Friday, January 1, 2010

Birkenfeld is Tax Analysts Person of the Year

It is common on New Year's Day to review significant events of the prior year. Today, Tax Analysts joins the crowd and names Bradley Birkenfeld its inaugural annual "Person of the Year."

Hear are some brief excerpts from the award after noting the seismic events he unleashed (notably high diplomatic drama between the U.S. and the Swiss and a big breach in Swiss secrecy dam after both sides found some common ground (or equally painful ground)):
In October 2005 Birkenfeld resigned from UBS. The specific reasons for his departure remain private. On leaving UBS, he provided senior management with written complaints that documented the private banking group's illegal practices. A subsequent internal review by UBS in 2006, predictably, found no wrongdoing.

Frustrated by the results, Birkenfeld traveled to the United States in 2007 and voluntarily registered as an IRS whistle-blower with the intention of exposing UBS's complicity with illegal tax evaders. For over a year Birkenfeld provided a treasure trove of inside information to U.S. authorities. He held frequent meetings with officials from the IRS, the Justice Department, and the SEC. The information he provided was the foundation for the UBS debacle and everything that followed. Significantly, Birkenfeld did not obtain immunity from prosecution in exchange for his disclosures.

On numerous occasions the U.S. government has acknowledged Birkenfeld's role as the source who made the UBS probe possible. A DOJ court pleading described his assistance as "timely, significant, useful, truthful, complete, and reliable." Kevin Downing, the prosecutor in charge of the UBS case, said that "without Mr. Birkenfeld walking through the doors of the Justice Department in the summer of 2007, I doubt this massive fraud scheme would have been discovered by the United States government." In short, there would have been no UBS scandal without him.

One area that Birkenfeld was apparently less than candid about was his personal actions. Those actions caused federal prosecutors to seek a warrant for his arrest. In May 2008 Birkenfeld returned to the United States from Switzerland to attend his 25-year high school reunion. He was arrested on exiting the plane at Boston's Logan Airport. He pleaded guilty to a single count of conspiracy to commit tax fraud -- the Olenicoff case -- which carried a maximum sentence of 60 months in jail. At his sentencing hearing in August 2009, U.S. prosecutors sought a reduced term of 30 months. Federal Judge William J. Zloch was unimpressed and gave Birkenfeld 40 months.

* * * *

Birkenfeld most recently made headlines for claiming a whistle-blower reward under section 7623(b) related to his UBS disclosures. Depending on whether he qualifies for the mandatory reward scheme, his claim could be enormous. By statute, the size of the reward ranges from 15 percent to 30 percent of the tax revenues collected from the whistle-blower's disclosures. When Birkenfeld leaves federal prison in 2013, he could be a billionaire -- just like the clients he previously serviced.
For parallel reasons, Tax Analysts calls last year, the year of the offshore account.

2 comments:

  1. I am so angry Birkenfeld is the only person to receive jail time - and he is the only one that didn't personally evade taxes - he just worked for a bank that told him how to handle clients. The presidents of UBS should go to prison - Birkenfeld doesn't make the rules.

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  2. I think that Birkenfeld's problem was that his "disclosure" / whistle-blowing was not complete and, in some respects, may have been affirmatively inaccurate.

    While the circumstances are different than when ordinary taxpayers disclose (whether in the OVDI or under general voluntary disclosure practice), the disclosure has to be complete and the cooperation unconditional.

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