The Birkenfeld Prosecution, Conviction and Sentence (11/13/17)

When I read the decision in Birkenfeld v. Olenicoff, 2017 Cal. App. Unpub. LEXIS 7675 (Cal. Ct. App. 4th Dist. Div. 3 2017), which I blogged earlier today, Birkenfeld Loses Malicious Prosecution Suit and Appeal Against His Partner in Crime, Olenicoff (Federal Tax Crimes Blog 11/13/17), here, I decided to revisit the Birkenfeld criminal conviction and sentencing saga.  Long-term readers of this blog know that Birkenfeld broke the logjam of secrecy that let to the U.S. initiative against UBS and the Swiss Banks assisting U.S. taxpayers evade U.S. tax.  He was rewarded handsomely ($104 million in whistleblower award) for the information he provided.  He was hailed as Tax Analysts Person of the Year.  See Birkenfeld is Tax Analysts Person of the Year (Federal Tax Crimes Blog 1/1/2010), here.  He also was prosecuted, convicted by plea agreement, and sentenced to 40 months. 

I wanted to look at his prosecution, conviction and sentencing to see why the person of the year was prosecuted in the first place and then sentenced to such a significant term.

I think the story is told in the transcript of the sentencing hearing, here.  I provide the key excerpts, which are lengthy, from the transcript below, but I thought I would summarize the key points.

1.  The Government -- through Kevin Downing (yes, that one) -- acknowledged that Birkenfeld was the key that gave the Government the opportunity and means to bring the Swiss banks to justice and to identify many U.S. taxpayers playing the offshore account game with Swiss banks.

2.  The Government says, however, that Birkenfeld was not truthful or forthcoming about his role with Olenicoff.  That was the reason that he was prosecuted in the first place and that the Government requested a 5K1 downward departure to 30 months.

3.  Based on that Birkenfeld's role in the Swiss bank initiative, Birkenfeld's lawyer requested a downward 5K1 departure to a probation range and sentencing to probation.

4.  The judge sentenced Birkenfeld to 40 months.  (JAT Note: I think it is somewhat unusual that the judge sentenced above the months recommended by the Government.)

5.  Booker, variance and vary are not mentioned, so the sentencing was based on the Guidelines and an appropriate 5K1 departure.

The following excerpts are the ones I think are important, although the whole transcript is available).

THE COURT: ALL RIGHT. LET ME HEAR FROM THE GOVERNMENT ON THE 5K1 MOTION AND THEN I WILL HEAR FROM THE DEFENSE, JUST ON THE MOTION, IF YOU HAVE ANYTHING ADDITIONAL TO ADD AFTER YOU HEAR FROM THE GOVERNMENT.

MR. MEIER: YES, YOUR HONOR.

MR. DOWNING: YOUR HONOR, AFTER --

THE COURT: JUST USE THAT PODIUM FOR THE COURT REPORTER.

MR. DOWNING: THANK YOU, YOUR HONOR.

AFTER MR. BIRKENFELD WAS ARRESTED AND AN UNDER SEAL INDICTMENT WAS UNSEALED, MR. BIRKENFELD IMMEDIATELY BEGAN TO COOPERATE WITH THE UNITED STATES GOVERNMENT AND PROVIDE DETAILED INFORMATION ABOUT HIS PERSONAL INVOLVEMENT WITH WHAT IS NOW KNOWN AS A MASSIVE TAX FRAUD SCHEME THAT WAS COMMITTED BY UBS'S EXECUTIVES, BANKERS, AND OTHERS AGAINST THE UNITED STATES GOVERNMENT.

PRIOR TO HIS ARREST, AND IN PARTICULAR IN THE SUMMER OF JUNE OF 2007, MR. BIRKENFELD CAME TO THE DEPARTMENT OF JUSTICE AND STARTED TO LAY OUT THE PARAMETERS OF THIS FRAUD SCHEME, GAVE SOME INFORMATION ABOUT THE INDIVIDUALS AT UBS THAT WERE INVOLVED, INCLUDING MANAGERS AND EXECUTIVES, AND TALKED IN RATHER DETAILED FASHION ABOUT THE PARAMETERS OF THE SCHEME AND HOW IT WAS CONDUCTED.

MR. BIRKENFELD AT THAT TIME ALSO PROVIDED DOCUMENTS TO THE UNITED STATES GOVERNMENT. SO IN JUNE -- AS OF JUNE OF 2007, THE UNITED STATES GOVERNMENT WAS IN A POSITION TO APPROACH UBS, TO REQUEST THAT THEY BEGIN TO PROVIDE INFORMATION TO THE UNITED STATES GOVERNMENT ABOUT THIS FRAUD SCHEME, AND THAT IN FACT DID OCCUR.

