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Whistleblower Blog

Federal Contractor Fraud Laws To Get Tougher? ACORN Controversy Casts Spotlight on Larger Contractors That Violate False Claims Act

Outrage over misuse of public funds is a healthy reaction to those who cheat taxpayers. It can also create interesting bedfellows, as newly-introduced legislation in the House demonstrates.

HR 3571, aimed at “de-funding ACORN,” would ban federal contracts and most federal funds to any organization that “has filed a fraudulent form with any Federal or State regulatory agency,” among other things. (Complete bill is below.)

As. Rep. Alan Grayson (D-FL) observed correctly, fraud by those who receive government funds involves much “bigger fish” than ACORN–and bigger dollar amounts of alleged fraud.

“We can’t have a situation where the laws of justice are applied to one organization and not to any of the others, particularly when there are organizations that are polluting water for our soldiers and electrocuting them.” Grayson presumably was referring to allegations that KBR’s performance of government contracts for our troops has caused soldiers to be electrocuted and otherwise endangered.

Rep. Grayson is on target. He saw these abuses as a lawyer vindicating the public’s interest in fighting fraud in pursuing qui tam whistleblower cases under the False Claims Act, the nation’s primary civil statute for combating fraud and false claims against the government.

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Calls Continue for a “False Claims Act” for Wall Street Whistleblowers

Since the Madoff and Stanford scandals, we have written about the calls for the Securities and Exchange Commission (SEC) to establish a meaningful whistleblower rewards program. Currently, no adequate incentives exist for whistleblowers to speak up when they might have a chance to stop large scale fraud and prevent the next Madoff or Stanford debacle. How much better off would so many Americans be if someone had exposed Madoff before he defrauded so many investors?

Forbes has run interesting column by Bill Singer, calling for a statute that apples “False Claims Act” whistleblower remedies to Wall Street. Why not protect investors from the massive losses that so many incurred? The current system obviously failed to do so. Harry Markopolis has described eloquently how the SEC could do so much better, and new SEC whistleblower rewards should make a huge difference.

We are already seeing the successes of another innovative law based on the same idea, the IRS Whistleblower Program. To stop those who would have you and I carry their share of the nation’s tax burden, private citizens are stepping forward with better and better information to provide to the IRS about significant tax cheating. The quality of the information that our clients are presenting is compelling, and some of it will help stop major abuses of the tax laws.
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New IRS Group to Address Offshore Accounts and Other International Tax Abuses by Wealthy Taxpayers

Offshore tax abuses and tax evasion have kept the IRS quite busy of late. The fast-approaching September 23 deadline for its “voluntary disclosure program,” and its agreement with UBS that will allow it to identify thousands of American taxpayers with offshore accounts, have added momentum to its efforts to combat offshore tax abuses by high net worth taxpayers.

Now, the IRS is creating a new group to “focus on examinations involving webs of entities and arrangements controlled by the high wealth taxpayer segment.” It will
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Protecting Whistleblowers from Criminal Prosecution: The Mystery of the UBS Whistleblower’s Prison Sentence

In one of two prominent whistleblower cases in the news this week, whistleblower John Kopchinski will be awarded more than $50 million for his role in exposing improper “off-label marketing” of the drug Bextra by Pfizer. Other whistleblowers also will be rewarded because of this settlement. That settlement of $2.3 billion is the largest in history ($1 billion to settle False Claims Act allegations, and $1.3 billion in criminal fine and forfeiture).

As large as the Pfizer settlement is, the other whistleblower’s actions seem likely to lead to recovery of dollars that could dwarf this $2.3 billion settlement. UBS whistleblower Bradley Birkenfeld has lifted the shroud of secrecy from thousands of American taxpayers’ offshore accounts at UBS. He has given the IRS a foothold into recovering potentially many billions in unpaid taxes owed.

Yet Birkenfeld was recently sentenced to serve 40 months in federal prison for conspiracy to defraud the United States in a tax fraud scheme while at UBS. His conviction also calls into question his ability to receive a reward under the IRS Whistleblower Program from the billions to be collected by the IRS.

