The IRS has awarded $104 million to former UBS AG banker Bradley Birkenfeld for providing it with inside information about UBS’s illegal encouragement of secret offshore accounts by U.S. taxpayers. The IRS issued a statement confirming the award because Mr. Birkenfeld signed a disclosure waiver. It is the largest IRS whistleblower award ever, according to Mr. Birkenfeld’s attorneys. (“UBS Whistleblower Gets $104 Million,” by Laura Saunders, Wall Street Journal).
In 2009, UBS paid $780 million to settle criminal charges and agreed to lift the veil of Swiss bank secrecy by identifying more than 4,000 secret account holders who were U.S. taxpayers.
The $104 million payment Mr. Birkenfeld resulted from the $400 million in tax paid by UBS as part of the settlement, according to the article. Mr. Birkenfeld’s information is said to have led to the recovery of more than $5 billion in taxes, most of it paid by taxpayers pursuant to the agency’s limited amnesty program for U.S. taxpayers holding secret offshore accounts.
The award is taxable and attorney’s fees could range from 15% to 35% of the pretax award.
Mr. Birkenfeld still has several whistleblowing claims outstanding, according to the article.
The size and speed of the award have made it a “watershed event” for the IRS whistleblower program, in that taxpayers are more likely to come forward, according to one observer.
Innocence is not a requirement to collect a whistleblower award. Mr. Birkenfeld was charged with withholding information about his own role in the matter, pleaded guilty to one count of conspiracy, and served part of a 40-month sentence. In 2009, he filed a whistleblower claim for up to 30% of revenue recovered using information he provided.
The law creating the IRS Whistleblower program was sponsored by Sen. Charles Grassley (R-Iowa). Mr. Grassley then pressured the IRS to implement the program and move quickly in making large awards. “The potential for this program is tremendous, and billions of dollars in taxes owed will be collected that otherwise would not have been paid,” Mr. Grassley was quoted a saying.
An IRS spokesperson added that the agency “believes the whistleblower statute provides a valuable tool to combat tax non-compliance, and this award reflects our commitment to the law.”
Page Perry is an Atlanta-based law firm with over 170 years of collective experience maintaining integrity in the investment markets and protecting investor rights.