Brad Birkenfeld

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Bradley Birkenfeld[1][2] (born February 26, 1965) is an American banker and whistleblower whose disclosures to the IRS led to a massive fraud investigation. In 2007, he gave information to the United States Department of Justice that resulted in $780 million in fines levied against UBS. In 2008, Birkenfeld pleaded guilty to conspiracy to defraud the United States and was sentenced in 2009 to 40 months in prison.[3] Many advocacy groups from around the world criticized Birkenfeld's prosecution and sentence. Birkenfeld was released from prison to a halfway house in New Hampshire in August 2012 and is scheduled to be fully released and put on probation on November 29, 2012.[4] Meanwhile in early September 2012 the IRS paid Birkenfeld a $104 million award for acting as a corporate whistleblower.[4]

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Early life and education [edit]

Birkenfeld was born on February 26, 1965, in Brookline, Massachusetts, a suburb of Boston.[5][6][7] His father was a neurosurgeon. Birkenfeld graduated from Norwich University in Vermont in 1988.[5] He obtained a master's degree at the American Graduate School of Business in Switzerland.[5]

Banking career [edit]

Birkenfeld began working at Credit Suisse in 1996, followed by Barclay's Bank in 1998.[5]

In October 2001, Birkenfeld began working at UBS in Geneva, Switzerland as a private banker.[7] His principal job responsibility was to solicit wealthy Americans to invest in the bank and thus avoid paying U.S. taxes. Although UBS was not permitted to give investment advice in the U.S., the bank instructed Birkenfeld and other similar employees to lie about the purpose of their trips to the U.S. Birkenfeld advised American clients how to avoid IRS scrutiny, including placing cash and jewels in Swiss safe deposit boxes. One of Birkenfeld's wealthiest clients was a California real estate developer, Igor Olenicoff. In 2001, Olenicoff and Birkenfeld met in Geneva, the result of which was a transfer of $200 million to UBS accessible by credit cards supplied by Birkenfeld.[7]

UBS's practices [edit]

According to Birkenfeld, in 2005, he learned that UBS's dealings with American clients violated an agreement between the bank and the IRS.[7] He resigned from UBS in October 2005 and complained to UBS compliance about the bank's "unfair and deceptive business practices". According to Birkenfeld, when he received no response, three months later he wrote to Peter Kurer, then General Counsel for UBS, about the illegal practices.[8] In 2009, based on an investigation begun in March 2006, the United States Department of Justice (DOJ) found that UBS's internal probe into Birkenfeld's allegations "did not examine or follow up on available evidence of private banker communications with U.S. clients".[8]

In February 2009, UBS paid $780 million to resolve a criminal tax avoidance investigation. It also admitted to assisting 17,000 clients evade their taxes through the use of offshore accounts between 2000 and 2007. In July 2009, to avoid additional fines, UBS agreed to provide the names of 5,000 Americans who had offshore accounts with UBS.[9]

Whistleblowing and arrest [edit]

In 2007, Birkenfeld decided to tell the DOJ what he knew about UBS's practices. At the same time, he wanted to take advantage of a new federal whistleblower law that could pay him up to 30% of any tax revenue recouped by the IRS as a result of Birkenfeld's information. Birkenfeld also wanted immunity from prosecution for his part in UBS's transactions.[6] In April 2007, Birkenfeld's counsel sent the DOJ a summary of the Birkenfeld's information. The DOJ responded that it was not part of the IRS's whistleblower program and that it would not grant Birkenfeld immunity.[6] Nonetheless, Birkenfeld met with the DOJ. When communications between Birkenfeld and the DOJ stalled, Birkenfeld contacted the Securities and Exchange Commission, the IRS, and the U.S. Senate.[6] In April 2008, Birkenfeld's lawyers told the DOJ that he would assist the DOJ in return for immunity. One or two months later, Birkenfeld was arrested.[6][10] The DOJ's top tax lawyer said, "With regard to whistleblowers: those who seek to be treated as true whistleblowers need to know they must come in early and give complete and truthful disclosures.... Mr. Birkenfeld did not come in and give complete and truthful disclosures. Therefore, he is not entitled to whistleblower status."[10]

