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Being a whistle-blower can get you $104 million….

September 20, 2012

I’m on the fence about the fact that the IRS has awarded a former Swiss Banker $104 million for providing information about overseas tax cheats – the largest amount ever awarded by the U.S. tax agency. Bradley Birkenfeld is credited with exposing widespread tax evasion at Swiss bank UBS. Birkenfeld served roughly 2 1/2 years in prison for a fraud conspiracy conviction related to the case, which resulted in a $780 million fine against the bank and an unprecedented agreement that required UBS to turn over to the IRS thousands of names of suspected American tax dodgers. The IRS sent 104 million messages to whistle-blowers around the world – that there is now a safe and secure way to report tax fraud and that the IRS is now paying rewards. The IRS, which doesn’t usually confirm individual award payments, said Birkenfeld signed a disclosure waiver, allowing the agency to confirm his award. Birkenfeld has become something of a cause celebre among whistle-blowers because of the magnitude of his case and the fact that he was jailed after cooperating with authorities. Federal prosecutors had said Birkenfeld withheld information about his own dealings with a former UBS client who pleaded guilty in 2007 to tax charges.

In 2006, Congress strengthened whistle-blower rewards. The law targets high-income tax dodgers, guaranteeing rewards for qualified whistle-blowers if the company in question owes at least $2 million in unpaid taxes, interest and penalties. It has been said that the IRS has been slow to pay out rewards. Apparently the potential of the program is tremendous, and it is up to the IRS to continue paying rewards and demonstrating to whistle-blowers that the process will work and that they will be heard and protected. An award of $104 million is obviously a great deal of money, but apparently the billions of dollars in taxes owed will be collected that otherwise would not have been paid as a result of the whistle-blower information.

I guess my greatest issue is what else could the government do with that $104 million dollars they gave to Birkenfeld. And what if they made a deal with Birkenfeld that we are not going to give you the $104 million but you won’t have to spend any time in jail? Seriously there seems to be some un answered questions here. Also the fact that the whistle-blower program targets the high-income tax folks means that the whistle-blowers are probably highly paid individuals that have access to the high-income tax folks…so highly paid folks that have that access are now being rewarded…seems odd. What do you think ? At Gunwel Associates we are always looking for ways to broaden our opinions, so what is yours? Let us know. Give us a call at 615-730-9444 and visit our website at www.gunwel.com. We’d love to hear from you?

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