UNFORTUNATELY WHEN MR. BIRKENFELD CAME IN, IN THE SUMMER OF 2007, HE DID NOT DISCLOSE TO THE UNITED STATES GOVERNMENT HIS OWN PERSONAL INVOLVEMENT WITH THAT FRAUD SCHEME, NOR DID HE IN PARTICULAR GIVE ANY DETAILS WITH RESPECT TO WHAT IS NOW PUBLICLY KNOWN ONE OF HIS CLIENTS MR. OLENICOFF, WHO IS ONE OF THE LARGEST CLIENTS IN THIS BUSINESS AT UBS THAT WAS INVOLVED WITH THIS TAX FRAUD SCHEME.

THE COURT: JUST FOR A REFERENCE POINT, THAT IS SET FORTH IN THE PRESENTENCE REPORT WHICH IS NOT AVAILABLE, BUT WHAT DID MR. OLENICOFF END UP PAYING BY WAY OF BACK TAXES, INTEREST AND PENALTIES?

MR. DOWNING: I THINK IN TOTAL IT WAS APPROXIMATELY 53 MILLION DOLLARS, YOUR HONOR.


THE COURT: FIFTY-THREE MILLION DOLLARS AND CHANGE.

MR. DOWNING: YES. AND THERE WAS A SUBSTANTIAL PENALTY INVOLVED WITH THAT.

I WILL SAY THAT WITHOUT MR. BIRKENFELD WALKING INTO THE DOOR OF THE DEPARTMENT OF JUSTICE IN THE SUMMER OF 2007, I DOUBT AS OF TODAY THAT THIS MASSIVE FRAUD SCHEME WOULD HAVE BEEN DISCOVERED BY THE UNITED STATES GOVERNMENT.

MOREOVER, BY ALLOWING US TO BEGIN OUR INVESTIGATION BACK IN JUNE OF 2007, THAT INVESTIGATION NOW HAS RESULTED IN NOT ONLY CHANGING THE WAY IN WHICH WE OBTAIN FOREIGN EVIDENCE FROM BANKS IN SWITZERLAND, IT HAS CAUSED THE SWISS GOVERNMENT TO COME AND ENTER INTO NEW TAX TREATIES WITH THE UNITED STATES GOVERNMENT THROUGH WHICH THE UNITED STATES GOVERNMENT WILL NOW OBTAIN INFORMATION IN CIVIL TAX CASES WHICH NEVER HAPPENED BEFORE AND MORE READILY OBTAIN THEM IN CRIMINAL CASES.

THE COURT: LET ME JUST -- I'M SORRY, FINISH YOUR THOUGHT.

MR. DOWNING: I JUST WANTED TO FINISH. IT HAS NOW LED THE INVESTIGATION INTO OTHER SWISS FINANCIAL INSTITUTIONS AND FINANCIAL INSTITUTIONS IN OTHER TAX HAVENS.

AND, IF I MIGHT, YOUR HONOR, BUT FOR MR. BIRKENFELD FAILING TO DISCLOSE HIS INVOLVEMENT WITH THE FRAUD AND THE U.S. CLIENTS THAT HE AIDED AND ASSISTED IN TAX EVASION, I BELIEVE WE WELL WOULD HAVE NONPROSECUTED MR. BIRKENFELD. BUT GIVEN THE FACT THAT HE REFUSED TO PROVIDE THAT INFORMATION AND LED US DOWN A COURSE WHERE WE HAD TO START INVESTIGATE MR. BIRKENFELD AND HIS ACTIVITIES, THAT IS WHY WE ARE HERE TODAY, THAT IS WHY HE WAS INDICTED, AND THAT'S WHY HE PLED.

THE COURT: HAVE THE IDENTITIES OF OTHER U.S. CITIZENS BEEN DISCLOSED IN LIGHT OF MR. BIRKENFELD'S ASSISTANCE?

MR. DOWNING: THEY HAVE.

THE COURT: AND THOSE INVESTIGATIONS ARE ONGOING?

MR. DOWNING: CORRECT. AND IN OUR LETTER WE INDICATED CURRENTLY THERE IS APPROXIMATELY 150 UNITED STATES TAXPAYERS UNDER INVESTIGATION AS A RESULT OF THE INITIAL DISCLOSURES MADE BY MR. BIRKENFELD ABOUT THIS MASSIVE TAX FRAUD SCHEME PERPETRATED BY UBS AND OTHERS.

