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Let’s Rein in Tax Cheats
The government’s treatment of UBS banking whistleblower Brad Birkenfeld, who is credited with shattering Swiss bank secrecy and revealing massive tax evasion by Americans, has alarmed government accountability advocates nationwide.
Birkenfeld is the only person in the scandal (which resulted in the Treasury’s recouping $780 million) to be sentenced to prison. Not a single one of the 52,000 American tax cheats who had UBS accounts faces jail time. Other countries, meanwhile, are taking the opposite view with financial whistleblowers—European nations realize that the information is so valuable that they are willing to pay for it.
An IRS whistleblower award law went into effect in 2006. It theoretically provides monetary awards to financial whistleblowers. Although an award has never been given, the IRS Whistleblower Office is supposed to pay people who expose tax cheats—possibly awarding whistleblowers up to 30 percent of collected amounts. Whistleblowers are eligible even if they participated in the wrongdoing, as long as they weren’t involved in planning or initiating the scheme.
Some people disagree with this approach, feeling that informants shouldn’t “profit” from their own wrongdoing. Birkenfeld, after all, pleaded guilty to conspiring to defraud the U.S. government and is currently serving a 40-month sentence at a federal prison in Pennsylvania.
But deals with these types of financial workers—who have inside knowledge and dirty hands—are exactly what’s needed when governments strive to reform murky industries. And guess what? Other countries realize this. Germany has signaled that it will purchase such information from Swiss bank whistleblowers.
The circumstances of the German case are far more opaque than Birkenfeld’s. Questions remain over the legality of how a Swiss bank informant secured the “smoking gun” documents that Germany wants to buy. The whistleblower then simply offered to sell bank records containing the identity of approximately 1,500 German tax evaders for millions of euros. After some debate, Germany decided to go for it. Why? Because they understand what it takes to root out ingrained corruption.
Switzerland, predictably, has protested the potential purchase on the hollow argument that stealing data is a crime. This is akin to a cigarette company threatening its own scientist who revealed that smoking causes cancer while the company tried to hide it.
If Germany is willing to purchase such information and use it to prosecute tax dodgers, then the United States should be more than willing to obey its own whistleblower award law. Similar U.S. laws encouraging people to report fraud against the government have been wildly successful—recouping billions of dollars in contract overcharges and false invoices. Congress expanded the False Claims Act last year, making it easier for whistleblowers to pursue claims for fraud that costs the government money. The Securities and Exchange Commission wants to implement a similar program.
As for the “unclean hands” issue, remember that the government regularly uses undercover informants who skirt the law to gather evidence in exchange for reduced sentences. Furthermore, a Swiss court rejected the settled agreement between the U.S. and UBS, which would have allowed the bank to avoid civil liability and turn over the names of American tax cheats. The Swiss aren’t exactly playing fair.
It remains unclear if the IRS is going to provide Birkenfeld with a percentage of recouped funds. But the laws and incentives were put in place for a reason. Solely jailing the whistleblower, coupled with IRS inaction, sends a chilling message to would-be financial whistleblowers that will continue for decades to the detriment of our economy.
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16 Comments so far
Show AllWhistle-blowing is a chancy business, you run the risk that no one will listen to you while informing your company or agency of your "traitorous" actions. And they can fire you and sic their paid goons on you for intemnidation. And, as we see, the reward may not be forthcoming no matter what the law says.
So hats off to those do do go ahead and blow the whistle on bad conduct.
Gary
"Some critics are now eroding another support of free enterprise – the loyalty of a management team, with its unifying values of cooperative work. Some of the enemies of business now encourage an employee to be disloyal to the enterprise. They want to create suspicion and disharmony, and pry into the proprietary interests of the business. However this is labelled – industrial espionage, whistle blowing, or professional responsibility – it is another tactic for spreading disunity and creating conflict."
-- James Roche, CEO General Motors
Loyalty to a company sometimes results in death. Sometimes people have to die before something defective is brought to ligiht. Medicine and automobiles come to mind....
tax cheats are the scum of the earth. taxes on the rich are lower in the u.s. than just about anywhere else that actually has a civilization, yet the rich are crybabies and can never get enough.
