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Protecting Whistleblowers since 1977

IRS Amnesty Program for the Super-Rich Inflates Its Numbers

Jesselyn Radack , October 16, 2009

This post was written by GAP Homeland Security Director Jesselyn Radack for her Daily Kos Blog.

The Justice Department sued UBS, Switzerland's largest bank, seeking the names of 52,000 customers using Swiss bank accounts to evade taxes.  In its lame settlement of the case (it's a joke to call this plea a "bargain"), Switzerland agreed to turn over 4,500 names (fewer than 10% of those the U.S. sought.)

The IRS, which obviously misunderstands basic game theory, set up an Amnesty Program for the Super-Rich, through which offshore account-holders can come forward and avoid criminal liability.  This is an insult to those of us who obey the law and pay our taxes . . . but to up the yuck factor, the IRS is now inflating its numbers to make its flaccid program look "robust."  Sounds like the IRS office should be bombarded with Freedom of Information Act requests to IRS, Whistleblower Office, 1111 Constitution Avenue, N.W., Washington, D.C.  20224.

The deadline for the IRS Voluntary Disclosure Program (a.k.a. the "Amnesty Program for the Super-Rich") was yesterday.  Under the program, which started in March, the IRS said that 3000 people came forward as of September 21.  The IRS extended the program until yesterday, and if we are to believe the IRS numbers, another 4000 tax dodgers came in.

This is far-fetched.  I can believe that during the first 6 months, 3000 tax cheats come forward.  But I'm supposed t believe that during the past 3 weeks, 4000 come forward?  You can't chalk it up to a bunch of last-minute guilty consciences, or else you would have seen the same confessional influx right before the program originally expired in late September.

I wish I could take the IRS at its word, but the UBS scandal has been so fraught with government lies, that I can't believe anything it says these days.  The United States had UBS kingpin Martin Leichti in custody, let him plead the 5th, and return to Switzerland--a free man.  It also did a show indictment of Leichti's deputy, Raoul Weil, who is now galavanting around Switzerland and Lichtenstein.

Meanwhile, the whistleblower who made the whole case possible, Brad Birkenfeld, is the only one to be sentenced to jail. In the government's own words,

Without Mr. Birkenfeld walking into the door of the Department of Justice, I doubt as of today that this massive fraud scheme would have been discovered by the U.S. Government.

(Sentencing Transcript, p.12).

But the government has been all over the map on whether Birkenfeld is a whistleblower.  In 2007, when he initially came forward, the Justice Department told him,

[T]he Department of Justice does not, in any way, participate in the Whistleblower Reward Program.

But then, contradicting this, during a 2009 Senate hearing, Senator McCaskill asked IRS Commissioner Doug Shulman,

Was there a whistleblower in this case?

Shulman deferred the question to Justice Department senior tax attorney John DiCicco, who answered,

Brad Birkenfeld . . .

Then a few weeks ago, DiCicco told TIME magazine that Birkenfeld "is not entitled to whistleblower status," supposedly because he "did not give full an accurate disclosures during his proffer."  This is contradicted by the Justice Department’s own Motion for Sentence Reduction in which it said:

Birkenfeld provided substantial assistance . . . This substantial assistance has been timely, significant, useful, truthful complete, and reliable.

So, was the government lying then, or is it lying now?  The fact of the matter is that, to quote Dean Zerbe, author of the IRS Whistleblower law, the government couldn't spell "UBS" before it met Brad Birkenfeld.

And as for the Amnesty Program for the Super-Rich, the IRS needs to double-check its returns.