THE COURT: NOW, YOU SAID SOMETHING THAT HAS GREAT SIGNIFICANCE AND I JUST WANT TO MAKE SURE THAT I AM CLEAR ON YOUR STATEMENT, AND THAT IS THAT BUT FOR MR. BIRKENFELD THIS SCHEME WOULD STILL BE ONGOING?

MR. DOWNING: I HAVE NO REASON TO BELIEVE THAT WE WOULD HAVE HAD ANY OTHER MEANS TO HAVE DISCLOSED WHAT WAS GOING ON BUT FOR AN INSIDER IN THAT SCHEME PROVIDING DETAILED INFORMATION, WHICH MR. BIRKENFELD DID.

THE COURT: HOW IS IT THAT MR. BIRKENFELD CAME TO THE GOVERNMENT?

MR. DOWNING: WELL, I THINK MR. BIRKENFELD MIGHT BE IN A BETTER POSITION TO EXPLAIN THAT. I DON'T KNOW --

THE COURT: ALL RIGHT. I WILL HEAR FROM HIS LAWYER ON THAT.

MR. DOWNING: -- SPECIFICALLY ON THAT. I DO KNOW 7 WE WERE CONTACTED BY LAWYERS. I DO KNOW WHEN MR. BIRKENFELD 8 CAME IN THE DOOR HE -- HE SEEMED TO BE MOTIVATED AND -- WHICH IS A GOOD THING BY THE NEW WHISTLE BLOWER STATUTE THAT APPLIES TO TAX CASES.

* * * *

THE COURT: AGAIN, YOU KNOW THE FACTS MUCH BETTER THAN THE COURT BECAUSE YOU HAVE BEEN INVESTIGATING THE MATTER, BUT AGAIN BUT FOR MR. BIRKENFELD THIS SCHEME WOULD NOT HAVE BEEN DISCOVERED BY THE UNITED STATES GOVERNMENT.

MR. DOWNING: I BELIEVE THAT YOUR HONOR, YES.

* * * *

THE COURT: ALL RIGHT. THANK YOU, SIR.

THE COURT WILL GRANT THE GOVERNMENT'S 5K1 MOTION FOR A DOWNWARD DEPARTURE BASED ON SUBSTANTIAL ASSISTANCE PROVIDED BY THE DEFENDANT. THE COURT FINDS THAT MR. BIRKENFELD HAS RENDERED SUBSTANTIAL ASSISTANCE TO THE UNITED STATES GOVERNMENT, THE GOVERNMENT CONCEDES THAT POINT. ACCORDINGLY, THE COURT WILL CONSIDER A DEPARTURE BELOW THE ADVISORY GUIDELINE RANGE.

* * * *

MR. MEIER [BIRKENFELD'S ATTORNEY]: THANK YOU, YOUR HONOR.

THANK YOU FOR THE OPPORTUNITY AGAIN TO ADDRESS THE COURT AS TO THE EXTENT OF A POTENTIAL DOWNWARD DEPARTURE ON BEHALF OF MR. BIRKENFELD. AS I UNDERSTAND IT, YOUR HONOR, THE GOVERNMENT HAS ASKED THE COURT TO DEPART DOWNWARD SOME 50 PERCENT TO A LEVEL WHICH WOULD REQUIRE MR. BIRKENFELD TO BE IN PRISON FOR SOME 30 MONTHS.

IN THE MEMORANDUM THAT I HAVE SUBMITTED TO THE COURT TOGETHER WITH THE ATTACHED EXHIBITS, RESPECTFULLY I AM ASKING THE COURT IN RECOGNITION OF THESE UNIQUE AND EXTRAORDINARY CIRCUMSTANCES TO DEPART DOWNWARD SOME 80 PERCENT SO THAT MR. BIRKENFELD'S ADVISORY GUIDELINE RANGE FALLS WITHIN ZONE B OF THE SENTENCING GUIDELINES, AND TO THEREAFTER BASED ON THESE FACTS AND THESE CIRCUMSTANCES IN THE COURT'S DISCRETION TO FASHION WHAT I SUGGEST MOST RESPECTFULLY IS A FAIR AND A REASONABLE SENTENCE WHICH WOULD REQUIRE MR. BIRKENFELD TO BE ON PROBATION FOR A PERIOD OF FIVE YEARS AND TO SERVE AN APPROPRIATE PERIOD ASA CONDITION OF THAT IN HOME DETENTION, PERHAPS SIX MONTHS OR NINE MONTHS.

