Bittersweet Justice for Bradley Birkenfeld

Today, the IRS awarded whistleblower Bradley Birkenfeld $104 million to reward him for having exposed UBS’ methods of helping US tax cheats hide their loot, tax free, in Switzerland.

It’s a bittersweet award, I’m sure. As Birkenfeld’s lawyer, Stephen Kohn, reminded at the ceremony, Birkenfeld was imprisoned by the Obama Administration for fraud in spite of what now is clear confirmation he acted as a whistleblower; he got out early on August 1 from his 40 month sentence.

The IRS reward will help undo the tremendous damage caused by the ill-conceived decision of the U.S. Department of Justice to ignore the whistleblower laws and prosecute Mr. Birkenfeld. Mr. Birkenfeld was the only UBS banker to blow the whistle and the only UBS banker to be prosecuted. By doing so the DOJ sent the wrong message to international bankers. They caused a chilling effect on the willingness of employees in the international banking industry with direct knowledge of illegal offshore banking practices to step forward to report these crimes.

The National Whistleblower Center carefully investigated the basis upon which the DOJ justified its prosecution. The DOJ did not tell the truth about Mr. Birkenfeld. At his sentencing hearing, the DOJ justified its decision to indict Mr. Birkenfeld based on its position that Mr. Birkenfeld had failed to inform the government about the illegal activities of his largest client, billionaire Igor Olenicoff.

But this charge against Mr. Birkenfeld was false and defamatory. The NWC carefully reviewed court records concerning the Olenicoff case, internal emails regarding Mr. Birkenfeld’s disclosures, and a confidential transcript of sworn testimony Mr. Birkenfeld provided to the U.S. Senate in 2007 about the illegal activities of Mr. Olenicoff. These materials absolutely verify that Mr. Birkenfeld did in fact blow the whistle on Mr. Olenicoff, and that the charges made by the DOJ were false. The NWC finds it very troubling that the prosecutor who leveled these charges in court against Mr. Birkenfeld has left his government job and taken a position with a major law firm that defends tax cheats. The DOJ also granted immunity to the top-ranking official at UBS who was responsible for the UBS tax frauds and permitted this official, Martin Liechti, to leave the United States and obtain safe-haven in Switzerland where, to this day, he has escaped justice. Mr. Liechti invoked the 5th amendment in testimony before the U.S. Senate.

There’s even a WikiLeaks cable suggesting we prosecuted Birkenfeld as a favor to the Swiss.

And it’s not just Birkenfeld who has gotten limited justice out of this–though obviously he is by far the worst off. While the IRS got over $5 billion in owed taxes as a result of his whistleblowing, no one else went to prison, not even the several individuals about whom specifically Birkenfeld blew the whistle. And a bunch of rich people–potentially including a Presidential candidate–enjoyed an amnesty that didn’t even require them to admit they had been cheating their country.

In short, like so much else with the Obama Administration, it’s an example where the real criminals go free while the whistleblowers get prosecuted.

Marcy has been blogging full time since 2007. She’s known for her live-blogging of the Scooter Libby trial, her discovery of the number of times Khalid Sheikh Mohammed was waterboarded, and generally for her weedy analysis of document dumps.

Marcy Wheeler is an independent journalist writing about national security and civil liberties. She writes as emptywheel at her eponymous blog, publishes at outlets including the Guardian, Salon, and the Progressive, and appears frequently on television and radio. She is the author of Anatomy of Deceit, a primer on the CIA leak investigation, and liveblogged the Scooter Libby trial.

Marcy has a PhD from the University of Michigan, where she researched the “feuilleton,” a short conversational newspaper form that has proven important in times of heightened censorship. Before and after her time in academics, Marcy provided documentation consulting for corporations in the auto, tech, and energy industries. She lives with her spouse and dog in Grand Rapids, MI.

14 replies
  1. allan says:

    “… a confidential transcript of sworn testimony Mr. Birkenfeld provided to the U.S. Senate in 2007 about the illegal activities of Mr. Olenicoff.”

    Does anybody know more about this? Did senators know, or just staffers?

  2. MadDog says:

    @allan: Senators? That they would admit to knowing anything ever seems unlikely. Unless it helps them rake in the corporate campaign cash to get re-elected.

  3. RAM says:

    I used to think Alberto Gonzales was the weakest, worst Attorney General ever. But Eric Holder is giving him a heck of a run for his money.

  4. emptywheel says:

    @MadDog: Birkenfeld’s lawyers went out of their way to commend Chuck Grassley for his help on this. So don’t knock it–Grassley is usually quite good on whistleblower issues.

