You may remember from a few years ago when the Swiss banking giant UBS was in the news. It turns out the bank was helping to enable US tax evasion by opening off-shore accounts and failing to report the gains. Ultimately they were caught, and in 2009 they were levied a fine of $780 million. But how did that case get started? That is where Birkenfeld comes into play.
The Swiss Bank and Tax Evasion
Switzerland has long been known for its secrecy. They have very strict privacy laws and it has been difficult for even the IRS to get information on the account holders. This has made it a great place for those who have large accounts and want to (illegally) avoid paying taxes.
That has greatly changed since 2009. It was then that Birkenfeld was imprisoned and fined for helping some of his clients avoid taxes. While his imprisonment was heavily criticized, especially because he was helping blow the whistle on UBS as a whole, the punishment stuck and he was sentenced to 40 months. He was in prison from August 2009 until August 2012.
During this time, however, Birkenfeld was still helping the IRS to crack down on the tax evasion of UBS. He gave information that he could, and helped to bring about a revolutionary change in the Swiss banking system.
While he had to spend 3 years in jail, he was still highly rewarded for his whistleblowing. In September 2012, while Birkenfeld was still living in a halfway house (he was released on probation in November 2012), he was awarded $104 million.
Back in the 1800s Lincoln was president and the country was caught in the midst of a Civil War. There were a lot of private companies that were doing business with the government supplying goods, munitions, and horses. Some decided they could make more money by claiming one product, yet selling another. For instance, they would sell an old sickly horse and claim it was healthy. Or they would sell rations that were already spoiled.
To crack down on this fraud, Lincoln signed into law the Federal False Claims Act. Although it has changed over the years, the premise is still the same. An individual can bring a lawsuit on behalf of the federal government to help stop or prevent fraud. This Qui Tam clause allows the individual to receive a monetary reward for his or her troubles, and the whistleblower laws protect that individual against backlash.
Birkenfeld is just one of many people who have taken a stance against fraud. His reward was huge because of it (the government saved billions of dollars, so $100 million was a small price to pay). If you search around there are many more that have filed similar lawsuits and have been highly compensated for their courage.