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Thank You, Bradley Birkenfeld, followup

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January 14, 2010 – Comments (0) | RELATED TICKERS: UBS , JPM , GS

Yesterday I posted about Mr. Bradley Birkenfeld. I strongly recommend having a look at the whistleblowers.org website, and both the Amy Goodman interview, and the FOX interview. The information that Mr. Birkenfeld brought to the IRS, including client names, helped to recover $1 billion dollars in taxes that Americans were hiding in Switzerland bank accounts managed by UBS. How it was done is explained in the last five minutes of Amy Goodman’s Democracy Now interview which is linked to on the whisleblowers.org website.

I raised two issues in that post. One is that Mr. Birkenfeld should get a much more lenient sentence for his part in blowing the tax scam open. Even though he did participate, he is also the only person who came forward voluntarily. He brought names, account numbers, dollar values, and how the scam was done, before the IRS ever heard of him. Because of the size of the scam, the complicit nature of the American millionaires and UBS employees in cheating on their taxes it is my opinion that Mr. Birkenfeld should get a lesser sentence than the other tax cheats, who did not come forward and have not spent a single day in jail. Mr. Birkenfeld should get probation and nothing more. That is my opinion, based upon the acknowledgement of the IRS that they would not have recovered a single penny had Mr. Birkenfeld not come forward.

The second and larger issue is the IRS concealing the names of the 19,000 millionaire tax cheats who have been scamming the IRS. On the whistleblowers.org blog from yesterday is this phrase “Birkenfeld disclosed that among his clients who used UBS to evade taxes are a wealthy US politician and a Hollywood movie star”. If you are like me, you would like to know one of those names a lot more than the other, but would still probably like to know both. And if you are like me you might want to know the names of the other 19,000 millionaires who ran to the IRS begging for leniency after they knew their names were revealed.

In response to this tax scam the IRS was revealed, not as being “too big”, but as being “too small” to handle this volume of tax scams in a timely and efficient manner. Knowing that they are under equipped to handle the tax evasion problem, the IRS began a voluntary disclosure practice which you can read here: http://www.irs.gov/newsroom/article/0,,id=104361,00.html (it is short). I am not a lawyer (car mechanic) but it does not seem to me that these tax deadbeats qualify for this program because they do not meet this qualification:

(4) A disclosure is timely if it is received before:

b.  the IRS has received information from a third party (e.g., informant, other governmental agency, or the media) alerting the IRS to the specific taxpayer’s noncompliance;

 

The tax cheats have been punished. They have been made to pay taxes owed, and penalties. The amnesty program promises consideration for cooperation and confessing with respect to prison sentences and penalties. Nothing promises anonymity, and these people barely qualify for the program if they do at all. None of their names should be protected, especially not the “wealthy politician”.

This little gem describes the process for coming forward in the hope of Tax Amnesty and how it differs from the treatment of UBS clients. It fully supports Mr. Birkenfeld’s contention that both UBS investment advisors and their clients committed their crimes intentionally.  It backs 100% Mr Birkenfeld’s description of the methodology of traveling to and from Switzerland in order to dodge the taxes and still see your accounts. http://www.nacdl.org/public.nsf/whitecollar/WCnews146?opendocument

Finally, clients can opt for the voluntary disclosure. If successful, it yields a pass from the IRS, but it can be a grueling and painful financial exam for wealthy individuals who typically pay lawyers more than $500 an hour to get the IRS off their back. Mr. Sharp typically begins such financial examinations in Zurich or Geneva, after a UBS client has given the bank permission to hand him a case file. Swiss banking laws require detailed record-keeping, which means that Mr. Sharp generally is given a massive paper trail of transactions. Mr. Sharp and his team often have to reconstruct a client's file to ensure that the income and assets in question weren't obtained illegally through activities such as insider trading or racketeering. They then present the client's case anonymously at an IRS center in Tampa or Plantation, Fla. That review includes the use of redacted documents, which are handed across a conference-room table so IRS officials, including a criminal specialist, can review them. If it looks like the IRS is reluctant to accept a disclosure, Mr. Sharp ends the discussions. It's time, he says, to "pull the rip cord." The voluntary disclosures in the UBS case are being handled differently, because U.S. authorities have been granted the court order to obtain client information. That means clients' names and taxpayer identification are given at the beginning of the discussions. It seems to me that showing the IRS documents with names redacted violates the terms of amnesty for Mr. Hardy’s clients but that is a separate issue.

The UBS clients still fail the amnesty standard because their names were turned in by someone else.

Now here is the thing: Most Americans are not involved in a scam like this. Most Americans are picking up their share of the cost of the roads the tax cheats drive on, and the military that protects them. The only reason the UBS clients got caught, is that Mr. Bradley Birkenfeld turned names in to the IRS. As I read through the links, I learned that we are not talking about “a few bad apples” here. This represents 90% of the UBS investment clients with more than a million dollars. The vast majorities of Americans have benefited from Mr. Birkenfeld coming forward, and should probably call their Congressman, the President and the AG’s office and ask that Mr. Birkenfeld be released, in order to encourage more insiders to come forward (202 224 3121). Or visit whistleblowers.org and sign the letter of support for Mr. Birkenfeld.

I still want to know who the wealthy politician is.

But if your investment advisor has advised you to put your money off-shore and check the box on the tax return that says you don’t have an off-shore account, you are guilty. And maybe with the first crack showing you should worry. But you are still safe from the IRS. The USA still has no way to know, or strength to investigate, off shore tax scams. And if you are lucky, that will last a long time, and you will be safe unless your investment advisor comes forward.

But as I listen to the news and researched this story a question came to mind.

I think about GS having bet against the investment advice they were giving you. I think about the likelihood your account is still twenty percent lower than it was two years ago. And now your investment advisor is getting a record bonus because he did a good job, or to keep him quiet?

Does it feel good to have your balls held that tightly?

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