In September 2012, the IRS Whistleblower Office awarded Birkenfeld $104 million as a whistleblower.[11][1][12] This award is one of the largest individual whistleblower payouts in history.[13] Birkenfeld received the award under the IRS whistleblower program, which gives informants a percentage of money the U.S. government recovers after fraud is found.[14] The IRS explained its decision by citing Birkenfeld’s “exceptional cooperation” and the “breadth and depth” of the information he provided, all of which led to “unprecedented actions” against UBS.[15] The IRS used the information to negotiate a $780 million settlement with UBS in 2009. Under that deal, UBS admitted to helping U.S. clients cheat on their taxes. The bank later turned over the names of nearly 5,000 U.S. clients suspected of tax evasion.[16] IRS amnesty programs have since collected $5 billion from people who participated in UBS’s illegal scheme based on the information provided by Birkenfeld.[15]

Birkenfeld's plea and sentencing [edit]

On June 19, 2008, Birkenfeld pleaded guilty to a single count of conspiracy to defraud the United States. On August 21, 2009, although the prosecution recommended 30 months, Birkenfeld was sentenced by U.S. District Judge William Zloch[17] to 40 months in prison.[18] He began serving his sentence on January 8, 2010.[10][19] His projected release date is November 29, 2012.[5][20]

Birkenfield did not appeal the conviction.[5] On April 15, 2010, his attorneys filed a Petition for Commutation of Sentence.[5][21] According to Reuters, Birkenfeld was released from prison in August 2012;[11] however, the Bureau of Prisons website still shows him as incarcerated in Pennsylvania with a release date of November 29, 2012.[20]

Criticism of prosecution [edit]

At a sentencing hearing, the prosecutor stated that the U.S. could not have pieced together UBS's "massive fraud scheme" without Birkenfeld's assistance.[22][23]

Various advocacy organizations from around the world requested that Attorney General Eric Holder review Birkenfeld's case. A letter from the National Whistleblowers Center said that the "destructive impact of Mr. Birkenfeld’s sentencing will radically undermine the ability of law enforcement to detect, prosecute and prevent illegal off-shore banking practices".[24]

On January 5, 2010, Birkenfeld asked Holder to investigate prosecutorial misconduct, claiming that DOJ officials had made misleading statements to the judge.[22][25]

References [edit]

