Saturday, September 15, 2012

Whistleblowers for Swiss Banks Appear to be Live and Well (9/15/12)

In a blog entry on my Federal Tax Procedure blog, I discuss whistleblower activity with respect to both so-called fee conversions for hedge and private equity firms taxable as partnerships and also whistleblow activity for Swiss banks.  See Whistleblowers, Carried Interests, Fee Waivers and Swiss Banks (Federal Tax Procedure Blog 9/15/12), here. I thought some readers might be particularly interested in the discussion regarding the Swiss banks, so I cut and paste it here:
I should also note with regard to whistleblowers that the offshore bank activity / opportunity for whistleblowers seems to be heating up.  I previous blogged that Bradley Birkenfeld who threw the light on the Swiss bank U.S. tax evasion activities (UBS in particular) received a reward of $104 million.  See Birkenfeld Gets $104 Million Whistleblower Award (9/11/12), here. That should grab the interest of Swiss bank employees who might want to deliver up data to the IRS.  And, other European tax authorities and politicians are showing a keen interest in obtaining similar data for their taxpayers and, like the U.S., might be willing to pay handsomely for it.  See Katharina Bart, Apologetic Swiss banks sweat it out as U.S., Europe mull redress (Reuters 9/12/12), here.  This excerpt after recounting the Swiss parries and thrusts with the IRS:
The going is equally sluggish closer to home. Crisis-hit European countries in need of extra income are delaying settlement with Switzerland as a flourishing trade in leaked bank client data tilts the talks further in their favour. 
Those leaks are also complicating an agreed but as-yet unratified tax deal with Germany -- whose citizens hold an estimated 150 billion euros in Swiss accounts -- key to Switzerland's attempts to make amends in Europe. 
Prosecutors in the German state of North Rhine-Westphalia said on Thursday they had new bank data with which to pursue tax evaders, strengthening the hand of opposition politicians who say Chancellor Angela Merkel is letting tax-dodgers off too cheaply and should re-word the agreement. 
Germany has promised to stop buying data naming tax cheats when the new deal between it and Switzerland comes into force, but the latest incident suggests that may be an incentive for officials to drag their heels in ratifying the agreement. 
It also underscores the position in which Switzerland finds itself: out of negotiating room.
"All Swiss banks can do now is wait it out," said Thomas Braun, founder and partner of fund management firm Braun, von Wyss & Mueller.


  1. Jack,

    I am a
    U.S. dual citizen. I am also an IRS whistleblower who blew the whistle on an
    offshore tax scheme by an American taxpayer with a case in the IRS
    whistleblower program.

    feelings towards Birkenfeld are pretty mixed indeed. First, Birkenfeld has
    caused a lot of trouble for me personally because until recently I had no idea
    I had to file U.S. tax returns. I have now corrected that going forward and
    will hope for the best with respect to previous years.
    I have paid all taxes in France and so I would get credit so there is
    no benefit for the IRS chasing me. Also, I don't think it was right that a
    smuggler and self-confessed thief and liar should get a reward but I suppose
    the law permitted it so the IRS had no choice. Still, it sends the wrong
    message for the rest of us who have done nothing wrong except tried to help.
    And how come he jumped the award queue? We all have cases lodged since 2007,
    2008, 2009. Where are our rewards.

    second point is that despite all the "hype" by Birkenfeld's lawyers
    about offshore accounts, there is not much of that going on anymore by ordinary
    people like me and the others are above the law so who exactly are they trying
    to warn. I thought their comments at their phony press conference outrageous
    and ridiculous. What whistleblower would hire any of them--for sure they would
    use any reward to publicize their own firms? On that, Birkenfeld has pissed off
    a lot of serious people and they may have put him in danger with their
    publicity even if he agreed to it, but that is for them to work out. Again, who
    would hire those jokers?

    third point is that the IRS whistleblower office still hasn't fixed the program
    despite all the hype as no awards for non-criminal whistleblowers.
    Whistleblowers should be pestering the IRS and Sen. Grassley's office for
    action, unless the message is that non-criminal whistleblowers don't count? Any
    IRS whistleblower with something to say about this program should contact other
    whistleblowers at ""

    Thank you for giving me this opportunity to vent my
    frustrations and hopefully other whistleblowers too.

    Smith Lydgate

  2. Hi Smith Lydgate,

    Agree with many of the sentiments in your blog.

    It certainly feels like, post Bloomberg article, the IRS has dissipated much of the criticism with (1) the 20 June 2012 Deputy Commissioner Steve Miller memo, (2)Dean Zerbe's article in Forbes, and (3) the token gesture of one very big 7623(b) IRS Whistleblower award courtesy of Bradley Birkenfeld.

    Since Steve Miller's 20 June 2012 memo;

    Where is the announcement of when Steve Miller's much heralded review of the mismanaged IRS Whistleblower Program is going to be complete?

    Where is the evidence that the back log of over 3000+ whistelbower cases is being reduced \ cleared?

    Where is the evidence that the numerous 'roadblocks' put up by IRS Counsel over the last 6 years to reduce, limit and delay awards has been dismantled i.e. No awards paid on criminal fines, Title 31 FBAR's, withholding tax on awards, awards reduced to 10% if based on evidence from "judicial and administrative proceedings" etc. etc?

    Where is the evidence that the IRS is now prepared to utilize regulation 613(n) and actually properly debrief "knowledgeable insiders" on an ongoing basis with respect to documentary evidence of complex tax fraud?

    I've been registered as a 7623(b) whistleblower with the IRS Whistleblower Office for over 5 years now and as of last night they still refuse to discuss or properly debrief me about the documents I provided them!!!!

    So much for Steve Miller's and Dean Zerbe's 'Brave New World' of a pro-active IRS Whistleblower Program! The recent hype is indeed very , very different from the reality I and other IRS whistleblowers are currently experiencing.
    Any whistleblowers who want to discuss any of the above issues are welcome to contact me and other IRS Whistleblowers at


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