Cashing in: A big-time tax evader helps the IRS crack down
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When good things happen to bad people, it doesn't mean they don't deserve it.
Former UBS banker Bradley Birkenfeld is a case in point. He once made a living helping wealthy customers evade taxes by hiding their profits in secret Swiss bank accounts.
Mr. Birkenfeld was prosecuted and convicted of helping a California developer cheat on his income taxes. For his trouble, the schemer was sentenced to 30 months in prison. But instead of spending his time watching TV or lifting weights, Mr. Birkenfeld cooperated with the U.S. Treasury and the Internal Revenue Service in recovering billions of dollars in unpaid taxes by American citizens.
The New York Times reports that the whistle-blower provided a tutorial on the inner workings of UBS and how sophisticated tax cheats get away with it. Armed with inside information on how UBS and other banks systematically conspired with tax dodgers to deprive the U.S. Treasury of billions, the government leaned on the Swiss banking system.
UBS paid $780 million to the Treasury to avoid prosecution and surrendered account information on 4,700 U.S. clients. This prompted 14,000 Americans to participate in an amnesty program yielding $5 billion in unpaid taxes.
This is an impressive haul by any standard. Still, Mr. Birkenfeld wasn't being patriotic by spilling the beans on his former employer. In exchange for his expertise and information, he was awarded a shocking $104 million by the IRS' whistle-blower program, the most it has ever given out.
In other words, for every hour Mr. Birkenfeld spent in prison, he made a cool $4,600. The size of his IRS reward will likely prompt other whistle-blowers to come forward. This could help the United States recover an estimated $100 billion annually in unpaid taxes.
Mr. Birkenfeld isn't really an admirable guy, but the country needs more like him if it is to recover money stolen from taxpayers. Even if the IRS has to pay whistle-blowers to come forward, that's a good investment in creating an honest and more equitable tax system.
First Published September 24, 2012 12:00 am