Last month, I gave a speech at the Ft. Worth CPA Tax Institute about Foreign Financial Asset Reporting. (If you have insomnia, you can find a copy of the speech on the Thought Leadership page of the HM&M website.) A big part of my speech dealt with the Foreign Account Tax Compliance Act of 2010. This new law was a direct result of the Swiss bank UBS AG being caught assisting thousands of U.S. taxpayers in hiding money from the U.S. government.
How was the bank caught? Bradley Birkenfeld, a former UBS banker, turned in his employer. He told the IRS how slick UBS Swiss bankers came to the U.S. to court rich and unscrupulous Americans, amassed $20 billion from those folks to hide in Switzerland, and then helped them cheat Uncle Sam. A stand-up guy, right?
Well, not exactly. He pleaded guilty to conspiracy to defraud the government and spent two years in jail. It seems that his “honorable act” was motivated by a whistleblower program administered by the IRS that became law in 2006. He argued (from behind bars, I guess) that he deserved billions of dollars under that program, but eventually got $104 million. Actually, after taxes and attorney fees, it works out to a bit less than $50 million – a little less than $50,000 per day in jail. This guy made out like a bandit. Oh, wait a minute, he is a bandit.
I am all for catching tax cheats; I am paying more because they are paying less (or nothing). I just don’t like the idea of paying somebody who went to jail for being part of the dishonest scheme. Seems to me like the authorities could have offered to throw him in jail, instead of throwing him under it, and still got him to sing like a bird.