April 15 Plea: Pardon Tax Whistleblower

Published on April 05, 2010

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April 15 Plea: Pardon Tax Whistleblower

(Forbes) Here’s one way President Obama can make April 15 less taxing in the future: Issue a pardon now to former UBS AG banker Bradley Birkenfeld, the most important tax whistleblower in the history of the nation. Mr. Birkenfeld, whom we represent, is the American who blew the whistle on the Swiss bank’s practice of helping thousands of Americans illegally hide money offshore.

At his sentencing, a prosecutor from the U.S. Department of Justice (DOJ) acknowledged that “but for” Mr. Birkenfeld “walking into the door … in the summer of 2007” the “massive fraud scheme” perpetuated against American taxpayers by UBS would not “have been discovered.” The result so far: UBS has agreed to pay $780 million in fines and restitution to the U.S. and turn over the names of thousands of “taxpayers” who secretly and illegally hid their wealth offshore. Moreover, capitalizing on the fears of public exposure triggered by Birkenfeld’s disclosures, the IRS last year offered a limited amnesty for Americans ready to fess up to their previously undisclosed offshore accounts. That amnesty drew thousands of disclosures and is producing billions of dollars in tax recoveries and leads about other banks that have enabled offshore tax evasion.

What was Mr. Birkenfeld’s reward for doing the right thing? He lost his career and his freedom. On Jan. 8, 2010, he began serving a 40-month prison sentence. His sentence is the most severe sentence received by a UBS banker or client to date. In fact, Mr. Birkenfeld has already served more time in prison than any other person connected with the UBS scandal. As a case in point, the architect of the entire illegal program, Martin Liechti, was allowed to return to Switzerland without prosecution. Not only did the DOJ fail to put the real “bad guys” in prison, they ignored the information Mr. Birkenfeld provided on how to get the names of all the illegal account holders–not just those who volunteered to come forward.

The DOJ’s stated reason for prosecuting Mr. Birkenfeld–that he wasn’t forthcoming about his role in assisting billionaire real estate developer Igor Olenicoff hide a quarter-billion dollars offshore–is false.

However, the issue for taxpayers should be that in prosecuting Mr. Birkenfeld, DOJ lawyers failed to see the bigger picture–how his sentence will hinder the uncovering and prosecution of other offshore tax frauds.

The National Whistleblowers Center has seen first-hand how Mr. Birkenfeld’s sentencing has had a chilling effect on potential whistleblowers. Few, if any, international bankers are going to want to step forward to report tax fraud knowing they will risk not only their careers but also their own personal freedom.

The U.S. Senate Permanent Subcommittee on Investigations estimated that $5 trillion to $7 trillion is hidden in secret offshore accounts, costing American taxpayers $100 billion a year. Mr. Birkenfeld’s whistleblowing put a big dent in these secret offshore accounts, but there is lots more out there. It took an insider to blow the whistle the first time and it is going to take another insider to do it again as account holders, especially the most flagrant tax evaders, are now moving monies to banks with even greater secrecy. When the government cannot stop offshore tax evasion, it is the honest American taxpayer who has to foot the bill.

President Obama can change this. He can pardon Mr. Birkenfeld on tax day and send a message to the world that the U.S. is serious about cracking down on bank secrecy, encouraging whistleblowers and stopping tax fraud. Other countries are way ahead of the U.S. in encouraging whistleblowers to come forward in the fight against offshore tax fraud. These countries recognize that whistleblowers are the best and often only way to deal with this problem. Germany is not only encouraging whistleblowers, it is putting money on the table for lists and names of individuals with offshore accounts. In theory, U.S. law also allows for large rewards to be paid to whistleblowers. But would-be informants will not want to risk coming forward if they fear being sent to prison.

There is tremendous public support for Mr. Birkenfeld because he is responsible for the U.S. recovery of billions of dollars.  While Mr. Birkenfeld is the biggest tax whistleblower in history, he should not be the last. Every American taxpayer owes Mr. Birkenfeld a debt of gratitude for putting money back into their pockets.

Mr. Birkenfeld has served enough time. Today is the day for President Obama to use his pardon power to ensure that “justice” does not come at the cost of what is in the best interest of the American taxpayers.

Stephen M. Kohn is the executive director of the National Whistleblower Center. Dean Zerbe is a former counsel for the Senate Finance Committee. They are both representing Mr. Birkenfeld.

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