U.S. IRS issues ruling on UBS whistleblower case - lawyers

WASHINGTON Tue Sep 11, 2012 12:29am BST

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WASHINGTON (Reuters) - Lawyers for a whistleblower who helped the U.S. government in a major tax fraud case against Swiss bank UBS AG said on Monday that authorities have made a decision in their client's case claiming a whistleblower payment.

Attorneys for Bradley Birkenfeld said in a statement that the Internal Revenue Service has ruled on his claim. The lawyers said they will announce it at a press conference on Tuesday, an event that should have implications for other whistleblowers.

Birkenfeld has been seeking a large payout under the IRS' whistleblower program, but it was uncertain if he will get one, said tax lawyers not directly involved in the case.

If Birkenfeld is denied a reward by the IRS, he could appeal the decision to the U.S. Tax Court, lawyers said.

Any potential reward to him would likely be limited by IRS regulations restricting the terms of such payouts, said Scott Knott, lawyer at the Ferraro Law Firm in Washington, D.C.

The outcome of the Birkenfeld case has "enormous implications" for other whistleblowers pursuing awards and who will be watching closely, said Andrew Carr, a lawyer with law firm Bateman Gibson in Tennessee. He is representing another IRS whistleblower in a separate case.

Birkenfeld turned over information about UBS to the authorities, but later he was jailed after the government said he withheld other information.

UBS entered into a deferred prosecution agreement in early 2009 and paid $780 million (487 million pounds) in fines, penalties, interest and restitution. The case was a key turning point in a U.S. effort to combat tax evasion in Switzerland and elsewhere overseas.

The IRS had no immediate comment.

In January 2010, Birkenfeld began serving a prison term for admitting to conspiracy in helping a former rich client conceal large sums at UBS. Birkenfeld was released from prison last month. He is represented by the National Whistleblowers Center.

The IRS whistleblower office gathers information from people who want to alert the tax-collecting agency about tax misconduct. Whistleblowers can get monetary rewards under the IRS program, which was overhauled in 2006.

Over the years, the office has brought in hundreds of millions of dollars in tax revenue for the U.S. government that would not have been collected without tips from whistleblowers.

But the office collected only $48 million in tax revenues in fiscal 2011, down from $464 million in fiscal 2010, the IRS reported to Congress in June. That was the lowest collection level since at least fiscal 2004. The drop in collections coincided with a decline in new whistleblower cases.

Republican Senator Charles Grassley, who wrote 2006 legislation that overhauled the program, said in June that the IRS had been driving away whistleblowers.

Some lawyers have complained that the office is slow to process cases and leaves whistleblowers in the dark about the status of their cases after they turn over information.

(Additional reporting by Lynnley Browning, Nanette Byrnes; Editing by Kevin Drawbaugh and Bob Burgdorfer)