Fraud up; SEC enforcement up; need for whistleblowers up

Posted on February 14, 2010 by Richard Renner

The LA Times reported last week on a series of trends in securities fraud. The $65 billion lost in the Madoff scandal highlights the huge losses millions of investors suffer as a result of corporate fraud.  Meanwhile, the new enforcement chief at the Securities and Exchange Commission (SEC) reports a dramatic rise in enforcement actions. The numbers of formal investigations and restraining orders have approximately doubled.  The total sum of restitution orders has more than doubled.

After serving his first year as the SEC's enforcement director, Robert Khuzami is now calling for improving the protections for whistleblowers, and even rewarding them for turning in their bosses or co-conspirators.  Khuzami proposes "cooperation agreements" that could assure whistleblowers that they will receive leniency or exemption from SEC enforcement action, or legal assistance in the event of prosecution. Khuzami is also calling for changes in the law to protect whistleblowers and even to reward them financially. "Whistle-blower laws provide a powerful incentive for people to come forward," Stephen M. Kohn told LA Times reporter Kathy M. Kristof.  Kohn is Executive Director of the National Whistleblowers Center. Kohn adds,  "The U.S. government has collected billions and billions of dollars as the result of the False Claims Act." Khuzami's call for a whistleblower reward recognizes what works.  The reward provided by the False Claims Act (FCA) has recovered billions of dollars for U.S. taxpayers.

Kristof's article notes that the success of Khuzami's new proposal may hinge on what happens to the world's most famous corporate and tax fraud whistleblower, Bradley Birkenfeld.

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While The Whistleblower Sits in Prison, More People May Walk Away

Posted on February 5, 2010 by Lindsey Williams

On January 28, 2010, the Washington Post announced that the Swiss government has suspended the disclosure of information about tax cheats to the United States under a February 2009 “deferred prosecution” agreement and may seek to renegotiate the deal.  Under the agreement the Swiss government was supposed to provide the U.S. with 4,450 accounts of the 52,000 secret accounts not declared to the IRS.

Basically, this means that 14,700 people walked away without prosecution under the IRS amnesty program, the head of entire illegal UBS program Martin Liechti was allowed to return to Switzerland without prosecution, the 4,450 tax cheats are likely to escape prosecution, and Bradley Birkenfeld (the person responsible for blowing the whistle and ending the illegal UBS program) is still the only banker sitting in prison.

When will the U.S. government wake up?  Bradley Birkenfeld’s prison sentence is not only unjust in terms of how they treated every other person associated with the UBS scandal, it is permanently harming national and international efforts to fight corruption.  Once again, what whistleblower is going to want to come forward after seeing how Mr. Birkenfeld was treated?

Please TAKE ACTION to stop this injustice now!

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Groups ask President Obama to pardon Birkenfeld

Posted on January 15, 2010 by Richard Renner

Leading national and international anti-corruption groups have joined the National Whistleblowers Center (NWC) in a clemency campaign on behalf of UBS whistleblower Bradley Birkenfeld. In an open letter President Barack Obama, the groups request a presidential pardon for Mr. Birkenfeld, or commutation of his prison sentence to time served to “reverse the devastating impact Mr. Birkenfeld’s case will have on international law enforcement efforts.“

The National Whistleblowers Center, with support from public interest groups, is urging people to personally endorse the clemency campaign for Mr. Birkenfeld through their TAKE ACTION program.

Mr. Birkenfeld blew the whistle on UBS bank in Switzerland, exposing a $20 billion tax scheme involving illegal, offshore bank accounts. Despite the government's acknowledgement that the multi-billion dollar UBS tax fraud scheme would have continued undetected without Mr. Birkenfeld's voluntary disclosure, Mr. Birkenfeld commenced serving a 3-year, 4-month prison sentence on January 8, 2010.

The letter states points out that “in return for his extraordinary cooperation with the U.S. government, Mr. Birkenfeld remains the only banker involved the in the largest illegal tax scheme in history to receive a prison sentence,” and advises that “great importance must be placed on the public policy implications of Mr. Birkenfeld’s case, international bankers must be able to come forward to report illegal practices like those exposed by Mr. Birkenfeld.“

Lindsey M. Williams, Director of Advocacy and Development, National Whistleblowers Center, said, “Sadly, saving the American taxpayers billions of dollars was not enough to save Mr. Birkenfeld’s freedom. A presidential pardon is the only way to correct this injustice.”

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Birkenfeld tells WSJ about high level cover-up

Posted on January 13, 2010 by Richard Renner

UBS whistleblower Bradley Birkenfeld told a Wall Street Journal reporter that the government's decision to send him to jail arises from “a cover-up at the highest levels.” Brikenfeld noted how the UBS clients who actually cheated on their taxes got either house arrest or probation, but the messenger who brought the key information to the US government is now in jail.

The WSJ's Thomas Coyle reports that,

Whatever his culpability, Birkenfeld helped set in motion a chain of events that included UBS agreeing to pay a large fine to the U.S. for its role in helping an initial list of several hundred Americans hide money in Swiss accounts, Switzerland changing its laws to allow banks to share the names of several thousand U.S.-based Swiss account holders, and thousands of Swiss-account holders coming forward under the terms of a voluntary disclosure program.