The 52,000 people who were outed by Birkenfeld have settled with the IRS. The only lesson learned was don't get caught. The terms of the settlement have not been disclosed and leave many questions unanswered. Was the settlement made in the interest of taxpayers or the 52,000? The tax liability assessed was based on what period of time? Did the IRS go back three years or more as in the case of fraud? Did the settlement include penalties and interest and again on what period of time? What interest rate was charged? Where intent was certain why were criminal penalties waived - jail time? What was the source of the income or capital? Was the income hidden because it was derived from criminal activity? Were government officials involved, implying bribes and kickbacks? Was money derived in violation of the Foreign Corrupt Practices Act? Are the 52,000 currently being audited to find other income and capital hidden from the IRS in the form of real property, bearer bonds, diamonds, gold bullion, etc.? Are the names of the 52,000 tax cheats available under the Freedom of Information Act? Is your Senator or Congressman on the list?
good question! anyone out there with any answers?
Those 52,000 people have certainly not settled with the IRS! Give a credible news source for that information. One of the news stories I quoted above indicated many of the crooks were worried that their names were ones that had been turned over to the IRS and were running to tax attorneys. Others were staying quiet.
And let's not forget the fact that 75% of Fortune 500 companies pay NOTHING in taxes in this country. Nada. Zip. Zero. Zilch. Tell that to your rightie "taxes should be lower on business" buddies next time they spout that nonsense.
When Reagan took office, business paid 36% of all taxes paid in this country. Today they pay about 8%. Why do you think we are $12 TRILLION in debt? It's because those who USED to pay their share to keep this country running decided they didn't WANT to anymore, and they bought enough gov't to make sure they didn't have to anymore. And now, after 30 years of ignoring even basic infrastructure upkeep, the whole thing is collapsing around our ears, and it's going to cost us ten times to rebuild what it would have cost us to repair in the first place. And still, some in gov't want to abdicate any responsibility and just keep going like nothing is wrong.
It's time to return us to a place where those who profit most from our way of life pay the most for that opportunity. Those who have less and the least are tapped out.
It's time to return us to a place where those who profit most from our way of life pay the most for that opportunity. Those who have less and the least are tapped out.
It's time to return us to a place where those who profit most from our way of life pay the most for that opportunity. Those who have less and the least are tapped out.
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there, it's now been put out there 3 times, I think that's how it works right? ;)
Whistle-blowers on rich tax cheats are an inconvenient impediment of "The Great Lurch Backwards" to a nightmarish redux of the Robber Baron era that was begun under Grandpa Caligula (Reagan), continued under Daddy Bush & Clinton, and finalized by Dubya, Cheney, & Co. Any "servant" like Brad Birkenfeld that dares to mess with that order will be dealt with by the more pliant functionaries of the wealthy, the IRS.
The guilty are innocent, the innocent guilty.
Evil is good, good is evil.
I sit night after night enjoying TV and laugh at an ad promoting a group of lawyers getting tax cheats off while owing the IRS thousands and thousands of dollars supposedly paying less than 10 cents on the dollar. These cheats are so proud and happy for screwing the government out of the money they owe. And apparently the IRS goes for it. Pitiful.
"Congress expanded the False Claims Act last year, making it easier for whistleblowers to pursue claims for fraud that costs the government money. The Securities and Exchange Commission wants to implement a similar program."
Hmmmmmm, when the SEC implements its program, I hope it intends to pursue "fraud" against average-Joe investors as well.
According to Matt Taibbi, "the SEC voted to ban flash trading in September, but five months later it has yet to issue a regulation to put a stop to the practice." This behavior doesn't exactly promote confidence in the SEC or the Federal government.
This reminds me of the telecom scandal involving illegal guvment wiretaps under Dubya, when one big telecom company refused to allow non-FISA-approved taps. Not sure which telecom refused, but if memory serves, the head of that firm got sent to prison for some ginned-up violation, ultimately for obeying the law!
The message: don't mess with the big dogs.
My guess is that this is one time when UBS banking whistleblower Brad Birkenfeld could have used a more connected lawyer. The article is, however, a little short on details and I am unfamiliar with the case.
