Whistleblower Protection Blog : Whistleblower Lawyer & Attorney : National Whistleblower Legal Defense and Education Fund : Whistleblower Protection, Fraud Claims : Washington DC

The Wall Street Journal is reporting today on the hurdles that whistleblowers face when they provide tips about financial fraud to the Securities and Exchange Commission (SEC) and Commodities Futures Trading Commission (CFTC) under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Called "Whistleblower Bounties Pose Challenges," the article says that, "collecting the bounty could be a challenge." According to the article, the SEC is predicting that it will get 30,000 whistleblower tips each year, and half of them could lead to claims for rewards. The mismatch between the number of reports to process and the funding provided to investigate them could lead the SEC to ignore many valuable tips, just as it ignored the tips about Bernie Madoff's scheme.

The article notes how the IRS has had a bounty program for four years, but has yet to pay the first penny of any reward. Of the 5,678 tips the IRS received last year, 460 appear to qualify.  "It's time to start moving," Stephen Kohn, told the Journal. He is Executive Director of the National Whistleblowers Center and a lawyer representing Bradley Birkenfeld. The Journal explains the Brad Birkenfeld case as follows:

Mr. Birkenfeld tipped off the IRS about the tax fraud that led to last year's agreement by UBS to pay $780 million to the U.S. government and hand over names of suspected tax cheats. Mr. Kohn said his client deserves between 15% and 30% of the $580 million recovered by the IRS. ($200 million went to the SEC.) According to Mr. Kohn, Mr. Birkenfeld also is entitled to a percentage of the money recovered from individuals as a result of his whistleblowing, though the final tally on that amount isn't known.

Dean Zerbe is special counsel at the National Whistleblowers Center. He told the Journal that before a federal law increased the size of IRS awards, the agency got just a "handful of legitimate claims" every year. "The new scheme has already proved a huge success in terms of producing very good information." More information about the Birkenfeld case is available here.

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Attorneys for UBS whistleblower Bradley Birkenfeld have written to U.S. Attorney General Eric Holder asking that he reconsider the Justice Department's prior recommendation that Birkenfeld be sentenced to prison.  The attorneys have asked specifically that the Justice Department investigate the veracity of statements made by the lead prosecutor in Birkenfeld's case.  The letter and documents show that Birkenfeld was desperately seeking a "friendly subpoena" to protect him from prosecution by Swiss authorities.  With a subpoena, he could reveal the names of particular clients who used UBS accounts to evade US taxes. The prosecutor claimed at Birkenfeld's sentencing hearing that he delayed disclosure of the names of his clients to further their tax evasion scheme. 

Birkenfeld's new attorneys, Stephen M. Kohn and Dean Zerbe of Kohn, Kohn & Colapinto, LLP, point to specific emails in which Birkenfeld's prior attorneys begged staffers of a Senate committee to issue a subpoena so that Birkenfeld could provide more detailed disclosures about the tax evasions of specific clients.  The Senate committee did then issue the subpoena, and Birkenfeld provided the names of UBS clients evading taxes before the Justice Department issued its indictment of Birkenfeld. Kohn and Zerbe have asked Attorney General Holder to review the prosecutor's claim of non-cooperation, find that it was untrue, and vacate both the recommendation of prison and the decision to indict Birkenfeld.

You can TAKE ACTION by sending your own letter to Attornery General Holder.

"Mr. Birkenfeld's case is unique in the history of tax law prosecutions," Kohn and Zerbe's letter states. Birkenfeld exposed a massive tax evasion scheme by the world's largest bank.  He helped the U.S. recover over one billion dollars in tax revenue.  His disclosures led to the identification of over 14,000 taxpayers who had used offshore accounts to hide their assets and avoid taxes. The letter concludes:

On its face it is troubling to imprison the only person responsible for exposing these massive and systemic frauds. However, the fact that the decision to indict Mr. Birkenfeld, and seek a long prison sentence for Mr. Birkenfeld, was predicated on false, misleading, inaccurate and incomplete information is simply intolerable.

The Wall Street Journal is reporting this letter to the Attorney General today.  You can follow this link to the WSJ Law Blog entry about it.

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