* * * *

THE COURT: THANK YOU, MR. MEIER.

MR. MEIER, I HAVE ONE QUESTION THAT I WOULD LIKE FOR, IF YOU WISH TO, TO RESPOND TO IT. AND THAT IS, THE GOVERNMENT IN ITS PRESENTATION ON THE 5K1 MOTION, IF I UNDERSTOOD THE GOVERNMENT CORRECTLY, INDICATED TO THE COURT THAT INITIALLY WHEN MR. BIRKENFELD APPROACHED THE GOVERNMENT THAT MR. BIRKENFELD DID NOT DISCLOSE HIS OWN INVOLVE IN THE MATTER. WHAT DO YOU SAY ABOUT THAT?

MR. MEIER: AGAIN, YOUR HONOR, I WAS NOT PRESENT FOR THOSE MEETINGS. THAT'S NOT THE POINT. MY UNDERSTANDING IS THAT MR. BIRKENFELD DID JUST ABOUT ALL HE COULD WITHIN THE WORLD, WITHIN THE LAW THAT HE WAS LIVING IN, IN SWITZERLAND. THAT IS, JUST LIKE UBS WAS UNABLE UP UNTIL SEVERAL DAYS AGO TO DISCLOSE THE NAMES OF ITS ACCOUNT HOLDERS, SO TOO MR. BIRKENFELD FELT WITHOUT A SUBPOENA, WITHOUT SOMETHING, AND WITHOUT THE SAFETY OF IMMUNITY THAT HE WAS UNABLE TO PROVIDE CERTAIN INFORMATION.

MY UNDERSTANDING FROM MR. BIRKENFELD, AND FROM MR. DOWNING, AND MR. NEIMAN, AND MR. BEN'ARY IS THAT IN FACT MR. BIRKENFELD WAS NOT TOTALLY FORTHCOMING SPECIFICALLY WITH RESPECT TO HIS CLIENTS.

THE COURT: YOU KNOW I AM GOING TO HEAR FROM THE GOVERNMENT ON THIS POINT.

* * * *

THE COURT: ALL RIGHT. WHAT SAY THE UNITED STATES?

MR. DOWNING: WELL, BRIEFLY, YOUR HONOR.

I THINK YOU GET A SENSE FOR THE DILEMMA THAT MR. BIRKENFELD INTENTIONALLY PUT HIMSELF IN. AS A U.S. CITIZEN HE GOES TO SWITZERLAND, HE TAKES A JOB IN A BUSINESS THAT IS CALCULATED TO HELP U.S. TAXPAYERS EVADE THE UNITED STATES INCOME TAXES, AND WHO BETTER THAN A UNITED STATES CITIZEN WORKING WITH MANY SWISS BANKERS WHO WERE NOT U.S. CITIZENS, WHO KNOW THE U.S. TAX LAWS TO KNOW BETTER THAN TO ENGAGE IN THAT CONDUCT. THAT'S NUMBER ONE.

NUMBER TWO, WHEN MR. BIRKENFELD DECIDED TO BE A WHISTLE BLOWER HE HAD TRANSFERRED ALL THE FUNDS THAT MR. OLENICOFF FROM UBS TO OTHER BANKS SO THAT HIM AND MR. STAGGL COULD CONTINUE AIDING AND ASSISTING MR. OLENICOFF COMMITTING TAX EVASION.

THE WHISTLE BLOWER LETTER APPEARS TO ME TO BE A SET UP AT THE END OF THE DAY TO FIND A WAY TO GET COMPENSATION FROM UBS AFTER HE DECIDED TO TAKE HIS SCHEME WITH MR. OLENICOFF ELSEWHERE.

FINALLY, WHEN HE CAME INTO THE UNITED STATES GOVERNMENT HE CAME IN TO BE A WHISTLE BLOWER HE WANTED TO EARN MONEY BY DISCLOSING THE WRONGDOING OF OTHERS. HE REFUSED TO DISCLOSE HIS OWN WRONGDOING. THERE IS A MAJOR PROBLEM FOR US IN INVESTIGATING A CASE AND TRYING TO USE  MR. BIRKENFELD AS A WITNESS.

THAT IS WHY THE GOVERNMENT CHARGED MR. BIRKENFELD. THAT'S WHY HE WAS INDICTED. THAT'S WHY WE ARE SEEKING JAIL TIME. WE CANNOT HAVE PEOPLE, U.S. CITIZENS, ENGAGE IN THAT KINDS OF FRAUD SCHEME COME BACK HERE AND PUT HALF THE LEG IN THE DOOR, DISCLOSE THE WRONGDOING OF OTHERS.