Several years ago I knew a guy who attended computer auctions who bought an old hard drive going back to the early 1990s. It turned out to have come from GE HQ in New England and had been used by the secretary to the Number Two guy there, Paolo what's-his-name. He showed me what he had. I was, frankly, astounded that a major corporation involved in national security could have let that hard drive go to auction without first zeroing it out.
It was a treasure trove. Correspondence involving upcoming trips to sell train engines to China. Swiss bank account numbers and monetary transfer letters. Correspondence about Ambassador Christopher Hill and how to approach him. GE private plane pilot license and plane numbers. Etc.
An unbelievable security breach by any measure.
My friend wanted to make money from this discovery.
As a former investigative reporter I thought it more important to look into the implications and study the history. The data he had were/was a blindblower.
Among the data was an encrypted Excel electronic Rolodex of the GE VP's private phone and contact list. My friend was a genius. No password needed. He converted that Excel doc to a Microsoft Word doc. (I hated anything Microsoft.) This bypassed the need for a password, although it created a lot of linguistic clutter. But there was Henry Kissinger's private Manhattan phone number, clear as a bell.
I contacted old friends and relatives in the Information Technology biz at several levels, and they advised me, as I then advised him, Leave It Alone! They are running in higher circles.
I don't know what he ultimately did with the data, but they sure told me a lot about how this country actually works. Swiss bank accounts and tranfers to strange women in strange places. Internal memos on how to deal with the Chinese! How do you even begin to approach selling back to GE the hard drive they let slip through the cracks? It never existed!
The bravery of Sibel Edmonds comes to mind.
Also, Ray McGovern.
If people today think the emails allegedly coming out of Toyota are a scandal, you have no idea!
The only way any single person could use what he/she knows to become a whistleblower would require some form of institutional "backing." The Watergate investigation had the backing of the Washington Post, back then probably the second-most-powerful journal in the country.
I am very conflicted by this article.
"The Truth Is Out There," but how do you get it OUT THERE?
My heart goes out to future Congressman Berkenfeld!
How DARE you attack the Secrecy of the Swiss Banking System, AKA UBS!
And, sure as hell, you can't trust the Congress, whatever their screed.
Do you trust Nancy Pelosi or Harry Ried? If you knew for a certainty that a huge object is about to strike the earth and wipe out half the population, don't bother telling them. They would claim there is something defective in your telescope.
We want Whistleblowers. Yeah. Sure. And we want Eric Holder to be the Attorney General he ought to be. There exists a Tradition of Independence within the Executive Branch. No time like the Present. Eh, Ray? (Note also, that the SCOTUS recently struck down the Plame/Wilson case. Take note, Greenwald!)
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Nanoo
Interesting read OldManR. The phone company that respected their customers rights of privacy is Qwest. Before the story broke I had AT&T that went along with tapping phones, mine included from all the clicking that went on, to the point that friends and family didn't want to talk to me much anymore. Immediately upon learning what was happening I switched to Qwest, and low and behold, the clicking ceased.
OldManRiver--Read these stories and we can laugh our cynical butts off. The $780 million was just the fine for UBS. The last I heard, they had agreed to give up the names of 4400 accounts that had the largest amount of money. One man from California had $200 million in the UBS bank. Berkenfeld was not an innocent! He was the one who set up the meetings to get people to send their money to UBS. He created phony trusts and companies, and traveled with an encrypted lap top. The outrage should be that only the idiot who tried to be a whistleblower because he didn't get a big enough bonus went to jail. Read,"Tax Scandal Leaves Swiss Giant reeling"," Wealthy Americans Under Scrutiny in UBS Case",and "Our Money is Buried in the Cayman's-Let's Get it Back". It would be really interesting to see if the Swiss have really turned over all 4400 names. It would be even better if Obama does some real threatening against the Swiss. It's amazing how the State Department can make wild threats against the Iranians on behalf of the Israelis, but we won't try to go after tax cheats that cause the loss of $100 billion each year by hiding it in overseas accounts.
Thanks, Nanoo and Aarky, for filling in some facts.
Do you think that these huge corporations actually PAY the fines that are levied by the gubment? I've wondered about that for years. And, if they do, how does the gubment redistribute that money? I've even asked reporters who covered smaller cases about this and I've never gotten an answer. After the sensationalist headlines, no follow-up, while the public perceives that "justice was done."
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