Birkenfeld Reports to Prison to Start 40-Month Term

Published on January 08, 2010

Please, share this page
Birkenfeld Reports to Prison to Start 40-Month Term

Jan. 8 (Bloomberg) — Bradley Birkenfeld, a key informant in a U.S. investigation of offshore tax evasion aided by UBS AG, reported today to a federal prison in Pennsylvania to start a 40-month prison term that he denounced as unfair. Birkenfeld, who pleaded guilty in 2008 to conspiracy, told reporters he shouldn’t be jailed for blowing the whistle on how UBS helped wealthy Americans evade taxes through secret bank accounts. UBS avoided prosecution in the U.S. by agreeing in February to pay $780 million, disclosing data on more than 250 Swiss accounts, and admitting it helped foster tax evasion. In August, UBS agreed to hand over data on another 4,450 accounts.

“I’d like to say how proud I am to be courageous enough to come forward to do what I did to expose the largest tax fraud in the world,” Birkenfeld, 44, told reporters outside of the Schuylkill Federal Correctional Institution in Minersville.

Birkenfeld, who was a banker at Zurich-based UBS for five years, was sentenced to prison on Aug. 21 by U.S. District Judge William Zloch in Fort Lauderdale, Florida. A federal prosecutor, Kevin Downing, recommended a 30-month sentence and said Birkenfeld’s cooperation had exposed a “massive tax fraud scheme” at UBS, Switzerland’s largest bank.

Birkenfeld claimed the Justice Department under former President George Bush mistreated him by urging a prison term when it “rewarded” UBS with a deferred-prosecution agreement, and other bankers and taxpayers avoided prison.


‘Sacrificed My Life’


“The American taxpayers should be outraged, and this is what I’m getting?” said Birkenfeld, who spoke to reporters as snow fell. “I sacrificed my life, my reputation, my finances, and this is how I get treated?”

Birkenfeld’s imprisonment will have a “chilling” effect on other bankers who may seek to come forward and report wrongdoing, said his attorney, Stephen Kohn, executive director of the National Whistleblower Center in Washington.

“To take the whistleblower who is responsible for the single largest recovery ever for the American taxpayer, who has already saved $2 to $3 to $4 billion and put him in jail is a travesty of justice, a miscarriage of justice, and it’s grotesque,” Kohn told reporters.

Birkenfeld is seeking a reward from the Internal Revenue Service of as much as 30 percent of any taxes the agency recovers as a result of his whistleblowing activities.

Birkenfeld first came to U.S. authorities in 2007 to report how UBS courted wealthy Americans without a license from U.S. regulators and helped them set up accounts to evade taxes. He spoke that year to the Justice Department, U.S. Senate, IRS and Securities and Exchange Commission.


No Immunity


Still, he failed to reach an immunity agreement with prosecutors and was indicted under seal in April 2008 for conspiracy. He was arrested a month later at Logan International Airport in Boston as he went to a high school reunion.

When he pleaded guilty six weeks later, he said UBS made $200 million a year helping wealthy U.S. clients conceal $20 billion in assets. He said the bank set up sham entities in Switzerland, Panama, Hong Kong, the British Virgin Islands and other tax havens.

He continued to cooperate with prosecutors, although a rift developed with the Justice Department by the time of his sentencing. At that hearing, Downing said Birkenfeld wasn’t initially truthful about his own role in the fraud and his dealings with his largest client, Igor Olenicoff, a California real-estate developer.

Olenicoff pleaded guilty to filing a false tax return, admitting he hid $200 million in assets at UBS. He got two years probation.


No Remorse


At his sentencing and outside the prison today, Birkenfeld expressed no remorse about helping Americans evade taxes.

“This was the system that was working in Switzerland, and it shouldn’t have been done,” Birkenfeld said today.

On Dec. 26, Birkenfeld asked Zloch to delay his prison surrender date and grant him a new hearing on his sentence. Zloch denied that request on Jan. 4, a day after Birkenfeld was interviewed on CBS Corp.’s “60 Minutes” television show and criticized his sentence.

Birkenfeld said he was not scared to spend time behind bars in Minersville, which is 46 miles north of Harrisburg, the state capital.

“I’ll be doing what I always do,” he said. “I’ll be doing a lot of reading and working out and hopefully encouraging other whistleblowers around the world to come forward.”

The case is U.S. v. Birkenfeld, 08-cr-60099, U.S. District Court, Southern District of Florida (Fort Lauderdale).

By David Voreacos

Report Fraud Now