After a flurry of articles with inflammatory headlines like, From Snitch to Rich (thank you, Wall Street Journal), whistleblower attorney Stephen Kohn had an amazing Op-Ed in Forbes. http://www.forbes.com/...
The truth of the matter is that whistleblowers more often than not end up blacklisted and bankrupted, depressed or dead. For anyone laboring under the delusion that whistleblowing is a get-rich-quick scheme, follow me after the jump. And this is not to mention the government misconduct in this underlying case, which the Justice Department is supposedly investigating... but Attorney General Holder (who recused himself), handed it off to David Ogden (who resigned the next week), who apparently handed it off to H. Marshall Jarrett (who was put out to pasture at EOUSA after Judge Emmet G. Sullivan expresed "no confidence" in OPR, the office Jarrett formerly led, to investigate lawyers who botched the case of former Sen. Ted Stevens.)
Last week, numerous credible news media outlets, see http://www.nytimes.com/..., reported that Brad Birkenfeld, who shattered Swiss bank secrecy by blowing the whistle on UBS, may make billions of dollars for doing so.
As Kohn points out:
What really happens to employees who blow the whistle and seek a reward? Birkenfeld, like most whistleblowers, has lost his job and career. He was forced to resign from UBS after his internal protests regarding illegal bank practices were ignored.
There are a number of whistleblower reward statutes, which theoretically entitle whichtleblowers who report fraud on the government to a portion of any amount that the government recovers. This IRS law contains a reward provision similar to the False Claims Act: whistleblowers are entitled to 15%-30 % the monies recovered by the U.S. as a result of their disclosures. But the process is long, Byzantine in its complexity, and big awards are the exception rather than the rule.
Here are some sobering facts:
--Since 2006, when the IRS reward program was made consistent with the False Claims Act, no whistleblower has obtained any reward from the IRS.
--Between 1987-2009, the average False Claims Act reward paid to a whistleblower was $1.9 million dollars--not "billions".
--In the 22-year history of the False Claims Act, no reward paid to a single whistleblower has approached the $100 million mark, regardless of the amount of money obtained by the government.
What is lost in the hyperventilating speculation over the theoretical size of Birkenfeld's reward are these facts:
*In 2005, when Birkenfeld first blew the whistle internally at UBS, the IRS reward law did not yet exist.
* Birkenfeld did not resign over a poor performance evaluation, as UBS has claimed. His performance evaluation was "superior." He resigned because when he discovered UBS' supposed policy on offshore recruiting, which conflicted with its practices, and the bank refused to remedy the problem. He felt no other choice but to resign.
* In 2006, before Congress passed the IRS whistleblower law, Birkenfeld traveled here and hired attorneys for the specific purpose of exposing UBS misconduct to the government, which he did to the Justice Department, IRS, SEC and Senate.
Birkenfeld has lost his home, his job and his career.
He has also lost his freedom, and is scheduled to report to jail on January 8, 2010.
The fact that he sought the benefits and protections of U.S. laws (which is, ironically, the only way to get whistleblower status with the IRS)--and that these laws were turned against him--speaks for itself.
Kohn says it better than I can:
If the United States government is actually serious about encouraging employees to blow the whistle on tax fraud, the Birkenfeld precedent is simply not the way to accomplish those goals. If rewards are simply pie in the sky, and employees who uncover massive tax fraud by large banks face unending economic retaliation, legal battles and potential prosecution when they try to report the crimes to their government, what are the future prospects for any employee in the banking industry who tries to stop massive tax fraud against the American people?