In presenting programs on how to protect whistleblowers from criminal and civil liability, we have watched in amazement as UBS whistleblower Bradley Birkenfeld got himself incarcerated for a felony conviction–despite apparently being one of the most valuable IRS whistleblowers ever.
Today’s announcement of Birkenfeld’s release after serving almost 30 months of a 40 month prison sentence–reportedly based on “good time” credits accrued, not some change of heart by the Justice Department lawyers who prosecuted him–comes amidst blistering criticism by Sen. Chuck Grassley of impediments that some IRS officials have created to the functioning of the IRS Whistleblower program. Grassley was so frustrated that he refused to allow nominations of two persons for Assistant Secretary of the Treasury positions to proceed until July 30, after his arm-twisting for information about the tax whistleblower program had made some headway.
Now that Birkenfeld has been released, attention will shift to his claim to receive what he contends is his lawful percentage of the huge sums that the IRS is reaping based on his disclosures about UBS and US taxpayers. Based on my discussions with IRS criminal agents, they will howl if Birkenfeld receives any reward of significance.
Some believe that Birkenfeld’s “holding back” cost the IRS dearly in its investigation of a former Birkenfeld/UBS client. They will argue, “Why reward a convicted felon?”
On the opposite extreme, some persons who advocate for whistleblowers have loudly condemned the entire prosecution of Birkenfeld. Those arguments have struck me as short-sighted. They ignore the principle that there is a rule of law that must apply to all of us, including whistleblowers.
Based on our review of available Birkenfeld court filings and transcripts, he apparently violated the cardinal rule that a whistleblower cannot “hold back” information about his own alleged misdeeds in his “cooperation” with the government. This is not a novel theory, but a long-settled principle.
To obtain a “pass” for one’s own felonious conduct, one must tell it all. (Read Birkenfeld’s sentencing transcript to see how he failed to dispute then the essential facts relied on by the government). Rather than frighten potential whistleblowers, whistleblower attorneys should encourage them to learn the facts by pointing out Birkenfeld’s apparent errors–and show how easily those errors can usually be avoided.
Except for those who have a financial interest in representing Birkenfeld, I do not see how whistleblower advocates would fail to appreciate how failing to prosecute Birkenfeld under these circumstances would have been even more damaging to the cause of whistleblowers generally.
Given that he apparently flouted this cardinal rule and thus allegedly misled prosecutors, his serious misconduct cannot be ignored. Opponents of compensating whistleblowers for revealing fraud would use an unchastened and unprosecuted Birkenfeld as “red meat” to try to undermine–if not repeal–the IRS whistleblower law.
In the next phase, the rule of law should also apply to the determination of what, if any, reward Birkenfeld should receive, for bringing enormously valuable information to the IRS. Not someone’s opinion, but the language Congress used in section 7623(b) of the Internal Revenue Code, should determine what reward (if any) Birkenfeld will get.
It is an utterly defensible position–and I submit the only honest position–to compensate Birkenfeld under the statute if he meets the statutory criteria. If he does not meet those criteria defined by Congress–not by the IRS–then he should receive no reward.
Otherwise, we enter a dangerous “slippery slope” if we allow anyone to distort the criteria Congress actually used in the statute. Just as the rule of law must be applied in the decision to prosecute Birkenfeld for his now-admitted misdeeds, it must be applied in determining whether he receives a percentage of the massive sums that he apparently caused the IRS to collect, based presumably on transactions for which Birkenfeld was not convicted or even charged.
Birkenfeld’s case might even cause Congress to tweak the statute, but he–like anyone else–deserves to have the rule of law applied fairly.
Nonetheless, I do not envy IRS Whistleblower Office Director Steve Whitlock’s task in determining whether Birkenfeld is entitled to an award, and if so, how much. Having seen Mr.Whitlock in action over the past six years, I believe he is both principled and strong enough to call it as he sees it.