Qui Tam

Protecting Whistleblowers from Criminal Prosecution: The Mystery of the UBS Whistleblower's Prison Sentence

By Finch McCranie, Esq.

In one of two prominent whistleblower cases in the news this week, whistleblower John Kopchinski will be awarded more than $50 million for his role in exposing improper "off-label marketing" of the drug Bextra by Pfizer. Other whistleblowers also will be rewarded because of this settlement. That settlement of $2.3 billion is the largest in history ($1 billion to settle False Claims Act allegations, and $1.3 billion in criminal fine and forfeiture).

As large as the Pfizer settlement is, the other whistleblower's actions seem likely to lead to recovery of dollars that could dwarf this $2.3 billion settlement. UBS whistleblower Bradley Birkenfeld has lifted the shroud of secrecy from thousands of American taxpayers' offshore accounts at UBS. He has given the IRS a foothold into recovering potentially many billions in unpaid taxes owed.

Yet Birkenfeld was recently sentenced to serve 40 months in federal prison for conspiracy to defraud the United States in a tax fraud scheme while at UBS. His conviction also calls into question his ability to receive a reward under the IRS Whistleblower Program from the billions to be collected by the IRS.

How could this happen?

There are tried and true steps lawyers representing whistleblowers must take to protect their clients from the risk of prosecution. This was one of the topics of the "IRS Whistleblower Boot Camp" panel discussion that I led this past March, with panelists including IRS Whistleblower Office Director Steve Whitlock--how to protect the whistleblower who has potential criminal liability, but who has valuable information.

If adequate protection cannot be obtained, often the whistleblower with real criminal exposure should choose not to go forward. If the information is important enough to the government, however, protection for the whistleblower often can be negotiated, so long as the whistleblower is truthful and forthcoming. As former federal prosecutors who have also defended clients in white collar criminal prosecutions, we have represented many clients in obtaining this type of protection.

In Birkenfeld's case, we cannot tell whether he simply was not forthcoming even with his original attorneys about his own misdeeds at UBS. His current lawyers wrote in his Sentencing Memorandum of Birkenfeld's "timely (if not immediate) acceptance of responsibility." Government lawyers who interviewed him alleged he failed to be
"totally forthcoming about his own conduct at UBS."

Still, it is staggering to think that Birkenfeld's information was so useful that it led to the IRS's July, 2008 issuance of a ?John Doe? summons, which ultimately made possible UBS's historic Deferred Prosecution Agreement. As a result, UBS has released thousands of American taxpayers' names to the IRS

Some have commented that Birkenfeld's experience will discourage whistleblowing. We have a different reaction: his case underscores the need for counsel with prosecution or criminal defense experience to negotiate sufficient protections for the whistleblower--and to educate the client on the very real dangers of not proceeding according to the rules.

Obtaining protection for whistleblowers may require an intricate "dance" with goverrnment officials. We see no reason why the next whistleblower with information as good as Birkenfeld's should not be able to proceed intelligently, and enjoy the results of the information he or she brings forward. Counsel with this experience--listened to--can accomplish that result.

Full post as published by Whistleblower Lawyer Blog on September 03, 2009 (boomark / email).