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Whistleblower jailed in UBS case gets $104m award

WASHINGTON — First, the government threw Bradley Birkenfeld in prison for helping a former client at UBS AG hide his wealth from the Internal Revenue Service. Now, as part of the same case, the IRS has awarded the former banker $104 million for helping to expose widespread tax evasion by the Swiss banking behemoth.

The dizzying turnabout leaves him with the largest government whistle-blower award ever to an individual, said Stephen Kohn, one of Birkenfeld’s attorneys and executive director of the National Whistleblowers Center, a nonpartisan group that defends employees’ disclosures of wrongdoing.

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The size of the award, announced Tuesday, reflects an investigation that resulted in UBS’s being fined $780 million, an unprecedented agreement requiring UBS to give the US government the names of 4,700 Americans who held secret overseas accounts, and the recovery of $5 billion in back taxes and penalties from other taxpayers with overseas accounts under amnesty programs.

More broadly, the award is a resounding signal to other financiers with information about tax wrongdoing that the IRS will treat them properly, said Kohn, who called Birkenfeld ‘‘the Babe Ruth of whistle-blowers.’’

Birkenfeld has become something of a cause celebre among whistle-blowers because of the magnitude of his case and the fact that he was jailed after cooperating with authorities. His lawyers say he discovered UBS’s illegal activities in 2005; after the company failed to change, he went to US authorities in 2007.

Birkenfeld, 47, served 31 months in prison after pleading guilty in 2008 to conspiracy to defraud the United States, related to his work for UBS. The Justice Department said Birkenfeld did not reveal his own misconduct, a charge his attorneys say is not true.

As Birkenfeld entered prison in 2010, he called his treatment an injustice, saying, ‘‘I’m a proud American who did the best I could for my country and this is how they reward me.’’

Kohn said Birkenfeld left prison in August but is confined to a house in New Hampshire center and works as a groundskeeper. His home confinement ends in November, when he will begin three years on parole.

Kohn said Birkenfeld has already received his check — from which the IRS has already withheld taxes. He would not say how much was withheld.

Gordon Schnell, a New York lawyer who handles whistle-blower work, said the huge award may signal a turnabout by the IRS whistle-blower office, which he said has had a reputation for doing little.

‘‘It’s sending out a message to whistle-blowers, ‘Don’t stop coming. Our doors are now open for real and we will listen to you,’ ’’ Schnell said.

The IRS whistle-blower program was strengthened by Congress in 2006 to focus on high-earning tax dodgers, guaranteeing awards for whistle-blowers whose information leads to collections of at least $2 million in unpaid taxes, interest, and penalties. The agency is allowed to pay an award of up to 30 percent of the collected taxes, interest, and penalties.

The IRS has said it collected $48 million under the program last year and handed out $8 million in awards, down from $465 million collected and $19 million in awards in 2010. The report did not explain why the amounts had decreased.

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