Ex-Banker Begins 3-Year Prison Term Wondering Why

Published on January 07, 2010

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Ex-Banker Begins 3-Year Prison Term Wondering Why

Commentary by Ann Woolner

Jan. 8 (Bloomberg) — One of the perks of wearing the robe of a federal judge is that you don’t have to explain yourself.

But when a judge sends to prison for three years-plus the man who pointed U.S. tax collectors to billions of dollars of untaxed American wealth, who tore open the veil of secrecy surrounding Swiss banking, he ought to say why.

If Bradley Birkenfeld hadn’t blown the whistle on his former employer, UBS AG, thousands of Americans would still be evading taxes instead of paying them on some $20 billion they had stashed away overseas at the bank. Switzerland wouldn’t have been forced to agree to make banking more transparent.

And hundreds of suspected tax evaders wouldn’t now be under investigation, spawning guilty pleas and multimillion-dollar recoveries for the national treasury.

“Without Mr. Birkenfeld walking into the door of the Department of Justice in the summer of 2007, I doubt as of today that this massive fraud scheme would have been discovered by the United States government,” Birkenfeld’s chief prosecutor, Kevin Downing, told the sentencing judge in August.

So, why is Birkenfeld headed to a federal prison in Pennsylvania today?

U.S. District Judge William Zloch gave no explanation in August when he sentenced him to 40 months, 10 months longer than prosecutors recommended. A transcript shows Zloch was silent on the point.

Defense Request

Nor did Zloch say why this week he slapped down a defense request to shorten Birkenfeld’s sentence and delay his jailing. Nothing in Zloch’s one-page order gives a reason for the ruling or for its timing. He decided the matter without waiting to hear whether the prosecution opposed or supported the motion.

What he might have heard was CBS’s “60 Minutes” report the night before his ruling, in which Birkenfeld complained that he shouldn’t be going to prison at all.

To be sure, each side has a different view as to how heroic were Birkenfeld’s efforts. To hear prosecutors tell it, for all the whistleblowing he did implicating UBS, he didn’t immediately confess his own crimes and those of his richest client.

It’s true Birkenfeld was deeply involved in the crimes he reported. As one of UBS’s international bankers, it was his job to fly from his home base in Switzerland to the U.S. to persuade wealthy Americans to come to UBS, where they hid assets from the Internal Revenue Service.

If Birkenfeld had confessed his own sins from the first day, he probably wouldn’t be facing prosecution at all, Downing told the judge in August.

Explosive Information

That is preposterous, says one of Birkenfeld’s lawyers, Stephen Kohn. Birkenfeld went to every federal agency he could think of with his explosive information, with documents and with a willingness to go undercover if they wanted. The banker told investigators everything they wanted to know, says Kohn, who is also executive director of the National Whistleblowers Center in Washington.

Prosecutors misrepresented that fact at the sentencing hearing, Kohn says, and he is seeking an internal Justice Department investigation of the handling of Birkenfeld’s case.

And yet, Birkenfeld’s lawyers didn’t object when Downing claimed in court that their client had been less than entirely candid. In fact, one of them conceded the point.

But because Birkenfeld brought such an historically important case to the feds, they asked Zloch to sentence him to five years’ probation, including six months in home detention. Besides, even major tax evaders who admitted their crimes only when caught have not had to serve time in prison.

Increased Term

Pick one side or the other, and you still can’t explain why the judge ordered a prison sentence longer than prosecutors sought. Downing told Zloch at the hearing that he might later request a sentence reduction.

If that’s what he had planned, Zloch didn’t give him the chance. Is it possible the judge acted that quickly because the “60 Minutes” report the night before irked him?

And, why did the judge assign more time than the obviously tough prosecutor wants? Why send a signal to those contemplating blowing the whistle on people who are cheating the government that they would be better off keeping their mouths shut?

I called Zloch’s office to ask about Birkenfeld. An assistant checked and said the judge declines to comment because it’s an open case. She said he normally doesn’t talk to reporters.

A Tough Judge

At 66, the Reagan appointee to the South Florida court and former Notre Dame quarterback has a reputation as a tough judge. The week before he nixed Birkenfeld’s latest effort, he suspended a Fort Lauderdale, Florida, lawyer from practicing law for 3 1/2 years for accusing Zloch in the press and in legal briefs of harboring a religion-based bias against his clients.

But at least he explained his decision in a 68-page ruling. The lawyer “has publicly impugned the dignity” of the judge and the entire court “with scurrilous and baseless accusations,” Zloch wrote.

He accused the lawyer of “a dogged and relentless pursuit of an illegitimate purpose: to force a federal judge to recuse from cases where there is no basis” for recusal.

On second thought, perhaps Birkenfeld is fortunate the judge didn’t explain why he is headed to prison.

(Ann Woolner is a Bloomberg News columnist. The opinions expressed are her own.)

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