First jail, then $104M for whistle-blower

WASHINGTON - In 2010, the government threw Bradley Birkenfeld in prison for helping a former client at UBS AG hide his wealth from the Internal Revenue Service. Now, as part of the same case, the IRS has awarded the former banker $104 million for helping expose the widespread tax-evasion scheme by the Swiss banking behemoth.

The dizzyingly abrupt turnabout in Birkenfeld's life leaves him with the largest government whistle-blower award ever to an individual, said Stephen M. Kohn, one of Birkenfeld's attorneys and executive director of the National Whistleblowers Center. The center is a nonpartisan group that defends employees' disclosures of wrongdoing and waste.

The size of the award, announced Tuesday by Birkenfeld's lawyers and confirmed by the IRS, reflects an investigation that resulted in UBS's being fined $780 million. It also led to an unprecedented agreement requiring UBS to give the U.S. government the names of 4,700 Americans who held secret overseas accounts and the recovery by the IRS of $5 billion in back taxes and penalties from other taxpayers with overseas accounts under agency amnesty programs, Kohn said.

More broadly, the award is a resounding signal to other financiers with information about wrongdoing that the IRS's program will treat them properly, said Kohn, who in an interview called Birkenfeld "the Babe Ruth of whistle-blowers."

"It's not about Brad," Kohn said. "It's about how other sources of information, other bankers view the U.S. whistle-blower program."

Birkenfeld has become something of a cause célèbre among whistle-blowers because of the magnitude of his case and the fact that he was jailed after cooperating with authorities. His lawyers say he discovered illegal UBS activities in 2005, and after UBS failed to change them he went to U.S. authorities with the information in 2007.

Birkenfeld, 47, served 31 months of a 40-month prison sentence after pleading guilty in 2008 to a count of conspiracy to defraud the U.S. related to his work for UBS.

The Justice Department said Birkenfeld did not reveal his own misconduct in helping a client, a charge his attorneys say is not true.

As Birkenfeld entered prison in 2010, he called his treatment an injustice, saying, "I'm a proud American who did the best I could for my country, and this is how they reward me."

Birkenfeld's time was cut short for good behavior in prison and "they did not take one minute off his sentence" for his cooperation with the IRS on the UBS case, Kohn said.

Kohn said Birkenfeld left prison in August and is now confined to a house in a New Hampshire conference center - he did not say where - and works as a groundskeeper to satisfy his release requirement for a job. He said his home confinement ends in November, when he will begin three years on parole.

"This is the day I thought would never come," said a statement issued by Douglas Birkenfeld on his brother's behalf. "This is a monumental day not only for me, but for every whistle-blower worldwide."

Bradley Birkenfeld did not appear at a Washington news conference held by his lawyers, who said their client did not have government permission to talk to reporters.

Kohn said Birkenfeld has already received his check - from which the IRS has already withheld taxes. He would not say how much was withheld.

Gordon Schnell, a New York lawyer who has handled whistle-blower work and is not involved in Birkenfeld's case, said the huge award signaled a possible turnabout by the IRS whistle-blower office, which he said has had a reputation for doing very little. The agency's latest annual report said that in 2011, its whistle-blower office received nearly 7,500 cases and had a staff of 18 people.

"It's sending out a message to whistle-blowers: 'Don't stop coming. Our doors are now open for real, and we will listen to you,' " said Schnell.