Justice bites the hand that feeds it

January 7, 2010 10:28 AM

Blow the whistle on the rich and powerful, go to jail, while they avoid jail. Tax Notes, the weekly publication on federal taxation, announced its "2009 Tax Person of the Year" - a whistleblower from Swiss banking giant UBS whom it called "the Benedict Arnold of the private banking industry." Bradley Birkenfeld came forward and exposed the tax fraud dealings of UBS which led thousands of millionaire tax cheats to come forward and pay billions in back taxes. His reward? Tomorrow he goes to jail. The Government Accountability Project (GAP), a Washington watchdog organization that has extensive whistle-blower experience, says a chilling effect is already apparent: a senior executive at a European bank that offers similar U.S. tax shelters is having second thoughts about going public because of the Birkenfeld case.
posted by caddis (42 comments total)

My understanding is that Birkenfeld withheld information about both his own involvement in tax fraud as a private banker as well as fraud committed by his largest personal client.

I think it's probably a bad idea for the USAO/DOJ to put him in jail because it will almost certainly deter other whistle-blowers, but his situation is in no way uncommon or egregious. If you want immunity from prosecution, you have to be 100% forthcoming about your own transgressions. He wasn't, so he didn't get immunity. I don't feel that bad for him.
posted by jckll at 10:33 AM on January 7, 2010 [6 favorites]

NOT OLIGARCHIST
posted by DU at 10:33 AM on January 7, 2010

Well, Birkenfeld is a criminal so it hardly seems surprising that he's going to jail. Of course, he should properly be going to a Swiss jail for violating Swiss law.
posted by atrazine at 10:38 AM on January 7, 2010

So the system is working as intended. Exxxxcellent. *rubs hands*
posted by ChurchHatesTucker at 10:44 AM on January 7, 2010 [4 favorites]

He's not going to jail for whistleblowing--he's going to jail for tax fraud. Which he committed. And for obstructing an investigation into tax fraud.

On the other hand, the other people should be in jail, too, but a lot of these links seem to gloss over the fact that he committed crimes.
posted by Sidhedevil at 10:46 AM on January 7, 2010

Yeah, however he should also be going to jail for violation of Swiss banking laws, it's a shame that he won't.
posted by atrazine at 10:51 AM on January 7, 2010

according to 60 minutes he may be eligible for some percentage of the tax money collected by the IRS from these people...
posted by njohnson23 at 10:52 AM on January 7, 2010

I saw the interview on 60 minutes on this. I realized after thinking about it that there's a pretty decent chance that this was not as an altruistic event as Mr. Birkenfield likes to portray it. I ended up wondering if it wasn't his plan to try and leverage the egregious indiscretions of UBS into a personal get out of jail free card for him and his client(s). Essentially trying to say to the Feds "Hey, look at this HUGE fish I brought in for you, so no worries on this small fish, eh? wink wink nudge nudge". If his intention was to come clean, then he did it wrong. If his intention was to try and garner former illegal gains into legal (or at least quasi-legal) ones, then his actions make more sense in that context.
If the Feds suspect the latter, then it makes a bit of sense of why they're playing a bit of hardball with the guy. It would certainly make things very complicated for them if whistle blowers or other informants are given blanket immunity on all past transgressions, both known and unknown.
My personal opinion is that Mr. Birkenfeld, as a banker, (mis)calculated that the government would weigh justice in dollars and is in a bit of shock that prosecutors care about misconduct more than financial windfall.
posted by forforf at 10:59 AM on January 7, 2010 [1 favorite]

If I recall this case correctly is he not also due to get a finders fee of some kind from the US Gov of about a bazillion dollars when he gets out?
posted by Damienmce at 11:01 AM on January 7, 2010

This is just ridiculous. We give immunity to Mafia hit men and major drug dealers for their testimony but not to a banker that fattens the government's coffers? Guess killing folks is better than cheating the government. His mistake was not seeking council prior to negotiating his deal with the feds.
posted by white_devil at 11:02 AM on January 7, 2010 [3 favorites]

Birkenfeld sounds like an idiot. I mean, he went to the DoJ and said, basically, "I'm doing all this wicked illegal tax fraud, and I want to tell you about it." And the DoJ was all like "Dude!" And then Birkenfeld failed to secure immunity for himself, but told them details anyway, as a "gesture of goodwill?" So... he just walked in and admitted to committing crimes? Do that in any police station, and you'll probably go to jail too.

My outragefilter is unmoved here.
posted by rusty at 11:09 AM on January 7, 2010 [1 favorite]

If I recall this case correctly is he not also due to get a finders fee of some kind from the US Gov of about a bazillion dollars when he gets out?

Yeah he gets up to 25%, which I'm pretty sure is tax free? There was well over a billion in the taxes, though it is far from certain he'll be able to get any money from it.
posted by geoff. at 11:10 AM on January 7, 2010

This case turns my stomach and I hope he gets pardoned. If we want to catch the big fish, we have to open the door to whistleblowers. The fact that he was blowing the whistle internally for months before he resigned makes me believe that he's a legitimate whistleblower, not just trying to game the system.