Birkenfeld disclosed that among his clients who used UBS to evade taxes are a wealthy US politician and a Hollywood movie star. Follow this link to TAKE ACTION TO SUPPORT BRAD BIRKENFELD.

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IRS Commission: UBS program brought in "billions"

Posted on January 11, 2010 by Richard Renner

Speaking on the Diane Rehm Show today, IRS Commissioner Doug Shulman said that the agency's amnesty program for US citizens who hid their assets in off-shore accounts brought in "billions" of dollars. That program, of course, was prompted by the disclosures of former UBS employee Bradley Birkenfeld. Over 15,000 taxpayers came forward because they faced criminal prosecution once UBS was forced into turning over its records revealing the huge scheme to help Americans evade their taxes. Audio of the interview is available here. Although Commissioner Shulman addresses the UBS scandal earlier in the show, his comment about the huge recovery is in the last ten minutes of the hour-long interview.

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As Birkenfeld reports to jail, Swiss court toughens bank secrecy

Posted on January 11, 2010 by Richard Renner

On the same day that UBS tax whistleblower Bradley Birkenfeld had to report to federal prison, a Swiss court issued an order saying that FINMA, a Swiss regulatory agency, erred in ordering UBS to turn over information about 300 clients. The court concluded, according to Reuters, that FINMA's unilateral action weakened Switzerland's strict bank secrecy rules. The report notes that the investigations into Switzerland's biggest bank had prompted clients to withdraw huge sums.

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Birkenfeld enters jail after initiating disclosure of UBS tax fraud scheme

Posted on January 8, 2010 by Richard Renner
At 2 pm today UBS whistleblower Bradley Birkenfeld surrendered to U.S. authorities and commenced serving a three-year and four-month sentence at the Schuylkill County Federal Correctional Institution in Minersville, Pennsylvania.

Stephen M. Kohn, the Executive Director of the National Whistleblower Center and one of Mr. Birkenfeld's attorneys issued the following statement:

"An American tragedy.  A disgraceful miscarriage of justice. An insult to every honest American who must work hard and pay their taxes.  The imprisonment of Bradley Birkenfeld, the most important tax whistleblower in history, is shocking and unjustified. This decision is not only grossly unfair and personally harmful to Mr. Birkenfeld, it will also have a radical chilling effect on the willingness of other bankers to step forward and expose fraud. This is devastating to any efforts to expose the use of illegal offshore bank accounts by criminals who want to avoid taxes."  

"After a careful investigation, we have now demonstrated that the justifications provided by the Justice Department for this unprecedented act of retaliation against a whistleblower were not true.  Justice Department lawyers misled the public and a court in justifying their reasons for indicting Mr. Birkenfeld and asking the Court to sentence him to a long prison term."

The National Whistleblower Center, through its TAKE ACTION advocacy program, is urging people to contact the Attorney General and request that the Birkenfeld case be reviewed and the decision to imprison him be reconsidered.
 

 


"Mr. Birkenfeld's 40-month sentence is a direct result of blowing the whistle on one of the largest tax fraud schemes in U.S. history, which has resulted in UBS bank paying a $780 million penalty to the United States, and over 14,000 "taxpayers" voluntarily disclosing their illegal offshore accounts. Mr. Birkenfeld's disclosures have resulted in a multi-billion dollar net-gain to American taxpayers, and have forced UBS bank to shut down a massive illegal offshore banking practice.  He is a hero, not a criminal.  He did the right thing in voluntarily stepping forward and exposing these massive frauds.  He deserves our thanks and praise, not the terrible fate that awaits him in prison."

"We are asking every person who wants to stop illegal offshore banking that results in over $100 billion in tax losses per/year to the United States to TAKE ACTION and write to the Attorney General, asking that the Justice Department's decision to imprison Mr. Birkenfeld be reconsidered."

Dean Zerbe, co-counsel  for Mr. Birkenfeld, stated:  "This is a sad day for Brad and his family.   A tragedy for the honest American taxpayers who will shoulder higher taxes because a generation of tax whistleblowers will be discouraged from coming forward."

This miscarriage of justice will have the perverse effect of silencing whistleblowers who want to report tax fraud. In our entire history tracking whistleblower cases, this is the most abhorrent action ever taken against a whistleblower.  Mr. Birkenfeld deserves to be commended for protecting the American people and yet he faces the loss of his liberty.
 
The facts of the case are clear:
  • Mr. Birkenfeld repeatedly tried to correct the illegal UBS tax fraud scheme internally.
  • Mr. Birkenfeld resigned from UBS when they failed to correct the problem internally.
  • Mr. Birkenfeld voluntarily approached the U.S. government with his allegations.
  • Mr. Birkenfeld made full disclosures to the Department of Justice, Internal Revenue Service, Securities and Exchange Commission, and the Senate Permanent Subcommittee on Investigations.
  • Every UBS tax cheat that has been prosecuted has received probation, fines, and/or community service - NO jail time.
  • Mr. Birkenfeld is the ONLY person connected with UBS to receive a prison sentence.