How could this happen?

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Latest State “False Claims Act” Is Enacted in North Carolina

We have followed closely the trend of states enacting their own versions of the nation’s chief whistleblower law the False Claims Act. North Carolina has become the newest state to enact its own False Claims Act, which is reprinted below.

We congratulate the State of North Carolina on a momentous accomplishment.
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UBS and IRS Voluntary Discloure Program: Interesting Convergence for IRS Whistleblower Program

Offshore tax abuses have been an IRS priority for some time, but the impending September 23, 2009 deadline for the IRS “Voluntary Disclosure” program–combined with the recent announcement that UBS has agreed with the IRS to release 4,450 names of U.S. account holders–has created a flurry of activity for the IRS.

Anxious taxpayers with exposure cannot be sure that their names are not on the list being produced. Last week, the IRS added a 52nd “FAQ” about the Voluntary Disclosure Program to explain its application to UBS account holders:

Q52. Are UBS account holders eligible to make a voluntary disclosure under the IRS’s offshore Voluntary Disclosure Practice (VDP) announced on March 23, 2009, and set to expire September 23, 2009?

Yes, provided that the UBS account holder is otherwise eligible under the VDP. However, a UBS account holder becomes ineligible to make a voluntary disclosure under the offshore VDP at the time the IRS receives information from any source, including from the Swiss Federal Tax Administration (“SFTA”), UBS, an informant, or otherwise, relating specifically to the account holder’s undisclosed foreign accounts or undisclosed foreign entities.

As part of the agreement with Switzerland and UBS announced by the IRS and the Department of Justice on August 19, 2009, UBS will be sending notices to account holders indicating that their information may be provided to the IRS under the agreement. If a UBS account holder gets this notification from UBS before September 23rd, this notification will not by itself disqualify the account holder from making a voluntary disclosure under the offshore VDP by the September 23rd deadline. Although many of these notices will not be sent by UBS to account holders until after September 23rd, the September 23rd offshore VDP deadline applies to all UBS account holders even if they have not received a notice by that date.(See https://www.irs.gov/newsroom/article/0,,id=210027,00.html).

The IRS Whistleblower Program adds another element of suspense for non-compliant taxpayers. How many of these taxpayers may learn that the IRS Whistleblower Program has already identified them to the IRS?

And if not yet identified, how many taxpayers who will decline the benefits of voluntary disclosure by September 23 will be revealed to the IRS later through the very effective IRS Whistleblower Program?
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Court Agrees with IRS That Hospital CEO Is Personally Liable for Unpaid Payroll Taxes

Health care cases that our lawyers see most often involve whistleblowers who know of violations of the False Claims Act. While we also pursue many IRS violations under the IRS Whistleblower Program, the health care industry is not the source of most of those claims.

In perhaps a new trend, last week a federal court in Florida agreed with the IRS that a hospital CEO is personally liable for failing to pay over to the IRS close to $2 million in payroll taxes. (Doulgeris v. United States, M.D.Fla., August 03, 2009).

Earlier this year, the chairman of the board of a tax-exempt hospital was held personally liable for the hospital’s failing to collect and pay to the IRS payroll taxes, as the Fifth Circuit Court of Appeals affirmed that decision. (Verret v. United States, 5th Cir., 2009). The board chair, however, had extensive involvement in the operations of the entity.

Payroll tax fraud thus appears to remain an IRS priority. The reasoning of the Florida federal judge explains how the CEO was found personally liable for unpaid payroll taxes;
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The “Program Fraud Civil Remedies Act”–A “Mini-False Claims Act”

For a “webinar” on August 11, 2009, I have been asked to discuss not only potential liability under the False Claims Act for false or fraudulent claims to the federal government, but also what has been called the “Mini-False Claims Act”: the “Program Fraud Civil Remedies Act,” 31 U.S.C. §§ 3801-12,

Because it is not feasible for the government to handle under the False Claims Act every conceivable case of a false claim in procurement, the PFCRA was enacted so that smaller claims could be handled in an administrative process.

