The Justice Departments’ War on Whistleblowers
“The impact of whistleblowing has consequences more similar to a serious crime than a good deed”
— Financial Journalist Constantin Seibt ( Tages-Anzeiger News, Switzerland )
* Because of the continued budget cuts to the IRA and the complexity of the tax evasion schemes, whistleblowers are the most efficient and effective means of significantly reducing this kind of tax dodging
* That’s why the departments of justice prosecute whistleblowers so vigorously- and the billionaire controlled media suppress the coverage
Our story begins in 2005 with a US citizen, Bradley Birkenfeld, a private banker who had worked in the department of a Swiss bank, UBS (formerly the United Bank of Switzerland), the world’s largest bank. It marketed tax savings schemes for its ultra-high net worth customers in the U.S..
In 2006, the U.S. Congress passed the Tax Relief and Health Care Act. Whistleblowers could file confidential complaints and get a share of the money recovered. A share in the collection is partial compensation for what amounts to professional suicide when you are a whistleblower.
All to suggest that Congress was getting serious about stopping tax evasion. But as Birkenfeld learned, there is no automatic lasting immunity. Whatever you submit ‘can and will be used against you in a court of law’.
Birkenfeld immediately contacted the Department of Justice and arranged for a ‘Queen for a Day’ immunity to come to the US, show what he had to offer, get immunity and a percentage of the recovery.
Under Swiss law, Birkenfeld committed a serious criminal offense if he gave any information about Swiss Bank accounts unless it was pursuant to a subpoena. If the Swiss authorities found out about his meeting with the DOJ, they would clap him in jail for a good long time. The DOJ refused to issue a subpoena after seeing Birkenfeld’s evidence.
Birkenfeld’s lawyer arranged to have a Senate committee subpoena him. With the protection of a subpoena from Swiss prosecution, he could tell his tale in more detail to the Senate. That testimony included information about his golden goose client, a Russian billionaire Igor Olenicoff, now enjoying the California sunshine and US-style tax evasion.
So now, the DOJ had hard evidence of Olinenicoff’s bank account data to connect the dots, and Birkenfeld’s role in it. As they had evidence of massive tax evasion by a transplanted Russian oligarch, what do you think the DOJ did?
The DOJ reneged on its amnesty deal with Birkenfeld claiming that, although he disclosed his dealings with Olenicoff to the Senate, he didn’t tell the DOJ. His information to it was not complete; therefore, he did not qualify as a whistleblower. Their deal with him was off.
As noted above, there is no automatic protection for information provided under the whistleblower statute. If the DOJ finds the applicant does not qualify as a whistleblower, it can use all the information the applicant provided to prosecute them at its sole discretion.
The DOJ prosecuted Birkenfeld and secured a 40-month jail term. It gave a sweetheart deal to the Russian billionaire. He had to pay his multi-millions in tax arrears and a penalty-but no jail.
The IRS disagreed with the DOJ and said Birkenfeld was a whistleblower and paid him $104 million for his reward on money collected because of his information. For the people named on the Birkenfeld disclosures, the IRS offered an amnesty program . More than 7500 Americans took advantage of the program. None were prosecuted or fined for tax evasion.
Whistleblower Legislation As Entrapment
Jessylin Reddick, a former DOJ attorney and head of the homeland security for the Government Accountability Project said of the Birkenfeld case:
“Basically, the government doesn’t like whistle-blowers, and they have demonstrated time and again mountainous bad faith — as in this case, turning a perfectly good whistle-blower-incentive law into virtual entrapment”. (Emphasis added)
Edward Snowden understood the entrapment use of whistleblower legislation when the issue is illegal activity by senior management. It is used to identify whistleblowers to be able to prosecute them, not to change practices. He would have complained to the senior officers who were surveilling Americans like J. Edgar Hoover did to get data to blackmail politicians and discredit political activists they didn’t like. Snowden learned from the prosecution of Thomas Drake who earlier tried to stop this type of surveillance unsuccessfully through a whistleblower application. Drake then was prosecuted when a newspaper carried a leaked story.
The national whistleblower centre, founded to assist whistleblowers, indicates that the IRS whistleblower program has been successful. From 2007 to 2020, the IRS Whistleblower Office collected over $5.9 billion and made awards in the amount of over $1 billion. Yet, how many of these were employees telling on their employers and no threat to the wealth protection industry? On its website, it indicates that it advocated for Birkenfeld to successfully obtain his award, but failed to note his jail time.
The IRS has the ability to protect whistleblower identity even from freedom of information requests. That may safeguard some whistleblowers.
However, the Justice Department’s message in prosecuting Birkenfeld was clear to potential bank whistleblowers with caches of data: reveal how the wealthy are hiding their taxes, Congress’s intentions be damned. if it has your name, it will prosecute you.
You can read about the DOJ’s recent prosecution of FinCen whistleblower, Dr. May Edwards, who the Washington Posts calls the forgotten whistleblower, in my last post here.
Acknowledgements: Olen Properties Corporation photo by Ken Steinhart.
Originally published at https://jandweir.substack.com.
