IRS hands out record whistleblower award

By Bernie Becker - 09/11/12 07:31 PM ET

The IRS has awarded a whistleblower $104 million for information on the Swiss banking giant UBS’s use of offshore accounts.

Bradley Birkenfeld – a former UBS banker who was sentenced to federal prison for helping clients stash resources offshore – provided the IRS with information that it was unable to find on its own, the agency said Tuesday.

According to Birkenfeld’s lawyers, Stephen Kohn and Dean Zerbe of the National Whistleblowers Center, the nine-figure award Birkenfeld likely received is likely the largest ever given an individual whistleblower in the U.S.

“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,” Kohn and Zerbe said in a statement. “The IRS also sent 104 million messages to banks around the world – stop enabling tax cheats or you will get caught.”

UBS acknowledged that it helped clients avoid U.S. taxes and paid the federal government $780 million in 2008, in order to avoid prosecution.

In all, the banking giant agreed in 2009 to identify about 4,500 Americans suspected of tax evasion. The IRS also has implemented its own offshore disclosure program, which it says has raked in more than $5 billion in back taxes, interest and penalties.

In a finding posted by his lawyers, the IRS said that Birkenfeld, who recently completed a more than two year stint in prison, played a central role in their efforts.

“While the IRS was aware of tax compliance issues related to secret bank accounts in Switzerland and elsewhere, the information provided by the whistleblower formed the basis for unprecedented actions against UBS AG,” the statement read.

Sen. Chuck Grassley (R-Iowa), a former chairman of the Finance Committee and author of 2006 whistleblower legislation, applauded the payout, but also urged the IRS to be more aggressive in its efforts.

“The potential for this program is tremendous, and it’s up to the IRS to continue paying rewards and demonstrating to whistleblowers that the process will work and that they will be heard and protected,” Grassley 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.”

A Treasury Department inspector general report from this year also called on the IRS to further beef up the whistleblower program.