A major provision of the PFCRA, section 3802, is reprinted below:

Chapter 38. Administrative Remedies for False Claims and Statements
§ 3802. False claims and statements; liability
(a)(1) Any person who makes, presents, or submits, or causes to be made, presented, or submitted, a claim that the person knows or has reason to know–

(A) is false, fictitious, or fraudulent;

(B) includes or is supported by any written statement which asserts a material fact which is false, fictitious, or fraudulent;

(C) includes or is supported by any written statement that–

(i) omits a material fact;

(ii) is false, fictitious, or fraudulent as a result of such omission; and

(iii) is a statement in which the person making, presenting, or submitting such statement has a duty to include such material fact; or

(D) is for payment for the provision of property or services which the person has not provided as claimed,

shall be subject to, in addition to any other remedy that may be prescribed by law, a civil penalty of not more than $5,000 for each such claim. Except as provided in paragraph (3) of this subsection, such person shall also be subject to an assessment, in lieu of damages sustained by the United States because of such claim, of not more than twice the amount of such claim, or the portion of such claim, which is determined under this chapter to be in violation of the preceding sentence.
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Can IRS Whistleblower Program Help Offset Cost of Health Care Overhaul?

How to pay for health care in the United States, as costs inexorably grow?

The IRS Whistleblower Program may help by narrowing the “tax gap”–the difference between taxes owed and taxes paid each year. Treasury’s latest estimate is that $345 billion owed remains uncollected from those who engage in tax fraud, tax evasion, and other tax noncompliance. (“Update on Reducing the Federal Tax Gap and Improving Voluntary Compliance”).

Senate Finance Committee Chair Max Baucus, D-Mont., raised this tax gap with the next IRS Chief Counsel, William J. Wilkins, on July 14: “We’re right now trying to figure how to pay for healthcare reform,” Baucus told Wilkins. “And it’s ironic that coincidentally, the amount we are trying to raise is that amount.”

The new IRS Whistleblower Program should dramatically improve the IRS’s efforts to close that tax gap. In December 2006, Congress authorized rewards of 15-30% paid to IRS whistleblowers who provide information that assists the IRS in collecting amounts owed to the IRS.

For the first time, IRS whistleblowers have an enforceable “right” to receive a reward. Early indications from the clients who have contacted us are that many substantial claims are being presented, including claims of over $1 billion owed to the IRS. (To see how the IRS Whistleblower Program works, see excerpts of this interview with IRS Whistleblower Office Director Steve Whitlock.)

Even the SEC is examining the success to date of the IRS program, in determining how the SEC might encourage and reward whistleblowers who come forward to reveal the next Madoff or Stanford.

Whistleblowers with solid information will help close the tax gap, and avoid imposing new taxes on the rest of the law-abiding Americans who pay their taxes.
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Whistleblower Attorneys Discuss False Claims Act Amendments & “The Most Pressing Issues in Representing Whistleblowers”

At the 20th Annual Convention of NELA, the National Employment Lawyers Association, I recently had the pleasure of moderating a panel discussion of some of the country’s top “whistleblower” lawyers. The topic was “The Most Pressing Issues in Representing Whistleblowers.”

Joining me in this panel discussion were Richard Renner and David J. Marshall. Richard is an attorney with Kohn & Colapinto in Washington, DC. and also serves as Legal Director of the National Whistleblowers Center. David is a partner with Katz, Marshall & Banks, LLP
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International Tax Evasion Targeted by IRS Move to Revamp Its Large Business Division

To battle offshore tax abuses and other international tax fraud and tax evasion, the IRS has announced that it is “realigning” and renaming its Large and Mid-Size Business (LMSB) division. To reflect its new emphasis, it will known as the “Large Business and International” division (LB&I).

