IRS Whistle-Blower on UBS Case
February 20, 2017
With $70 billion per year in uncollected taxes at stake, the Internal Revenue Service (IRS) is cracking down on offshore tax evasion. The concentrated effort began in earnest last year after an extensive investigation into the activities of the Swiss banking giant UBS AG uncovered the largest offshore tax evasion scheme in history. The bank paid a $780 million fine in February.
The disparate handling of the bank, the whistle-blower who tipped the IRS to the massive fraud, other UBS employees and the wealthy tax evaders has raised some eyebrows. The whistle-blower, Bradley Birkenfeld, began serving a 40-month prison sentence in January after prosecutors charged him with failing to disclose the entirety of the fraud, within his knowledge. Birkenfeld’s attorney disputes that charge, saying Birkenfeld insisted that the IRS subpoena him for the information, because in the absence of a subpoena his provision of the data would violate Swiss banking laws. Birkenfeld did disclose the very information sought by the IRS to the Senate Subcommittee on Investigations and the Securities and Exchange Commission pursuant to subpoena.
What Consequences Does Birkenfeld Face?
For tipping off the government to 19,000 offshore accounts valued at $19 billion, Birkenfeld received more prison time than any other participant in the fraud. The sentences of other bank employees are considered by some to be proverbial slaps on the wrist, ranging from probation to three months of jail time. Moreover, the head of the banking division where the fraud took place wasn’t charged. And the wealthy American tax evaders? The IRS offered them a short term amnesty program, allowing persons with unreported off-shore accounts to voluntarily come forward and pay back taxes and civil penalties with no risk of prosecution. This program is now over and individuals who did not take advantage of this program may now face criminal prosecution.
So, while the IRS may give whistle-blowers who turn in tax evaders, including whistle-blowers complicit in the fraud, up to 30 percent of the revenue collected, the whistle-blower program can be high-risk. The law contains provisions protecting whistle-blowers from retaliation by their employers, but what is lacking is whistle-blower immunity to protect them from overzealous IRS agents.
Birkenfeld, meanwhile, isn’t giving up. He filed an appeal for clemency on tax day.
Speak to an experienced tax attorney for more information regarding the UBS case and any implications Bradley Birkenfeld’s sentence may have on future cases of unreported off-shore accounts or other forms of tax evasion