Another thing I don't understand - apparently the judge gave him an even longer sentence than the government asked for. That so very rarely happens, and I can't fathom why somebody with a documented record of extensive cooperation would merit that.
posted by yarly at 11:11 AM on January 7, 2010

I ended up wondering if it wasn't his plan to try and leverage the egregious indiscretions of UBS into a personal get out of jail free card for him and his client(s). Essentially trying to say to the Feds "Hey, look at this HUGE fish I brought in for you, so no worries on this small fish, eh? wink wink nudge nudge". If his intention was to come clean, then he did it wrong.

So what? He made the U.S. government billions of dollars. The whole point of the laws are to incentivize bad actors to turn in other people. This guy didn't get anyone killed any of the damage can be rolled back by having people pay back taxes and fines.

How long is this guy's sentence?
posted by delmoi at 11:16 AM on January 7, 2010 [1 favorite]

40 months. And as to what others were asking, he will probably see between 15 and 25 percent of the government's settlement with UBS (which was just under $800 million) in accordance with The False Claims Act (qui tam).
posted by jckll at 11:20 AM on January 7, 2010

Oh wow, the judge for Birkenfeld was Judge Zloch, who just issued this strangeruling recently.
posted by yarly at 11:20 AM on January 7, 2010

Although it could certainly take years before he sees any of it, and he could be disqualified. Also I realize I misstated the provision as the False Claims Act, which does NOT apply to tax fraud. I'm not a tax lawyer so I don't know the equivalent provision as it relates to the IRS.
posted by jckll at 11:21 AM on January 7, 2010

in accordance with The False Claims Act (qui tam).

This is actually an IRS tax whistleblower case, not a qui tam case. Qui tam is more like contractor fraud against the federal gov't.
posted by yarly at 11:22 AM on January 7, 2010 [1 favorite]

See also Mark Whitacre, subject of an excellent This American Life episode which led to the film The Informant!.
posted by designbot at 11:30 AM on January 7, 2010 [2 favorites]

The difference with Mark Whitacre is that his conviction was actually unrelated to his whistleblowing. He blew the whistle on a huge anti-trust conspiracy. He was convicted for embezzlement.
posted by yarly at 11:41 AM on January 7, 2010

A local "New Times" blog has been looking at Judge Zloch and yarly seems to have caught on to another of the idiosyncrasies of the man. Here is a bit more to that story. In terms of the Birkenfeld case, I think that the other "New Times" blogger is on the money...

It acts as a deterrent to all future whistleblowers who find themselves in Birkenfeld's position: knowing of some illicit, corrupt activity but having a measure of their own guilt. Having seen what happened to Birkenfeld, why would such an invaluable source call the law?

posted by Hypnotic Chick at 11:49 AM on January 7, 2010

was the term "plea bargain" completely unknown to him before he opened his pie hole. Watch some Law and Order man!
posted by Neekee at 11:55 AM on January 7, 2010

I think what some people are missing here is that he is being busted for not disclosing his own misdemeanors at the time of whistleblowing. If he had done so, he'd be fine, now. The question is whether or not this was simple oversight versus his own scheming. I wouldn't be surprised if it was the former, just because it doesn't make any sense to me. Sure, he could hold onto some ill-gotten gains, but as others pointed out, isn't he supposed to get some money from his whistleblowing? If we're talking 20% of 800 million, I'd be surprised if the undisclosed crimes profited him anywhere in that neighborhood.
posted by Edgewise at 12:30 PM on January 7, 2010

was the term "plea bargain" completely unknown to him before he opened his pie hole. Watch some Law and Order man!

Would a plea agreement let him collect the reward? I'd spend 40 months in jail for $800 million dollars. That's $20 million a month!

People don't normally do plea agreements unless they've been caught. How would it work if you approached them? I suppose he could have approached through a lawyer.
posted by delmoi at 12:32 PM on January 7, 2010

Oops, I didn't realize the 15% was of the $800 million, not that the $800 million was a 15% portion of some larger figure.
posted by delmoi at 12:34 PM on January 7, 2010

I think what some people are missing here is that he is being busted for not disclosing his own misdemeanors at the time of whistleblowing. If he had done so, he'd be fine, now. The question is whether or not this was simple oversight versus his own scheming.

I saw the 60 Minutes piece on this and that's exactly what happened. Gotta come clean the whole way to benefit from all of this. I can understand why he didn't, but you can't forget about what you did, either.
posted by Ironmouth at 12:45 PM on January 7, 2010 [1 favorite]

Also those Qui Tam suits are hard to win. I have looked at those code sections and it is a complicated procedure.
posted by Ironmouth at 12:45 PM on January 7, 2010

See also Mark Whitacre, subject of an excellent This American Life episode which led to the film The Informant!.

Actually, the excellent book led to the film.

It's recommended required reading for all would-be corporate whistleblowers. This means you.
posted by clarknova at 12:54 PM on January 7, 2010 [1 favorite]

That'll teach would be whistle blowers from blowing their whistles again!