As more transactions cross international borders, and more corporations and wealthy individuals use offshore tax havens and foreign low tax jurisdictions to avoid their tax obligations, the IRS is smart to focus more of its enforcement efforts in this way.

Based on our experience with tax whistleblowers, it is clear that the IRS Whistleblower Program is already seeing increasing numbers of tax whistleblower claims dealing with offshore tax abuses and other international tax issues.

The new IRS international unit will include a “transfer pricing” director, as well as a chief economist, who will oversee the IRS’s economic positions pertaining to transfer pricing.

(Transfer pricing, in ordinary language, involves a multinational company’s reallocating income or expenses between related entities in different countries with different tax rates to reduce taxes, by artificially increasing or decreasing the price one business entity charges another for goods, services, or intangibles. Transfer pricing cases can be good IRS Whistleblower claims.)

This action is the latest IRS step to address international tax evasion, including the investigation of the misuse of offshore accounts and foreign entities by U.S. taxpayers. Last fall, the IRS introduced a Global High Wealth Industry unit to improve monitoring of tax compliance by high income individuals, and their related enterprises.

Time will tell if the IRS succeeds in its stated goal “to create a more centralized organization dedicated to improving international tax compliance.”

The IRS announcement is reprinted below:
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Offshore Tax Havens Face Increasing Scrutiny, With IRS Whistleblowers Assisting

“Offshore” accounts are an increasing priority of IRS enforcement, aided by the new IRS Whistleblower Program. The Offshore World has changed and will never be the same again. The traditional tax haven assurance of secrecy and anonymity won’t necessarily work any more.

The US has concluded Tax Information Exchange Agreements (TIEA’s) with a number of Offshore jurisdictions. Although the TIEA’s fall short of comprehensive Double Tax Treaties, they allow the IRS to obtain tax information about entities and accounts in Offshore jurisdictions under
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How Whistleblower Lawyers Work Alongside Government Lawyers In Successful Qui Tam Cases Under the False Claims Act

When whistleblower attorneys bring a qui tam False Claims Act case, the most successful results usually occur when Government counsel and the whistleblower’s lawyers (Relator’s counsel) work together in what is known as the “public-private” partnership model.

This approach to qui tam cases allows the government to leverage its limited resources by calling on the resources provided by private attorneys. This is essentially a “joint prosecution effort, ” in which the government counsel and investigators can rely on Relator’s counsel at each stage,

–from the beginning of its investigation,

–to obtaining input for preparation of subpoenas for documentary evidence from the defendants,

–to review of evidence compiled by the government in response to subpoenas,

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New Rewards for Whistleblowers Reporting Bribery of Foreign Government Officials, Corporate Fraud In Foreign Government Contracts

When the President signed the new financial reform bill into law today, new whistleblower provisions quietly took effect to battle corruption, bribery, and corporate fraud to obtain foreign government contracts.

This new law creates the new SEC whistleblower program that we have followed since its gestation after the Madoff scandal broke. The SEC and the U.S. Department of Justice share jurisdiction over a growing and increasingly important area of enforcement, the Foreign Corrupt Practices Act (FCPA).

Bribery of foreign government officials in international business transactions, and false entries in books and records of those companies within the statute, are the targets of the FCPA. Whistleblowers whose information helps the SEC recover monetary sanctions from those corrupt entities in FCPA cases now have an enforceable right to a monetary award of 10-30%.

Based on the increasing number and size of these FCPA cases, the rewards to whistleblowers can be meaningful–as they must be to cause whistleblowers to come forward. Over the past decade, the government has pursued more and more FCPA cases, and some recover hundreds of millions of dollars.

Recall that, in late 2008, Siemens agreed to pay more than $1.6 billion to the United States and Germany, after allegedly paying “$1.4 billion in bribes to government officials in Asia, Africa, Europe, the Middle East and the Americas.” Announcing the guilty plea and settlement, the government described “a corporate culture in which bribery was tolerated and even rewarded at the highest levels of the company.”

