The Internal Revenue Service (IRS) awarded a record $104 million to a whistleblower for his role in helping to expose an enormous tax fraud scheme orchestrated by Swiss banking giant UBS AG. The award, the largest ever paid by the federal government to an individual whistleblower, was given to Bradley Birkenfield, a UBS AG banker who was also thrown in prison to serve a 40-month sentence as part of the same case.
The IRS confirmed last week that Mr. Birkenfield will receive the record award for his part in a federal investigation that resulted in UBS being fined $780 million for helping thousands of individuals evade their tax obligations. The case also led to an agreement with UBS to release the names of nearly 5,000 Americans who stash their fortunes in secret overseas accounts and the recovery of $5 billion in back taxes and penalties.
Just as significantly, the award sends a strong message to other financiers who may know about wrongdoing within their companies, an attorney for Mr. Birkenfeld told the Associated Press. Employees who share information with federal investigators about fraud and other wrongdoing in their companies can receive a percentage of funds recovered in a successfully persecuted case under provisions in U.S. whistleblower laws.
However, U.S. authorities didn’t view Mr. Birkenfeld, described as the “Babe Ruth of whistleblowers” by one if his lawyers, as an objective observer after he approached them with information about UBS’ illegal activities. Although a potential award awaited him for his instrumental role in exposing the fraud, Mr. Birkenfeld landed in prison for not revealing his own misconduct in helping a UBS client, according to government authorities. Mr. Birkenfeld served 31 months of a 40-month prison sentence after pleading guilty to one count of conspiracy to defraud the U.S.
According to the Associated Press, Mr. Birkenfeld’s prison time was cut short for good behavior. He left prison in August and continues to serve out his sentence as a groundskeeper at a New Hampshire conference center until November. After that, he will start three years of parole. Mr. Birkenfeld’s lawyers told the AP that their client has already received his check minus federal tax withholdings.
One New York based whistleblower attorney told the AP that Mr. Birkenfeld’s case could be viewed as a significant turnabout for the IRS whistleblower office, which receives about 7,500 cases annually but maintains a staff of just 18 employees.
“It’s sending out a message to whistleblowers,” he told the AP. “Don’t stop coming. Our doors are now open for real and we will listen to you.”