Brad Birkenfeld
Encyclopedia
Brad Birkenfeld is an American banker who formerly worked for UBS, Switzerland's largest bank.
He is the first person to expose what has become a multi-billion dollar international tax fraud scandal over Swiss private banking. Despite his unprecedented, extensive and voluntary cooperation, and registering as an IRS whistleblower, Birkenfeld is the only U.S. citizen to be sentenced to jail
as a result of the scandal.
He resigned from UBS in October 2005 and provided written whistleblower complaints to Peter Kurer, Head Counsel for UBS, and other UBS senior executives regarding the illegal practices of U.S. cross-border business. When UBS's internal investigation found no irregularities, Birkenfeld went to the United States and registered as an IRS whistleblower in June 2007 to expose this international scandal to the authorities. The Justice Department later found that UBS's internal probe into Birkenfeld's allegations that bank managers were encouraging breaches of UBS's own written policies did not examine or follow up on available evidence.
Over the next three years, Birkenfeld voluntarily undertook affirmative actions to initiate contact with and to provide sensitive, detailed information about the misconduct to the U.S. Internal Revenue Service
(IRS), Securities and Exchange Commission (SEC), and to the U.S. Senate.
In an unprecedented move, the Swiss parliament voted to approve a deal between the Department of Justice and UBS in which UBS has agreed to turn over the names of 4,450 U.S. citizens who held secret and illegal bank accounts at UBS. However, the agreement with UBS was for only a small portion of the names of tax dodgers and the fine was low compared to the entire $20 billion dollar illegal program. Additionally, Senator
Charles Grassley(R-Iowa), ranking Republican on the Finance Committee, wrote to the heads of the IRS and Treasury Department because he was concerned the IRS was "doing next to nothing" to expose the UBS account holders while waiting for the Swiss to deliver.
All the major players, including the UBS senior executive in charge of offshore business in the United States, have paid fines, been put on probation, or been set free. One of the executives, Martin Liechti, was detained for 4 months by U.S. authorities, invoked the Fifth Amendment in front of the U.S. Senate in July 2008, and was released back to Switzerland in August 2008.
At a March 4, 2009 Hearing before the Permanent Subcommittee on Investigations of the Senate Committee on Homeland Security and Governmental Affairs, Senator Claire McCaskill
asked, "Was there a whistleblower in this case?" IRS Commissioner Doug Shulman
deferred the question to John DiCicco, a senior trial attorney in the Justice Department's Tax Division, who answered, "Mr. Birkenfeld...."
Six months later, DiCicco told TIME magazine, "With regard to whistleblowers: those who seek to be treated as true whistleblowers need to know they must come in early and give complete and truthful disclosures.... Mr. Birkenfeld did not come in and give complete and truthful disclosures. Therefore, he is not entitled to whistleblower status."
The Justice Department's Motion for Sentence Reduction stated: "Defendant Birkenfeld has provided substantial assistance.... This substantial assistance has been timely, significant, useful, truthful, complete, and reliable."
, urging him to conduct an independent review of Birkenfeld's case because of the chilling effect it is having on potential financial whistleblowers.
On December 7, 2009, Birkenfeld's attorneys sent a letter to Holder detailing alleged misleading statements by the prosecutor, which were the most prejudicial to Birkenfeld's harsh sentence, and filed a motion with the judge regarding the same. The judge denied the motion on January 4, 2010 without hearing. On January 5, 2010, Birkenfeld's attorneys sent a letter to the Attorney General and the Justice Department's Office of Professional Responsibility calling for the Department to correct the public record concerning statements issued to the public related to the Olenicoff disclosures.
On January 1, 2010, Tax Analysts
, a non-profit organization that encourages transparency in tax laws, named Birkenfeld "Person of the Year." On January 3, 2010, Birkenfeld's case was a story on the first 2010 episode of 60 Minutes
.
On May 23, 2010, the Make It Safe Coalition gave an award to Mr. Birkenfeld for his outstanding contribution as a whistleblower.