The SEC obtained $350 million in disgorgement from that settlement, which was the largest FCPA settlement to date.

In announcing that 2008 recovery, the government explained that “there is no question that the Department has in recent years significantly increased its FCPA enforcement. From 2001 to 2004, the Department resolved or charged 17 FCPA cases. For the period of 2005 to 2008, that number is 42 resolutions, representing an increase of more than 200 percent within these four years as compared to the prior four-year period.”

With money scarce both at home and abroad, it is even more urgent to recoup funds lost to fraud. The new SEC whistleblower awards and Commodity Futures Trading Commission rewards should prompt more efficient law enforcement efforts to stop this fraud, just as the False Claims Act and the new IRS Whistleblower Program have shown is possible.

This corruption harms legitimate businesses, who cannot compete when corruption prevents a level playing field. This crime also causes damage to others, as the government explained in announcing the Siemens settlement. That transcript is reprinted below, and in part states:

For let there be no doubt that corruption is not a victimless offense. Corruption is not a gentlemen’s agreement where no one gets hurt. People do get hurt. And the people who are hurt the worst are often residents of the poorest countries on the face of the earth, especially where it occurs in the context of government infrastructure projects, contracts in which crucial development decisions are made, in which a country will live by those decisions for good or for bad for years down the road, and where those decisions are made using precious and scarce national resources.

To illustrate the types of corruption this new whistleblower law should bring to light more often, the government’s announcement of the 2008 Siemens settlement is reprinted below:
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Whistleblowers Reporting Derivatives Fraud? Whistleblower Incentives Must Be Paid by CFTC Under New Financial Reform Bill

The new financial reform bill that awaits the President’s signature this week has something important for potential whistleblowers with knowledge of fraud in options, futures, derivatives and other financial products within the jurisdiction of the Commodity Futures Trading Commission (CFTC). The bill will modify the Commodity Exchange Act to provide whistleblower rewards and protections.

Similar to the new SEC whistleblower awards for persons who reports securities fraud, the rewards to whistleblowers will be available if the CFTC recovers monetary sanctions of more than $1 million because of the whistleblower’s information.

Like SEC whistleblowers, CFTC whistleblowers will have an enforceable right to 10-30% of what the CFTC recovers in substantial cases when the whistleblower has “voluntarily provided original information to the Commission that led to the successful enforcement of the covered judicial or administrative action, or related action.” (Section 748 of Dodd-Frank Wall Street Reform and Consumer Protection Act, reprinted below).

Crucial to the success of these new whistleblower programs, whistleblowers will know that they will receive at least 10% of the recovery in significant cases when the whistleblower meets the law’s criteria.

The history of the nation’s major whistleblower statute, the False Claims Act, shows that guarantees of meaningful rewards are the critical element in causing whistleblowers to report substantial fraud. Fraud recoveries increased dramatically once Congress amended the False Claims Act in 1986 to provide meaningful whistleblower rewards of 15-25% in cases in which the government intervenes.

The new IRS Whistleblower Program is proving the same point, as quality submissions have poured in now that a right to a meaningful whistleblower award exists.

Congress has set forth general criteria for the CFTC to determine the amount of the award within the 10-30% range. Factors that the CFTC will consider include:

“(I) the significance of the information provided by the whistleblower to the success of the covered judicial or administrative action;

”(II) the degree of assistance provided by the whistleblower and any legal representative of the whistleblower in a covered judicial or administrative action;

”(III) the programmatic interest of the Commission in deterring violations of the Act (including regulations under the Act) by making awards to whistleblowers who provide information that leads to the successful enforcement of such laws; and
”(IV) such additional relevant factors as the Commission may establish by rule or regulation”.
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New SEC Whistleblower Program Approved by Senate in Financial Reform Bill

Since the SEC refused for years to heed Madoff whistleblower Harry Markopolis’ warnings that Madoff was running a Ponzi scheme, we have followed with great interest the efforts of those who sought to create the first meaningful SEC whistleblower program.