  1. ^ a b Coder, Jeremiah (September 2012). "IRS PAYS BIRKENFELD $ 104 MILLION WHISTLEBLOWER AWARD. (Section 7623 -- Expenses of Detecting Frauds)". Tax Notes Today. 2012 TNT 177-1 (177). 
  2. ^ Sheppard, Lee A. (September 12, 2012). "NEWS ANALYSIS: SWISS BANKING DEROBED: INTERNATIONAL IMPLICATIONS OF BIRKENFELD". Tax Notes Today (in English). 2012 TNT 177-2 (2012 TNT 177-2).  More than one of |author= and |last= specified (help)
  3. ^ Sheppard, Lee A. (September 12, 2012). "NEWS ANALYSIS: SWISS BANKING DEROBED: INTERNATIONAL IMPLICATIONS OF BIRKENFELD". Tax Notes Today (in English). 2012 TNT 177-2 (2012 TNT 177-2).  More than one of |author= and |last= specified (help)
  4. ^ a b Laura Saunders and Robin Sidel (September 11, 2012). "Whistleblower Gets $104 Million". The Wall Street Journal. 
  5. ^ a b c d e f g "Petition for Commutation of Sentence" (PDF). Whistleblowers.org. April 15, 2012. 
  6. ^ a b c d e Hilzenrath, David S. (May 16, 2010). "Swiss Banker Turned Whistleblower Ended Up With a Prison Sentence". The Washington Post. Retrieved July 6, 2012. 
  7. ^ a b c d Pfeifer, Stuart (October 26, 2009). "He put a dent in tax evasion". The Los Angeles Times. Retrieved July 6, 2012. 
  8. ^ a b Roland, Neil (March 3, 2009). "Justice Dept. chastises UBS chairman over IRS fraud probe". Investment News. Retrieved July 7, 2012. 
  9. ^ Quinn, James (August 3, 2009). "UBS strikes deal with US over tax". The Telegraph. Retrieved July 7, 2012. 
  10. ^ a b c Stier, Ken (October 6, 2009). "Why is the UBS Whistle-Blower Headed to Prison?". Time Magazine. Retrieved July 7, 2012. 
  11. ^ a b "U.S. IRS awards $104 million to UBS tax case whistleblower". Reuters. September 11th, 2012. Retrieved September 11th, 2012. 
  12. ^ Sheppard, Lee A. (September 12, 2012). "NEWS ANALYSIS: SWISS BANKING DEROBED: INTERNATIONAL IMPLICATIONS OF BIRKENFELD". Tax Notes Today (in English). 2012 TNT 177-2 (2012 TNT 177-2).  More than one of |author= and |last= specified (help)
  13. ^ Triedman, Julie (November 28, 2012). "Long Delay for $104M IRS Whistleblower Payment". The American Lawyer. Retrieved 1 February 2013. 
  14. ^ Ramonas, Andrew (September 11). "Swiss Bank Whistleblower Wins $104M Reward from IRS". The Blog of the Legal Times. Retrieved 1 February 2013. 
  15. ^ a b ElBoghdady, Dina (September 11, 2012). "UBS whistleblower gets $104M from IRS for helping in Swiss bank probe". The Washington Post. Retrieved 1 February 2013. 
  16. ^ Browning, Lynnley (June 17, 2010). "Swiss Approve Deal for UBS to Reveal U.S. Clients Suspected of Tax Evasion". The New York Times. Retrieved 1 February 2013. 
  17. ^ "UBS whistle-blower gets 40 month-sentence", UPI, Aug. 21, 2009. "The judge socked it to Birkenfeld ....". Retrieved 2012-09-12.
  18. ^ Sheppard, Lee A. (September 12, 2012). "NEWS ANALYSIS: SWISS BANKING DEROBED: INTERNATIONAL IMPLICATIONS OF BIRKENFELD". Tax Notes Today (in English). 2012 TNT 177-2 (2012 TNT 177-2).  More than one of |author= and |last= specified (help)
  19. ^ Silverstein, Ken (August 24, 2009). "The White House and the Justice Department: Different approaches to UBS". Harper's Magazine. Retrieved July 7, 2012. 
  20. ^ a b "Inmate Locator". Bureau of Prisons. Retrieved July 7, 2012. 
  21. ^ "Former Banker for UBS Seeks Shorter Sentence". The New York Times. April 15, 2010. Retrieved July 7, 2012. 
  22. ^ a b Voreacos, David (January 6, 2010). "Ex-UBS Banker, Informant Birkenfeld Seeks Probe of Prosecutors". Bloomberg. Retrieved July 7, 2012. 
  23. ^ Sheppard, Lee A. (September 12, 2012). "NEWS ANALYSIS: SWISS BANKING DEROBED: INTERNATIONAL IMPLICATIONS OF BIRKENFELD". Tax Notes Today (in English). 2012 TNT 177-2 (2012 TNT 177-2).  More than one of |author= and |last= specified (help)
  24. ^ "International and National Advocacy Organizations Urge Attorney General Holder to Investigate Birkenfeld Case". WebWire. November 25, 2009. Retrieved July 7, 2012. 
  25. ^ Browning, Lynnley (January 5, 2010). "Ex-UBS Banker Asks Review of the Handling of His Case". The New York Times. Retrieved July 7, 2012. 

External links [edit]

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