Bank whistleblower gets 40 months prison time

By MARTHA BRANNIGAN, Miami Herald

In a surprisingly heavy judgment, Bradley Birkenfeld, the former UBS AG private banker who blew the whistle on a wide-ranging scheme in which the Swiss bank helped wealthy Americans dodge income taxes through secret accounts, was sentenced to 40 months in prison Friday morning.

The sentence was 10 months longer than the prosecution had asked for. The defense had sought probation, pointing to the major impact of Birkenfeld’s unprecedented cooperation. The prosecutors said Birkenfeld is still helping the government and will remain free until Jan. 8, 2010.

In federal court in Fort Lauderdale, U.S. District Judge William J. Zloch ordered Birkenfeld to pay a $30,000 fine. After prison, he has three years of probation.

 

Bradley Birkenfeld (left) AP

Bradley Birkenfeld (left) AP

Birkenfeld, a tall and athletic man of 44, laid the foundation for the federal government’s most devastating assault ever on Swiss banking secrecy and offshore tax cheats. He wore a gray pinstripe suit, blue shirt, red tie and the beginnings of a goatee.

 

Drawing heavily on details Birkenfeld provided about UBS’ illegal practices in helping U.S. tax cheats, the Internal Revenue Service filed a civil suit seeking to force the bank to turn over information on thousands of unidentified UBS account-holders with secret offshore accounts.

As a result, the U.S. and Swiss government on Wednesday unveiled details of an agreement under which the IRS will end up getting details on 4,450 secret accounts through diplomatic channels in exchange for abandoning its aggressive court tactics.

Assistant U.S. attorney Jeffrey A. Neiman recommended that Birkenfeld get 30 months in prison for his conviction on one count of conspiracy to defraud the government — down from the 60-month maximum sentence he is exposed to — because of his extensive cooperation.

Zloch had delayed Birkenfeld’s sentencing four times at the request of prosecutors who are continuing to debrief him, but last week turned down a fifth request.

Birkenfeld was one of about 50 UBS private bankers catering to U.S. clients. His special services to rich Americans who wanted to hide money in secret offshore accounts once included slipping through U.S. Customs carrying diamonds stuffed inside a toothpaste tube.

Birkenfeld, an MBA whose father is a Boston neurosurgeon, joined the bank in October 2001 after working at several other institutions. Birkenfeld might have avoided criminal prosecution or gotten a government recommendation for lighter punishment, but for one misstep: When he began cooperating with U.S. authorities, he initially kept mum about his own involvement in the scheme, prosecutors said in court papers Tuesday.

Court papers filed by defense attorney David E. Meier of Todd & Weld on Tuesday said that Birkenfeld was already cooperating extensively with U.S. prosecutors and other U.S. authorities when he was arrested upon arriving at Boston airport from Switzerland in May 2008.

Birkenfeld was arrested in 2008 when he flew to the United States for scheduled meetings with the Securities and Exchange Commission and the U.S. Senate, whom he was cooperating with, his court papers said.

In spilling the beans, Birkenfeld failed to mention his most prominent client, Lighthouse Point billionaire Igor Olenicoff, who had already attracted scrutiny from the Internal Revenue Service independently of Birkenfeld.

Olenicoff, a real estate developer who once was on Forbes’ list of richest Americans, eventually pleaded guilty and paid a large fine.

In June 2008, Birkenfeld pleaded guilty to conspiring to help Olenicoff evade $7.2 million in taxes by helping him conceal $200 million and continued his cooperation with authorities. He has remained free on bond, with an electronic ankle bracelet and a curfew.

Based in part on damning information Birkenfeld provided to federal prosecutors, UBS wound up paying a $780 million fine to the United States as part of a deferred prosecution agreement in February that allowed the bank to avoid criminal charges. It agreed to shut down its cross-border business of providing secret bank accounts to wealthy Americans.

The bank also provided the IRS with information on about 250 to 300 U.S. customers with Swiss accounts — information that federal prosecutors said Tuesday has triggered criminal investigations of more than 150 Americans suspected of illegally concealing income.

Three UBS customers have already pleaded guilty to charges of filing false tax returns and a fourth is set to plead guilty to failing to disclose an offshore bank account.

Posted at the Miami Herald. Also see this June 2008 Bloomberg article for more background.

One response to “Bank whistleblower gets 40 months prison time

  1. Pingback: COTO Report Tops 100,000 Visitors « COTO Report

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