In 2010, Juan Williams of Democracy Now!
said, "U.S. whistleblower Bradley Birkenfeld deserves a statue of Wall Street, not a prison sentence."
Birkenfeld's sentencing was originally set for August 15, 2008, but was delayed four times as the Justice Department, citing his cooperation in the UBS investigation, repeatedly asked for more time. This is belied by the fact that June 10, 2008 was the last time the Justice Department asked Birkenfeld for any information regarding UBS, Swiss private banking, or his former U.S. clients.
On August 21, 2009, he was sentenced to 40 months in jail (ratcheted up from the 30-month prison term prosecutors sought) by federal judge William J. Zloch
in the United States District Court for the Southern District of Florida
.
Although he had already been under house arrest for a year and a half (none of which counted towards his sentence), the Justice Department said that it intended to continue using Birkenfeld in conducting investigations, deferring his sentence until January 8, 2010. Accordingly, Birkenfeld reached out to the Justice Department multiple times, which indicated it had no interest in speaking with him and failed to ask him a single question during this time.
Birkenfeld began serving his sentence at the Federal Correctional Institute in Schuylkill, Pennsylvania on January 8, 2010. Currently, he is the only UBS banker or client to go to jail. On Tax Day, April 15, 2010, his attorneys filed a clemency petition, which is pending before the Pardon Attorney. On June 8, 2010 Senator Charles Grassley sent a letter to Treasury Secretary Timothy Geithner and IRS Commissioner Douglas Shulman requesting answers to what they have done with the extensive information Birkenfeld gave them to identify all the U.S. clients with offshore bank
accounts, which the government failed to obtain from UBS. Grassley sent a follow-up memorandum on September 15, 2010, which the Treasury Department and the IRS ignored. Sixteen months after Grassley's letter, there has still been no answer. There is also no head of the Tax Division at the U.S. Department of Justice.
He is the first person to expose what has become a multi-billion dollar international tax fraud scandal over Swiss private banking. Despite his unprecedented, extensive and voluntary cooperation, and registering as an IRS whistleblower, Birkenfeld is the only U.S. citizen to be sentenced to jail
as a result of the scandal.
Background
In October 2001, Birkenfeld began working at UBS in Geneva, Switzerland, handling private banking, primarily for clients located in the United States. In 2005, he learned that UBS's secret dealings with American customers violated an agreement the bank had reached with the IRS.He resigned from UBS in October 2005 and provided written whistleblower complaints to Peter Kurer, Head Counsel for UBS, and other UBS senior executives regarding the illegal practices of U.S. cross-border business. When UBS's internal investigation found no irregularities, Birkenfeld went to the United States and registered as an IRS whistleblower in June 2007 to expose this international scandal to the authorities. The Justice Department later found that UBS's internal probe into Birkenfeld's allegations that bank managers were encouraging breaches of UBS's own written policies did not examine or follow up on available evidence.
Over the next three years, Birkenfeld voluntarily undertook affirmative actions to initiate contact with and to provide sensitive, detailed information about the misconduct to the U.S. Internal Revenue Service
Internal Revenue Service
The Internal Revenue Service is the revenue service of the United States federal government. The agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue...
(IRS), Securities and Exchange Commission (SEC), and to the U.S. Senate.
Results
In February 2009—following the issuance of a "John Doe" summons that was based in significant part upon the information that Birkenfeld provided to the IRS in June 2007—UBS entered into an historic Deferred Prosecution Agreement with the Government to avoid indictment on criminal charges of aiding tax evasion. The Agreement entailed UBS paying $780 million in fines and turning over the names of about 250 clients.In an unprecedented move, the Swiss parliament voted to approve a deal between the Department of Justice and UBS in which UBS has agreed to turn over the names of 4,450 U.S. citizens who held secret and illegal bank accounts at UBS. However, the agreement with UBS was for only a small portion of the names of tax dodgers and the fine was low compared to the entire $20 billion dollar illegal program. Additionally, Senator
United States Senate
The United States Senate is the upper house of the bicameral legislature of the United States, and together with the United States House of Representatives comprises the United States Congress. The composition and powers of the Senate are established in Article One of the U.S. Constitution. Each...