The Senate this week took an important step by authorizing a new SEC whistleblower program–one more potent than the SEC apparently wanted–as part of the Wall Street Reform and Consumer Protection Act.

When the Madoff fiasco surfaced, Congress asked why the law failed to encourage SEC whistleblowers to come forward, in the same way the qui tam whistleblower provisions of the False Claims Act have been so successful in rewarding whistleblowers for helping stop fraud against the government. Those same principles in the new IRS Whistleblower program have caused an explosion of valuable information presented by whistleblowers in exposing tax liability of many billions of dollars.

SEC leadership helped shape the tepid House version, which would have made rewards to whistleblowers wholly discretionary.

When we criticized the House version of the proposed SEC whistleblower rewards for that reason, staffers of the Senate Banking Committee contacted us to discuss what a meaningful whistleblower program should include, based on our experience with whistleblowers under the False Claims Act and IRS Whistleblower program. Our response was that, at minimum, a whistleblower with information about significant fraud must have a legally enforceable right to a meaningful reward.

Fortunately, the Senate version included such a right to an award of 10-30% in substantial cases, and the Senate view ultimately prevailed (see below text of whistleblower provisions in Section 922).

It remains to be seen how SEC leadership will respond. At this spring’s Offshore Alert Conference in Miami, an SEC official listened to his panelists describe how successful mandatory rewards have been in causing whistleblowers to come forward in False Claims Act cases and IRS Whistleblower claims, yet apparently failed to “get” that SEC whistleblowers need a similar incentive to come forward in the best cases.

In our experience in representing whistleblowers, persons with the most significant information will rarely come forward without an enforceable right to a meaningful reward. The SEC has not exactly fostered public confidence in its judgment in recent years. If it embraces whistleblowers as Congress has directed, the SEC will find that–like the IRS Whistleblower Office–it will receive better, and dramatically more, information about fraud within its jurisdiction.

The full text of section 922 regarding SEC whistleblowers is reprinted below:
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New IRS Procedures for Whistleblowers Should Encourage More Significant IRS Whistleblower Claims

This morning’s Washington Post quotes me, among others, in criticizing one aspect of the new procedures for IRS whistleblowers recently published in the Internal Revenue Manual. That one glaring defect aside, the new IRM procedures are welcome news that should encourage more IRS whistleblowers to come forward.

Today’s Post article by David Hilzenrath on the IRS whistleblower procedures makes the following point, among others:

“There’s apparently an institutional resistance to rewarding whistleblowers that will take some time to dissipate,” said Michael A. Sullivan
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TARP Fraud and Other Violations Alleged by SEC Against Chairman of Major Mortgage Lender

As we have written previously, the billions of “bailout” dollars to financial institutions through the TARP program inevitably would result in many fraud cases, including some by TARP whistleblowers.

Today, the SEC announced allegations of TARP fraud and securities fraud of more than $1.5 billion other violations against Lee B. Farkas, through his company Taylor, Bean & Whitaker Mortgage Corp. (TBW).

According to the SEC, Farkas “sold more than $1.5 billion worth of fabricated or impaired mortgage loans and securities to Colonial Bank. Those loans and securities were falsely reported to the investing public as high-quality, liquid assets. Farkas also was responsible for a bogus equity investment that caused Colonial Bank to misrepresent that it had satisfied a prerequisite necessary to qualify for TARP funds. When Colonial Bank’s parent company – Colonial BancGroup, Inc. – issued a press release announcing it had obtained preliminary approval to receive $550 million in TARP funds, its stock price jumped 54 percent in the remaining two hours of trading, representing its largest one-day price increase since 1983.”

Perhaps the SEC is showing a new attitude after the Madoff debacle. Whistleblowers should soon be able to participate in the new SEC whistleblower program, which is part of the financial reform legislation now being hashed out in conference committee.