AS TO HIS BANK SECRECY CLAIM? WE MADE IT CLEAR TO MR. BIRKENFELD AND HIS LAWYERS THAT WE WOULD SEEK A COURT ORDER THAT WOULD GIVE HIM THE NECESSARY LEGAL COMPULSION THAT WOULD SHOW THE SWISS GOVERNMENT THAT HE WAS COMPELLED AND AS A NECESSITY HAD TO PROVIDE INFORMATION, AND THAT IS A KNOWN EXCEPTION TO SWISS BANK SECRECY DISCLOSURES. MR. BIRKENFELD KNEW THAT, HIS LAWYERS KNEW THAT.

BUT FINALLY, I MUST SAY TO YOU, MR. OLENICOFF WOULD BE IN JAIL HAD MR. BIRKENFELD COME IN, IN 2007 AND DISCLOSED THAT INFORMATION. THEY WANT TO COMPARE MR. OLENICOFF'S TREATMENT WITH MR. BIRKENFELD? WE DID NOT HAVE THE EVIDENCE THAT MR. BIRKENFELD PROVIDED AFTER MR. OLENICOFF PLED. THAT IS WHY WE ARE HERE TODAY, AND THAT IS WHY THE U.S. GOVERNMENT SEEKS JAIL TIME FOR MR. BIRKENFELD.

THAT'S ALL, YOUR HONOR.

YOUR HONOR, MIGHT I ADD ONE MORE POINT?

THE COURT: SURE.

MR. DOWNING: I WANTED TO END ON ALSO A POSITIVE NOTE.

WE DO INTEND ON CONTINUING TO UTILIZE MR. BIRKENFELD IN CONDUCTING INVESTIGATIONS AND BRINGING CASES AGAINST OTHER UBS CLIENTS AND OTHER CLIENTS OF MR. BIRKENFELD, AND WE DO ANTICIPATE THAT WE MAY BE BACK TO
6 THIS COURT.

THE COURT: FOR A MOTION FOR A REDUCTION IN SENTENCE --

MR. DOWNING: THAT'S CORRECT, YOUR HONOR.

THE COURT: -- PURSUANT TO RULE 35?

MR. DOWNING: CORRECT.

THE COURT: WELL, I APPRECIATE YOU BRINGING THAT TO THE COURT'S ATTENTION.

ALL RIGHT, MR. BIRKENFELD, IF YOU WILL STEP UP TO THE PODIUM, PLEASE.

THE COURT BEING FULLY INFORMED OF THE FACTS AND CIRCUMSTANCES SURROUNDING THE CRIME AND NO LEGAL REASON HAVING BEEN SHOWN AS TO WHY SENTENCE SHOULD NOT NOW BE IMPOSED, AFTER CONSIDERATION OF STATEMENTS BY ALL PARTIES AND A COMPLETE REVIEW OF THE ENTIRE REVISED PRESENTENCE REPORT WHICH CONTAINS THE ADVISORY GUIDELINE RANGE WHICH THIS COURT HAS CONSIDERED -- IT CONTAINS THE ADVISORY GUIDELINE COMPUTATION AND RANGE WHICH THIS COURT HAS CONSIDERED, THE COURT HAS ALSO CONSIDERED ALL OF THE STATUTORY FACTORS.

FURTHER, IT IS THE FINDING OF THE COURT THAT MR. BIRKENFELD IS ABLE TO PAY A FINE. THEREFORE, A FINE SHALL BE IMPOSED.

AS THE COURT NOTED EARLIER, THE COURT WILL DEPART BELOW THE OTHERWISE APPLICABLE ADVISORY GUIDELINE RANGE FOR THE REASONS PREVIOUSLY STATED. ACCORDINGLY, PURSUANT TO SENTENCING REFORM ACT OF 1984, IT IS THE JUDGMENT OF THE COURT AND THE SENTENCE OF THE LAW THAT BRADLEY BIRKENFELD IS HEREBY COMMITTED TO THE CUSTODY OF THE UNITED STATES BUREAU OF PRISONS TO BE IMPRISONED FOR A TERM OF 40 MONTHS AS TO THE ONE COUNT INDICTMENT.

* * * *

THE SENTENCE DEPARTS FROM THE OTHERWISE ADVISORY GUIDELINE RANGE, AND THAT DEPARTURE IS BASED ON THE GOVERNMENT'S 5K1 MOTION WHICH THE COURT GRANTED FOR THE REASONS PREVIOUSLY STATED.