What would it take for you to turn in your clients? Would 30% of the take do it? What if it meant jail time?
These are all things that Bradley Birkenfeld must have considered before approaching the IRS two years ago to turn in tax cheats at UBS. And he did it anyway.
Now, Birkenfeld isn’t quite so thrilled with the consequences. Over the weekend, he filed a motion to push back his prison start date (currently January 8) and reduce his sentence (currently 40 months in prison and a $30,000 fine).
Brace yourself: I think he might get something here. The government had initially recommended a lighter sentence based on the amount of cooperation that Birkenfeld offered in the government’s investigation. Birkenfeld further indicated that he would continue to cooperate with the government if they give him a little bit more time outside of prison. I’m not sure how much information he still has to disclose but, depending, that could be appealing to the feds.
But that’s probably where any sympathy from the feds ends. When Birkenfeld initially approached the IRS with information about the activities at UBS, he said he could not disclose the identities of his own clients without violating Swiss law. The feds claim that they later learned the identities of some of those clients without him and that Birkenfeld merely assisted them after the fact. Birkenfeld says that he disclosed some names, including that of his biggest client, Igor Olenicoff, before being charged.
The timing here matters. Under the whistleblower program, a tax whistleblower can receive of between 15% and 30% of the amount the IRS collects as a result of their information if the information provided is substantial. The IRS collected $780 million in penalty from UBS and $53 million from Olenicoff. If Birkenfeld is able to collect a percentage of any of that, it might make his sentence a little more palatable – something I’m sure that he considered before cooperating.
But the government sees it differently. They claim that Birkenfeld did not initially name names – and have gone so far to say that if he had, they would have recommended no jail time at all. They also point to Birkenfeld’s own bad acts: he was reportedly assisting Olenicoff as late as May 2008.
Birkenfeld pleaded guilty to tax conspiracy a month later. He was arrested at the airport on the way to his high school reunion. (Imagine that awkward conversation: So, where’s Bradley, guys?)
Whistleblower groups are urging the government to tread lightly. They claim that meting out harsh sentences for those who cooperate with investigations might lead to fewer folks willing to help out. The opposition claims that you can’t reward bad behavior because it might encourage others to do the wrong thing initially and then hold out hope that it will all be worth it later.
What do you think? Should whistleblowers do time – or should they be exempt? And should whistleblowers with so-called “dirty hands” be allowed to collect money for turning in tax evaders?
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