Charles Grassley(R-Iowa), ranking Republican on the Finance Committee, wrote to the heads of the IRS and Treasury Department because he was concerned the IRS was "doing next to nothing" to expose the UBS account holders while waiting for the Swiss to deliver.
All the major players, including the UBS senior executive in charge of offshore business in the United States, have paid fines, been put on probation, or been set free. One of the executives, Martin Liechti, was detained for 4 months by U.S. authorities, invoked the Fifth Amendment in front of the U.S. Senate in July 2008, and was released back to Switzerland in August 2008.
"Whistleblower" status
Birkenfeld initially came forward in 2005 under UBS's policy on "Whistleblowing Protection for Employees." When he went to the U.S. government in 2007, he registered with the IRS's Whistleblower Reward Program, but Justice Department tax prosecutor Kevin Downing told him that it "does not, in any way, participate in the Program. The Program is exclusively within the jurisdiction and control of the Internal Revenue Service."At a March 4, 2009 Hearing before the Permanent Subcommittee on Investigations of the Senate Committee on Homeland Security and Governmental Affairs, Senator Claire McCaskill
Claire McCaskill
Claire Conner McCaskill is the senior United States Senator from Missouri and a member of the Democratic Party. She defeated Republican incumbent Jim Talent in the 2006 U.S. Senate election, by a margin of 49.6% to 47.3%. She is the first woman elected to the U.S. Senate from Missouri in her own...
asked, "Was there a whistleblower in this case?" IRS Commissioner Doug Shulman
Douglas H. Shulman
Douglas H. Shulman is the U.S. Commissioner of Internal Revenue. His nomination was confirmed by the full U.S. Senate on March 14, 2008 and he was sworn in on March 24, 2008...
deferred the question to John DiCicco, a senior trial attorney in the Justice Department's Tax Division, who answered, "Mr. Birkenfeld...."
Six months later, DiCicco told TIME magazine, "With regard to whistleblowers: those who seek to be treated as true whistleblowers need to know they must come in early and give complete and truthful disclosures.... Mr. Birkenfeld did not come in and give complete and truthful disclosures. Therefore, he is not entitled to whistleblower status."
The Justice Department's Motion for Sentence Reduction stated: "Defendant Birkenfeld has provided substantial assistance.... This substantial assistance has been timely, significant, useful, truthful, complete, and reliable."
Chilling whistleblowers and prosecutorial misconduct
On October 22, 2009, whistleblower advocacy groups sent a letter to U.S. Attorney General Eric HolderEric Holder
Eric Himpton Holder, Jr. is the 82nd and current Attorney General of the United States and the first African American to hold the position, serving under President Barack Obama....
, urging him to conduct an independent review of Birkenfeld's case because of the chilling effect it is having on potential financial whistleblowers.
On December 7, 2009, Birkenfeld's attorneys sent a letter to Holder detailing alleged misleading statements by the prosecutor, which were the most prejudicial to Birkenfeld's harsh sentence, and filed a motion with the judge regarding the same. The judge denied the motion on January 4, 2010 without hearing. On January 5, 2010, Birkenfeld's attorneys sent a letter to the Attorney General and the Justice Department's Office of Professional Responsibility calling for the Department to correct the public record concerning statements issued to the public related to the Olenicoff disclosures.
Tax Analysts' "Person of the Year" and Other Awards
Attorney Dean Zerbe, who helped write the 2006 IRS whistleblower law when he served as tax counsel to the Senate Finance Committee, called Birkenfeld "the most important tax whistleblower ever."On January 1, 2010, Tax Analysts
Tax Analysts
Tax Analysts is a nonprofit publisher of weekly magazines and daily online journals on tax policy and administration. Tax Analysts also promotes transparency in tax policymaking and holds regular conferences on key tax issues.-History:Thomas F...
