Sen. Charles Grassley, R- Iowa, has pressed the Treasury secretary and the IRS commissioner for more effective implementation of the IRS whistle-blower program. (AFP / Getty Images)
The Internal Revenue Service awarded $104 million to whistle-blower Bradley Birkenfeld, whose reports of an illegal offshore banking scheme by Swiss bank UBS helped the government recover billions of dollars in back taxes, fines and penalties, the National Whistleblowers Center announced Tuesday.
The award shows that the process for reporting illegal activities works and that whistle-blowers will be heard and protected, Sen. Chuck Grassley, R-Iowa, said in a statement.
“An award of $104 million is obviously a great deal of money, but billions of dollars in taxes owed will be collected that otherwise would not have been paid as a result of the whistleblower information,” said Grassley, who pushed whistle-blower legislation in 2006.
Grassley has pressed the Treasury secretary and the IRS commissioner for more effective implementation of the IRS whistle-blower program.
“Unfortunately it has taken the IRS nearly four years to settle this whistleblower case,” Grassley said. “If the IRS is serious about encouraging future whistleblowers, it needs to continue to honor the spirit and intent of the law and issue awards in a timely manner.”
The award also rectifies the “chilling effect” on whistle-blowing that the Justice Department caused when it prosecuted Birkenfeld for his role in helping clients evade U.S. taxes, Stephen Kohn, one of Birkenfeld’s attorneys, said in a statement. Birkenfeld was sentenced to 40 months in jail in August 2009.
“The IRS today sent 104 million messages to whistleblowers around the world — that there is now a safe and secure way to report tax fraud and that the IRS is now paying awards,” said Kohn, who is also executive director of the National Whistleblowers Center, a nonprofit organization dedicated to protecting employees’ lawful disclosure of waste, fraud, and abuse
UBS paid a $780 million fine and admitted to helping U.S. taxpayers hide accounts from the IRS in 2009, according to information from the Justice Department. As part of an agreement with the Justice Department, UBS provided the government with information on 4,450 U.S. customers who were believed to have violated U.S. law.
Soon after UBS’s settlement, the IRS created a voluntary disclosure program for taxpayers who had previously undisclosed foreign bank accounts. More than 35,000 taxpayers have since come forward and are participating in amnesty programs to voluntarily repatriate their illegal offshore accounts, Kohn said. The voluntary disclosures have led to the collection of more than $5 billion in back taxes, fines and penalties, Kohn said.