Former UBS senior client adviser, Bradley Birkenfeld, wound up costing the bank giant close to $800 million after he exposed their massive tax evasion cover-up scheme. However, in so doing, he had to reveal confidential information that later wound up in the hands of the FBI and IRS.
Birkenfeld is now suing his legal council for failing to provide the proper forms that would have secured his protection as a whistleblower, according to Courthouse News. He subsequently faced a fine of $30,000, federal indictment and a 40-month prison sentence.
He claims the firm falsely held itself out as experienced and knowledgeable about federal whistleblower laws and procedures, but had 'very limited experience in the area of obtaining compensation and immunity for whistleblowers under federal law.'This case highlights the dangers that whistleblowers increasingly face when coming forward to reveal the truth about corruption they have documented from the inside.
Birkenfeld's revelations are not the only scandal to hit UBS; UBS trader Kweku Adoboli was arrested and charged with fraud and false accounting that resulted in a $2.3 billion loss, which led to the resignation of UBS chief, Oswald Gruebel in 2011. UBS also factored in to perhaps the greatest banking horror story in history, this year's Libor scandal, which highlighted massive manipulation of the London Interbank exchange rate that affects $360 trillion of financial products worldwide. (Source)
According the National Whistleblowers Center, Bradley Birkenfeld should rank among the most influential whistleblowers, rather than one of the most persecuted. The NWC enumerates the magnitude of what he revealed:
1. Bradley Birkenfeld served the public interest. Mr. Birkenfeld’s voluntary disclosures were historic in nature in terms of cracking the vault of bank secrecy . . . His work also led to the creation of IRS amnesty programs, under which the United States recovered $20 billion for taxpayers from 33,000 people who admitted to holding illegal offshore bank accounts. Ultimately, UBS was forced to shut down its entire $20 billion program that existed to solicit and encourage wealthy Americans to hide their money in illegal offshore bank accounts. The NY Daily News asserted that 'Bradley Birkenfeld deserves a statue on Wall Street, not a prison sentence.'
2. Bradley Birkenfeld never would have been charged if his original attorneys used whistleblower protection laws. Whistleblower protection laws apply to those who come forward with original information even if they have participated in illegal activity. Protection laws exclude only the narrowly-defined group of 'planners and initiators.'
The effort to combat fraud against the government (such as tax evasion) is based on an old Civil War statute that provides protection and rewards for whistleblowers. When passed, Congress knew that people who participate in crimes are key sources of information. Senator Jacob M. Howard, the lead Senate sponsor, endorsed rewarding participants, stating that 'setting a rogue to catch a rogue is the safest and most expeditious way I have ever discovered of bringing rogues to justice.'
Of the thousands of whistleblowers who have come forward under whistleblower protection laws (many of whom directly participated in underlying frauds), Bradley Birkenfeld is the first to face prosecution. The Justice Department’s treatment of Mr. Birkenfeld is unprecedented and undermines the integrity of America's anti-fraud laws.
3. The crackdown of illegal offshore banking would not have begun without Bradley Birkenfeld. The Department of Justice and UBS both agree (Section 15 to Exhibit C of Deferred Prosecution Agreement) that UBS could have solved all problems had they properly investigated Mr. Birkenfeld’s complaint. Brad Birkenfeld is a true whistleblower who tried to get UBS to fix the problem. UBS left him no choice but to resign and give up his international banking career. At his sentencing hearing the Court asked the Justice Department prosecutor: 'But for Mr. Birkenfeld this scheme would not have been discovered by the U.S. government? The answer was clear: 'I believe that Your Honor, yes.' This finding was stated multiple times during Mr. Birkenfeld's sentencing hearing. In addition, multiple government agencies, including the Securities and Exchange Commission, the Internal Revenue Service, and the Senate, have sent letters that point to the information revealed by Mr. Birkenfeld as crucial to the investigation of UBS.
4. Prosecutors based Bradley Birkenfeld's sentence on a misrepresentation of his whistleblowing activity. At his sentencing hearing, the Department of Justice Attorney said that if Mr. Birkenfeld had turned in one of the biggest tax offenders, his former client Igor Olenicoff, in 2007, he would not have been prosecuted. In fact, Mr. Birkenfeld did voluntarily release this information in 2007 to the Senate Subcommittee on Investigations and other government agencies. The Senate has a transcript detailing all of the disclosures Mr. Birkenfeld made, including those regarding Mr. Olenicoff, which confirms that these disclosures were made before Mr. Olenicoff was indicted or submitted his plea.The NWC had gone as far as to issue formal support for Birkenfeld, encouraging people to take action and stop illegal offshore banking and request a full pardon for Birkenfeld. That was never granted, despite his role in exposing profits made through illegal oil sales to Saddam Hussein's regime and exposing a system of evasion that led to 14,700 people coming forward to declare illegal offshore accounts, resulting in billions returned to taxpayers.
Birkenfeld will return to the courts in an attempt to seek $60 million for the legal malpractice he asserts led to his arrest and imprisonment, the breach of attorney duty, and unlawful trade.
His case should serve as a lesson about the minefield that awaits those who seek to expose the truth. It should not dissuade future whistleblowers, but should offer additional instruction about the care that is required when telling your story. In addition to the National Whistleblowers Center, the Government Accountability Project is another excellent source for guidance and contact information.
Here is a video of the history behind Birkenfeld's story with additional details about the Swiss cover-up and how he became the only one heading to prison; a clear demonstration of the intimidation the establishment uses against those who dare expose corruption at the highest levels:
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