeld, 47, has a lot to show for his time and effort: The Internal Revenue Service acknowledged Tuesday that information he provided was so helpful he would receive a $104 million whistle-blower award for revealing the secrets of the Swiss banking system.

Divulging the schemes that UBS used to encourage American citizens to dodge their taxes, Mr. Birkenfeld led to an investigation that has greatly diminished Switzerland’s status as a secret haven for American tax cheats and allowed the United States Treasury to recover billions in unpaid taxes.

In addition to the $780 million that the Swiss bank paid in 2008 to avoid criminal prosecution, the bank turned over account information regarding 4,700 American clients.

The unprecedented disclosure of Swiss banking information — which caused a fierce political debate in Switzerland before ultimately winning approval from the country’s parliament — set off such a panic among wealthy Americans that more than 14,000 of them joined a tax amnesty program. I.R.S. officials say the amnesty has helped them recover more than $5 billion in unpaid taxes.

Mr. Birkenfeld’s award, the largest ever paid by the I.R.S., is also a milestone for the agency’s whistle-blower program, which offers informants rewards of up to 30 percent of any fines and unpaid taxes recouped by the government. The program was revamped in 2006, offering higher rewards and more incentives for citizens to report tax dodges, in an effort to help recover more of the estimated $100 billion a year in underpaid taxes. But the program has been dogged by bureaucratic delays and institutional resistance within the I.R.S., causing some members of Congress to publicly complain that it was being undermined.

While Mr. Birkenfeld’s $104 million award is far less than the billions he sought, its sheer size — which amounts to more than $4,600 for every hour he spent in prison — could spur a surge in new whistle-blower complaints...

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