Word: birkenfeld
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...story of how he ended up headed for federal prison is still mired in sharply conflicting accounts. Justice officials claim that Birkenfeld was not completely forthcoming about his own dealings with particular clients, especially his biggest, the billionaire Olenicoff. Even as he was talking to the feds, they say, Birkenfeld was secretly advising the real estate mogul to move his money from UBS to Liechtenstein banks. (Olenicoff eventually settled for $53 million in tax and penalties...
...Birkenfeld's lawyers deny this, saying he was merely trying to avoid any suspicion that he was cooperating with the government. Also, to reveal more about his clients, they say, Birkenfeld needed some legal cover - like a subpoena, which Justice did not offer - because he would be violating strict bank-secrecy laws in Switzerland, where he was living...
...What is clear is that Justice was playing hardball. It refused to grant Birkenfeld a cooperating witness agreement - at which point some lawyers would have advised their client to cease cooperation - and instead offered a temporary, so-called queen for a day agreement, giving him much less protection for what he voluntarily disclosed. At one point they even dismissed Birkenfeld as a mere tipster, not a whistle-blower. "Those who seek to be treated as true whistle-blowers need to know they must come in early and give complete and truthful disclosures, with no dissembling or holding back or spinning...
...sounds simple. But that view not only contradicts Justice's own statement supporting a sentence reduction - Birkenfeld faced a possible five-year sentence for his work on behalf of Olenicoff - it's also flat-out wrong, says Stephen Kohn, executive director of the National Whistleblowers Center, who has been involved with hundreds of whistle-blower cases. After all, he notes, it would be a serious disincentive if whistle-blowers could be tripped up by inadvertently leaving out some information the government might come across later...
...That's not the only potential conflict at play. While the Justice Department has already decided that Birkenfeld isn't a true whistle-blower, the IRS has yet to make its own determination. An adverse ruling "may make more sense legally than it does from a policy standpoint," says former IRS commissioner Margaret Richardson. But if the IRS comes to a different conclusion from the DOJ - and under a new law, Birkenfeld can challenge the IRS decision in court - the UBS whistle-blower could end up collecting the first of millions of dollars from the government even as he sits...