In: Finance
critics are concerned that even with the large qui tam award, Birkenfeld prison sentence will discourage other tax whistleblower from coming forward. Is that a valid concern? why or why not?
It is a valid concern as it would lead to many insiders not coming out and blowing whistles against bigger frauds in the industry.
To understand it better, let us understand what happened in the case and why was Birkenfeld sent to prison or rewarded qui tam.
As per the National whistleblower centre:-
"Bradley Birkenfeld is a former international banker and wealth manager with UBS. In 2012, Mr. Birkenfeld made history when he obtained the largest whistleblower reward ever given to an individual whistleblower in the twenty-five year history of federal qui tam or whistleblower reward laws, for reporting IRS Tax Fraud.
Mr. Birkenfeld was the first international banker to blow the whistle on illegal off shore accounts held in Switzerland by U.S. Citizens. His disclosures have resulted in unprecedented recoveries for the U.S. taxpayers. The recoveries include $780 million dollars in civil fines and penalties paid by UBS bank, and over $5 billion dollars in collections from U.S. taxpayers who had illegally held “undeclared” offshore accounts in Switzerland and other countries.
Ultimately, Swiss government was forced to change its tax treaty with the United States in order to turn over the names of more than 4900 American taxpayers who held illegal offshore accounts. The long-term benefits for American taxpayers by Mr. Birkenfeld’s courageous whistleblower actions will be felt for years to come. Mr. Birkenfeld’s whistleblower award for revealing the secrets of the Swiss banking system was $104 million." (Source: https://www.whistleblowers.org/members/bradley-birkenfeld/)
But then why was he sent to prison?
Well, how he ended into prison is a conflicting story, Justice officials say that Birkenfeld was not honest about his own dealings with someclients, his biggest being the billionaire Olenicoff. Even when he was talking to the feds, it is believed that, Birkenfeld kept secretly advising the real estate mogul to move his money from UBS to Liechtenstein banks. (Olenicoff eventually settled for $53 million in tax and penalties.). His lawyers do not believe this argument.
But what happened due to this?
If he had or he hasnt done any personal dealings, sending him to prison has sent a strong negative message to other whistleblowers who planned of coming forward.