Actually he did commit crimes and he did confess to said crimes. Normally the law doesn't give you a break for being honest.
posted by Mastercheddaar at 12:56 PM on January 7, 2010 [1 favorite]

He plead guilty in June 2008. He's going to prison in January 2010, and the government was still trying to keep him out. That's not bad, and certainly not what Joe Schmoe could expect.
posted by smackfu at 1:31 PM on January 7, 2010

Actually he did commit crimes and he did confess to said crimes. Normally the law doesn't give you a break for being honest.

The law does cut you a break for being honest sometimes, but you have to a) negotiate said break, and b) be honest. He appears to have failed on both counts.
posted by Sidhedevil at 2:14 PM on January 7, 2010

Actually, the excellent book led to the film.

Aaaactually, screenwriter Scott Z. Burns heard the story on This American Life, which inspired him to pick up the rights for the book and pitch it to the studios.
posted by designbot at 3:24 PM on January 7, 2010

What I am learning here is that it's important to draw the line between whistelblowers- Good folks who see wrong doing- and people who are WRONG DOING and then decide to try and rat everyone out before they get caught. The latter may be a necessary evil, but far less sympathetic.
posted by GilloD at 3:49 PM on January 7, 2010 [1 favorite]

The thing here is that the government, and many people here, are focusing on whether someone deserves retribution/revenge for committing their bad acts. It's all about enforcing responsibility, everything else be damned. The broader view sees that sometimes we give up on seeking revenge for the broader good. For instance, perhaps we would be willing to give a few dishonest bankers a pass, or at least a relative pass, in order to get convictions and the money from a broad swath of cheats. Failing to do so might mean we don't get more of the cheats. One other banker at a competing Swiss bank is already getting cold feet because of how this guy was treated. Many whistleblowers are far from Eagle Scouts, but when revenge is your primary goal you have already decided to be less effective in going after the greatest number of wrong doers. This is not so much about how unfair this case is to one scum bag banker (and he probably is) but more about whether we set ourselves up to root out more of this wrong doing in the future or instead scare away the very people who have the information to expose fraudsters. The Justice Department made the decision that getting back at some guy they though was playing them was more important than dissuading future whistle blowers to come forward. The government has a pretty pathetic record in regards to whistle blowers. The whistle blower, whether Eagle Scout or scum, takes great personal risk to bring their information forward. Congress has passed laws to encourage this, but the Justice Department has repeatedly thwarted the purpose of those laws. Why this guy is willing to keep helping the Justice Department even after they screwed him is really odd. I think he got into this because of his desire to get revenge against his employer. He is not a sympathetic character, which some people have said, but that still misses the broader issue of what happens in the future. I wouldn't discount the fact that the sentence disparities also arise from the relative power of the cheats. Even when they are committing felonies if you have the audacity to take them down, yet are also similarly bad, you get hurt more so than they do.
posted by caddis at 5:45 PM on January 7, 2010 [1 favorite]

I could care less if he does the 40 months. He participated in this and for whatever reason he was the first rat to jump ship. Fine he gets the get out of jail free card. I want rest of these evaders charged and their names made part of the public record.

Many times the only way these things come to light is when one of the bad guys says something. Letting one bad guy off the hook to get 19,000 others. Sounds like a good deal to me.

There is probably some poor shlub who got caught shop lifting doing more time than these folks.

I have posted this to my FB page as well as the link to send the letters to your congress person, senator, and the AG.

I recommend everyone else do the same.

Why hasn't this shown up on the mainstream media.? (Rhetorical Question)

Darn, I used my one rant for 2010 and were only a week in...
posted by empty vessel at 6:39 PM on January 7, 2010

Darn, I used my one rant for 2010 and were only a week in...

You're new here aren't you? ;)
posted by desjardins at 6:54 PM on January 7, 2010

Why hasn't this shown up on the mainstream media.? (Rhetorical Question)

It was on 60 Minutes on Sunday. Doesn't get more mainstream than that.
posted by smackfu at 7:06 PM on January 7, 2010

Missed that...
posted by empty vessel at 7:28 PM on January 7, 2010

Oops, I didn't realize the 15% was of the $800 million, not that the $800 million was a 15% portion of some larger figure.

15% of $800 million for three and a half years is pretty tasty if you end up in a decent low-security prison. Not so much if you end up in the kind of place where rape and other forms of torture are de riguer.
posted by rodgerd at 10:25 PM on January 7, 2010

One other banker at a competing Swiss bank is already getting cold feet because of how this guy was treated.

See, prison does deter criminals. (although this guy isn't actually doing the time that he should be)
posted by atrazine at 11:18 PM on January 7, 2010

I saw the 60 Minutes piece on this and that's exactly what happened.

On Democracy Now his lawyer claims otherwise -- that Birkenfield tried to come clean but that the Justice Department played with him a bit, and that he did come entirely clean in his testimony to the Senate. Does the 60 minutes piece address that claim?

Or is there a way to test it by looking at his conviction and comparing them with a Senate transcript?
posted by weston at 11:19 PM on January 7, 2010

Darn, I used my one rant for 2010

On the Blue you can rant every week for your $5.
posted by rough ashlar at 11:25 PM on January 7, 2010