  5. MadDog says:

    @emptywheel: The exception that proves the rule?

    Notwithstanding Grassley’s work, from what I can see (paging Senator Diane Feinstein to the white courtesy phone), the most recent stuff coming out of places like SSCI seems to place whistleblowers in more legally vulnerable positions than less.

    I wish it were different, but it sure doesn’t seem that way with the long list of folks like former NSA employee Thomas Drake who get steamrolled by vengeful US government bureaucrats with turf to protect.

  6. Frank33 says:

    Great Post as usual. But you are using Wikileaks. You are endangering lives and careers and Swiss Bank Accounts.

    There are two Bradley’s who have been victimized by Holder and the secret government. Holder is, FUNNY. Birkenfeld was not “forthcoming” and Holder is a liar about everything.

    But the other Bradley has been imprisoned fpr years without the rule of law.

    Birkenfeld had pleaded guilty to a single fraud conspiracy count in June 2008, when he acknowledged helping his largest U.S. client hide assets from the Internal Revenue Service.

    In a claim disputed by Birkenfeld’s lawyers in a December 7 letter to U.S. Attorney General Eric Holder, Justice Department officials have said the jail time was justified because he was not initially forthcoming about the tax fraud committed by his billionaire U.S. client Igor Olenicoff.

  7. Gimme Shelter says:

    In court documents that lawyers for Bain Capital sought to keep secret, the company and other leading private equity firms are depicted as unofficial partners in a bid-rigging conspiracy aimed at holding down the prices of businesses they were seeking to buy.

    The documents have become part of a lawsuit in Federal District Court in Boston brought against Bain and other firms by shareholders who say the firms’ bid-rigging artificially deflated the sales price of more than two dozen companies and cost them billions of dollars.

    Bain, founded by the Republican presidential nominee Mitt Romney, is a defendant in the lawsuit, which also names Goldman Sachs’s private equity arm and the Blackstone Group, the firm run by the investor Stephen A. Schwarzman.

    http://www.nytimes.com/2012/09/12/business/documents-depict-equity-firms-like-bain-as-colluding.html?pagewanted=all

  8. guest says:

    Ugh. I work at the IRS and my folks are retired from DOJ, and this is the kind of stuff I have suspected goes on at the higher levels of DOJ and Treasury. But EW really knows how to distill it all down to it’s most demoralizing essence. And the weird thing is that my folks and most of my colleagues can see the instances of injustice, but seem incapable of comprehending how pervasive it is. Everyone still thinks we basically still live in the same country they grew up in (before Reagan and his minions sacked the place).

  9. montag says:

    IIRC, in the past decade, Congress both reduced the budget of the IRS and ordered the IRS to put most of its investigative attention toward poor people who claim the EITC, thus effectively preventing adequate investigation of the wealthy, corporate and individual (not that the IRS could ever adequately audit the overseas financial activities of the super-rich, anyway).

    And, along comes Mr. Birkenfeld and forces them to do what they did not want to do–trouble the wealthy in any way whatsoever. Of course they were going to make life miserable for him. It’s as if, in “The Wizard of Oz,” the Wizard had pulled out a pistol and shot Toto for pulling the curtain back.

    I suppose there has always been some politicization of the DOJ and the IRS (when Hoover was running the FBI, it was an art form), but it’s really gone into overdrive in the last two or three decades. And, now, with the uber-glorification of the rich, to the DOJ, it’s not nice to destroy the fable of the self-made John Galts working hard for their fortunes by showing them to be tax-evading criminals.

  10. emptywheel says:

    @guest: Had a conversation about a year and a half ago w/an acquaintance who works at DOJ in intl rule of law issues (she actually figures in some wikileaks cables, and rightly had concerns about her contacts in other countries, but in the first go around all her contacts’ names were redacted).

    She was completely unaware of the rule of law problems we have in our own country–even in our hypocrisy in Afghanistan. That’s particularly troubling for me, since she’s going to other countries without an awareness of how bad we look.

  11. Evelynn Brown, J.D., LL.M says:

    To have a good look at how bad the system is for federal whistleblowers, take a look at the Whistleblower Protection Enhancement Act (WPEA) and read the names on the Open Letter to Members of Congress. Many of us had our careers destroyed when we blew the whistle on corruption within the federal government. Protecting the public cost us our jobs.

    http://whistlewatch.org/2012/09/petition-to-members-of-congress-strengthen-whistleblower-and-taxpayer-protections/

  12. thatvisionthing says:

    @montag:

    It’s as if, in “The Wizard of Oz,” the Wizard had pulled out a pistol and shot Toto for pulling the curtain back.

    h/t

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