Birkenfeld wants money after whistle blowing

Bradley Birkenfeld

Bradley Birkenfeld, who was sentenced to 40 months in prison for his part in helping rich Americans dodge their taxes, is now after billions of dollars.

Birkenfeld, a former private banker at the Swiss bank UBS, won the enmity of his peers by violating the omerta of Swiss banking. He divulged the tax evasion secrets of UBS, the world's largest bank by assets, and its American clients. As part of a deal with federal prosecutors, he admitted to, among other things, helping to smuggle diamonds in a tube of toothpaste, the New York Times reported.

Whistleblower law

Thousands of wealthy Americans are seeking amnesty for keeping illicit, offshore bank accounts. Now, Birkenfeld and his lawyers hope to use a new federal whistleblower law to claim a multibillion-dollar reward from the American government. If they succeed - and legal experts say the odds are pretty good - it would be the largest reward of its kind.

Birkenfeld, is to begin his prison term in January. He is being represented by the executive director of the National Whistleblowers Center, Stephen Kohn.

"We are seeking at least several billion dollars,""Kohn, who stands to reap a fortune if Birkenfeld wins his case, said.

"I do think he has a serious claim," said Erika Kelton, a partner at Phillips & Cohen, a law firm that specializes in large whistleblower said. "It was very credible, very useful information from inside UBS that he provided. The law is pretty clean on this."

Tax laws

The United States Treasury loses an estimated $100 billion per year to offshore tax cheats, but finding tax dodgers is hard. The best information, the authorities acknowledge, often comes from insiders. In the last few years, the Internal Revenue Service has worked with whistleblowers to help find tax cheats.

Federal whistleblower laws date back to the Civil War, when the government sought to detect wrongdoing by suppliers to Union soldiers.

Under a 2006 whistleblower law, the IRS has sought to further encourage tax informants to come forward, arguing that sometimes "it takes a rogue to catch a rogue". Informants now stand to collect 15 to 30 percent of the taxes, fines, penalties and interest ultimately collected by the IRS.

Informants who are convicted of "planning" and "initiating" the schemes are not entitled to bounties.

Birkenfeld is not seeking rewards for money collected from his own clients. Kohn argues that Birkenfeld is entitled to a portion of the money recovered from 52,000 offshore UBS clients whose existence, but generally not names and account details, he described to the IRS and Justice Department.

Birkenfeld's disclosures, the Justice Department has acknowledged in court filings, were also the crucial factor leading to the criminal investigation of UBS.

In February 2008, the bank admitted that it engaged in criminal wrongdoing and enabled tax evasion by selling its offshore banking services to wealthy Americans; it agreed to pay a $780 million fine. Kohn argued that Birkenfeld was also entitled to a portion of that settlement.

Birkenfeld

The agency, which did not grant Birkenfeld immunity from prosecution when he came forward, considered him more of a tipster or an informant than a whistleblower, because while he described the bank's dealings, he provided few details on actual clients.

If Birkenfeld wins his case, it is unlikely he will be able to claim any reward until he is freed in 2013. But he could leave jail a rich man.

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