Monday, November 30, 2009

Whistleblowers in the US need support

UBS whistleblower Bradley Birkenfeld is seeking to get the money he says is owed to him on account of his having brought information to the U.S. Internal Revenue Services (IRS), helping it crack down on Switzerland's UBS and its wealthy clients. As the New York Times reports:

"Mr. Birkenfeld and his lawyers hope to use a new federal whistle-blower 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.
. . .
Informants now stand to collect 15 to 30 percent of the taxes, fines, penalties and interest ultimately collected by the I.R.S. — billions of dollars, in the case of UBS."

What do we think of such a thing? Birkenfeld isn't exactly an innocent man: he was a key UBS operative, having admitted, among other things, smuggling diamonds in toothpaste tubes to avoid detection. Was he a genuine whistleblower? Not in the mould of Enron's Sherron Watkins, to be sure, who simply found something that stank and blew the whistle. Birkenfeld, by contrast, sang after being arrested.

TJN-USA's director Jack Blum was recently talking about whistleblowers more generally, noting that even if large payouts to former practitioners may be distasteful, the greater good is served by having a good whistleblower programme. And that isn't currently the case:

"(on the subject of whistleblower money) Congress passed a law and the IRS was put in charge of an office in Buffalo, New York, that has been run by lower-level civil servants who seem terrified at the thought of actually rewarding people who have given up information. So in at least two other cases I am involved in, where there is no question of criminal behaviour in the United States on the part of the person who blew the whistle, they still haven't come up with the money even though they (the IRS) have collected tens of millions."

More is needed, Blum says.

"Congress needs much more oversight. They really need to ask some hard questions. Among other things, in the proposed regs they are saying that if any of the materials used in informing the IRS were obtained illegally, they won't pay the reward. So the question then becomes how do you provide information about an individul employer who has violated tax law without violating some other law? And that question hasn't been answered.

So if I take payroll records that say the employer is cheating on tax, and my employer says those records were stolen, does that mean no reward? And if they assume that, that means nobody ever collects.

The problem is enforcement, enforcement tools and where we go from here. The office that provides the rewards has to be cleaned up; the IRS needs more manpower, more trained people, greater capacity to really go after the people who've been cheating and whom they find out about."

Also note his co-speaker Jesselyn Radack who supports this view:

"I have had other potential financial whistleblower clients on the offshore tax haven issue who have not gone forward because of what they saw happening to Bradley Birkenfeld."

The world needs whistleblowers - and if this means negotiating with them for the greater good - then so be it.


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