The SEC’s full release is reprinted below:
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New IRS Whistleblower Claim Procedures for Determining Awards to Whistleblowers Announced

Today the long-awaited IRS Whistleblower Office procedures for determining awards to tax whistleblowers were announced in an update to the Internal Revenue Manual.

The new provisions for IRS Whistleblower claims address many details of how tax whistleblower claims will be handled. The full provisions are reprinted below:

Part 25. Special Topics
Chapter 2. Information and Whistleblower Awards
Section 2. Whistleblower Awards

25.2.2 Whistleblower Awards
25.2.2.1 Overview: Authority and Policy
25.2.2.2 General
25.2.2.3 Submission of Information for Award under Sections 7623(a) or (b)
25.2.2.4 Initial Review of the Form 211 by the Whistleblower Office
25.2.2.5 Grounds for Not Processing Claims for Award
25.2.2.6 Processing of the Form 211 7623(a) Claim for Award
25.2.2.7 Processing of the Form 211 7623(b) Claim for Award
25.2.2.8 Whistleblower Award Administrative Proceeding
25.2.2.9 Award Computation
25.2.2.10 Appeal Rights under section 7623(b)
25.2.2.11 Confidentiality of the Whistleblower
25.2.2.12 Funding Awards
25.2.2.13 Award Payment Procedures
25.2.2.14 Annual Report to Congress
Exhibit 25.2.2-1 1891 Letter
Exhibit 25.2.2-2 Rejection Letter – 1010 Letter
Exhibit 25.2.2-3 Acknowledgement Letter – Whistleblower Office
Exhibit 25.2.2-4 Debriefing Checksheet
Exhibit 25.2.2-5 Rejection Letter from the Whistleblower Office
Exhibit 25.2.2-6 Memorandum from Steven T. Miller, February 17, 2010
Exhibit 25.2.2-7 Sample Notice of Opportunity to Comment Letter
Exhibit 25.2.2-8 Sample Summary Award Report
Exhibit 25.2.2-9 Award Recommendation-Opportunity to Comment
Exhibit 25.2.2-10 Confidentiality Agreement
Exhibit 25.2.2-11 Sample Preliminary Award Report
Exhibit 25.2.2-12 Sample Determination Letter
Exhibit 25.2.2-13 Award Calculation Computation Guidelines (more…)

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Offshore Tax Violations: Sen. Grassley Calls For Accounting of Use of UBS Information Provided by Tax Whistleblower

Offshore tax evasion is a great priority for the IRS, and thus also the IRS Whistleblower Program.

Today, the leading advocate for robust whistleblower laws has called for the Treasury Department and the IRS to account for their use of information provided by the “UBS whistleblower,” Bradley Birkenfeld.

Sen. Chuck Grassley issued a press release today summarizing his letter to Treasury Secretary Tim Geithner and IRS Commissioner Douglas Shulman. Grassley commented on Swiss legislators’ move today to “unravel a U.S.-Swiss treaty that would allow for the disclosure of more client information to allow U.S. officials to review cases for potential enforcement of U.S. tax laws.”

“The action by Swiss legislators today to try to unravel an international treaty emphasizes the need for U.S. authorities to exhaust the information they have on U.S. taxpayers who use offshore accounts to evade taxes,” Grassley said. “Honest taxpayers deserve to know what’s happened with what could be very valuable leads, and if it’s nothing, they deserve to know why. It’s a matter of tax fairness and law enforcement. And the IRS shouldn’t wait for international agreements to fall into place when tax evaders can be identified through other appropriate tools.”

Grassley did not advocate for the UBS whistleblower’s release from federal prison, however, but focused on the government’s use of the information he provided. (See prior discussions of the UBS whistleblower’s case here).

Grassley, more than anyone, is responsible for passage of the December 2006 legislation that created the first meaningful IRS Whistleblower Program. The promising new IRS Whistleblower Program was inspired by the great successes of the nation’s primary whistleblower statute for exposing fraud, the False Claims Act.

Sen. Grassley’s announcement and letter today are reprinted below:
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