Tax Notes has named Mr. Birkenfeld as their inaugural "Person of the Year" and the New York Daily News has asserted that Mr. Birkenfeld should be given a "statue on Wall Street, not a prison sentence." With articles like these and stories on 60 Minutes, Democracy Now and Fox Business News, the public has begun to understand why Mr. Birkenfeld's sentence is not only unjust - it is dangerous to American taxpayers and the worldwide efforts to stop corruption.  

Now that the Government has decided to incarcerate Mr. Birkenfeld, the Justice Department might as well tell every American to open up a Swiss Bank Account and avoid paying taxes.  What whistleblower will come forward after seeing Bradley Birkenfeld sent to prison?
 

We need your help NOW! Please send a letter to Attorney General Holder and President Obama demanding that corrective action be taken immediately.  Then forward this action alert to as many people as possible and post it to your facebook, twitter, and other social networking sites. Together we can make it clear that this is unacceptable!

If you are outside of the United States please click here to Take Action.
 

 
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Stephen Kohn appears on Democracy Now about Birkenfeld case

Posted on January 7, 2010 by Richard Renner

Attorney Stephen Kohn, Executive Director of the National Whistleblowers Center, and an attorney for UBS whistleblower Brad Birkenfeld, appeared on Democracy Now this morning.

TAKE ACTION by sending a letter to Attorney General Holder

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60 Minutes featured Birkenfeld case

Posted on January 4, 2010 by Richard Renner

The CBS news magazine 60 Minutes featured a story about UBS whistleblower Bradley Birkenfeld this Sunday. In the story, Birkenfeld says he is the first Swiss banker ever to speak publicly about the famously secretive industry. He provided inside information that helped uncover thousands of untaxed Swiss accounts at his former employer, UBS. The accounts were owned by Americans and, so far, not one of their owners has gone to jail. But Birkenfeld is scheduled to enter a federal prison on January 8 for a 40-month term that he thinks he doesn't deserve. The interview was broadcast Sunday, Jan. 3, at 7 p.m. ET/PT. Video of the story is now available from CBS.


Watch CBS News Videos Online

"I gave them the biggest tax fraud case in the world. I exposed 19,000 international criminals. And I'm going to jail for that?" asks Birkenfeld. When reminded by Kroft that he was an enabler for clients who broke the law, he responds, "And I am the only one going to prison. Out of 19,000 accounts and no Swiss bankers."

According to Thomas Perrelli, the associate attorney general of the United States, Birkenfeld's information helped his office get "the accounts that are the core of the fraud." The information led to UBS making a settlement with the U.S. government that included a fine of $780 million. But because Birkenfeld was not initially forthcoming about his largest American client, he was prosecuted. "If he had come forward and told us everything that he knew…in the summer of 2007, we think it's likely he wouldn't have been prosecuted," says Perrelli.

Six Americans who had off-shore accounts at UBS have pled guilty but not gotten prison time. Raoul Weil, the UBS official once in charge of its Wealth Management operations, has been indicted but is a fugitive from justice in Switzerland. Martin Liechti, a Swiss citizen who was UBS' top private banker, was detained in Miami for four months on a material witness warrant, but allowed to leave the country in August. He was never charged in the U.S.

In his interview with Kroft, Birkenfeld also reveals little-known aspects of being a Swiss banker, including what kinds of services he provided clients, such as acting as a personal shopper "on a concierge level." Buying valuables is one way of hiding and moving assets, but Birkenfeld says it was just servicing clients the Swiss banking way. "People would ask you to make purchases for them, possibly maybe a car or a chalet - possibly -- a nice watch. So you would also cater to the client in that regard and then deliver it to them upon their choosing,” he tells Kroft. "It could be in their hotel room. It could be in…another country."

In one case, he purchased diamonds for a U.S. client and brought them into the country concealed in a toothpaste tube. Birkenfeld says the stones were not worth more than $10,000 and did not need to be declared, so no laws were broken. Then Kroft asks, "If it was legal why did you put them in a toothpaste tube? I'm having trouble with that." Birkenfeld replies, "Oh, it was just a way of carrying them so I wouldn't lose them."
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UBS Tax Fraud Whistleblower Person of the Year Honor

Posted on January 3, 2010 by Lindsey Williams

Bradley Birkenfeld, the former international banker who blew whistle on the largest tax fraud in U.S. history just received the honor of being named Tax Analysts inaugural annual "Person of the Year." The award recognized Mr. Birkenfeld's contribution in exposing UBS bank's tax fraud scheme and helping the federal government recover over 1 billion dollars in lost tax revenue for U.S. taxpayers. Despite the government's recognition that they would not have discovered the UBS tax scandal without Mr. Birkenfeld, he is scheduled to report to jail on January 8, 2010.  You can do your part to help whistleblowers who are trying to protect our tax dollars by taking action and sending a letter to Attorney General Holder to immediately review Mr. Birkenfeld's sentence.

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