, a non-profit organization that encourages transparency in tax laws, named Birkenfeld "Person of the Year." On January 3, 2010, Birkenfeld's case was a story on the first 2010 episode of 60 Minutes
60 Minutes
60 Minutes is an American television news magazine, which has run on CBS since 1968. The program was created by producer Don Hewitt who set it apart by using a unique style of reporter-centered investigation....
.
On May 23, 2010, the Make It Safe Coalition gave an award to Mr. Birkenfeld for his outstanding contribution as a whistleblower.
In 2010, Juan Williams of Democracy Now!
Democracy Now!
Democracy Now! and its staff have received several journalism awards, including the Gracie Award from American Women in Radio & Television; the George Polk Award for its 1998 radio documentary Drilling and Killing: Chevron and Nigeria's Oil Dictatorship, on the Chevron Corporation and the deaths of...
said, "U.S. whistleblower Bradley Birkenfeld deserves a statue of Wall Street, not a prison sentence."
Birkenfeld's plea, sentencing and incarceration
Although on at least one occasion Justice Department officials told Birkenfeld they were not looking to prosecute him, they arrested him in 2008 and he promptly pleaded guilty to a single fraud conspiracy count.Birkenfeld's sentencing was originally set for August 15, 2008, but was delayed four times as the Justice Department, citing his cooperation in the UBS investigation, repeatedly asked for more time. This is belied by the fact that June 10, 2008 was the last time the Justice Department asked Birkenfeld for any information regarding UBS, Swiss private banking, or his former U.S. clients.
On August 21, 2009, he was sentenced to 40 months in jail (ratcheted up from the 30-month prison term prosecutors sought) by federal judge William J. Zloch
William J. Zloch
William J. "Bill" Zloch is an American lawyer and judge, as well as a former American football quarterback and wide receiver for the University of Notre Dame....
in the United States District Court for the Southern District of Florida
United States District Court for the Southern District of Florida
The United States District Court for the Southern District of Florida is the federal United States district court with jurisdiction over the southern part of the state of Florida....
.
Although he had already been under house arrest for a year and a half (none of which counted towards his sentence), the Justice Department said that it intended to continue using Birkenfeld in conducting investigations, deferring his sentence until January 8, 2010. Accordingly, Birkenfeld reached out to the Justice Department multiple times, which indicated it had no interest in speaking with him and failed to ask him a single question during this time.
Birkenfeld began serving his sentence at the Federal Correctional Institute in Schuylkill, Pennsylvania on January 8, 2010. Currently, he is the only UBS banker or client to go to jail. On Tax Day, April 15, 2010, his attorneys filed a clemency petition, which is pending before the Pardon Attorney. On June 8, 2010 Senator Charles Grassley sent a letter to Treasury Secretary Timothy Geithner and IRS Commissioner Douglas Shulman requesting answers to what they have done with the extensive information Birkenfeld gave them to identify all the U.S. clients with offshore bank
Offshore bank
An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction that provides financial and legal advantages. These advantages typically include:...
accounts, which the government failed to obtain from UBS. Grassley sent a follow-up memorandum on September 15, 2010, which the Treasury Department and the IRS ignored. Sixteen months after Grassley's letter, there has still been no answer. There is also no head of the Tax Division at the U.S. Department of Justice.
External links
- 60 Minutes profile, January 3, 2010
- Why Is the Whistleblower the Only One Heading to Prison? - video report by Democracy Now!Democracy Now!Democracy Now! and its staff have received several journalism awards, including the Gracie Award from American Women in Radio & Television; the George Polk Award for its 1998 radio documentary Drilling and Killing: Chevron and Nigeria's Oil Dictatorship, on the Chevron Corporation and the deaths of...