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the Swiss government divulged client secrets. Alarmed by the whole affair, many depositors pulled their money out of UBS, and thousands of tax-dodging Americans have come clean with the IRS. Not as well known is a dis-
tinctly Washington drama: how Birkenfeld, 45, came in from the cold but ended up in a federal prison camp. With the new whistleblower
law, Congress had hung an open- for-business sign on the IRS, part of a strategy to collect some of the billions of dollars of taxes that go unpaid each year. However, to se- cure immunity, Birkenfeld had to deal with the Justice Depart- ment. In effect, he had to put his head in the lion’s jaws. In March 2007, Washington lawyer David H. Dickieson of the
firm Schertler & Onorato asked Justice for a meeting. The agen- da: a mystery client. “This is a ‘once in a career’ case for the lucky government attor- neys willing to follow up on the hard leads that our client is pre- pared to provide,” Dickieson wrote in an e-mail to prosecutor Karen E. Kelly. “We look forward to working on the same side as you and the government in this matter.” “Just what I need, a ‘once in a career case’!!” Kelly answered. At the outset, Justice wasn’t making any promises. “You should know that based upon the information that you have disclosed to date, we consid- er your client merely a tipster, not a whistleblower,” Kelly wrote. On April 19, 2007 — Patriots’
Day — Birkenfeld’s lawyers sent Justice a confidential summary of the information he was willing
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SUNDAY, MAY 16, 2010
Whistleblower and Justice Department caught in a Catch-22
to deliver. The document, which contained no names, heightened the intrigue. Birkenfeld was re- ferred to as “Salesman.” UBS was “the Vault,” a large international financial institution whose sales- men fanned out from Europe to help wealthy Americans open un- declared accounts. Hinting at the quality of Birkenfeld’s informa- tion, including written records, the document described “Slick” the oil trader, whose accounts al- legedly held more than $100 mil- lion.
If the prosecutors followed Salesman’s road map, “the entire European tax haven could be re- vealed,” the summary said. “We believe that the new IRS Whistleblower Reward program was designed by Congress pre- cisely to encourage persons like Salesman to come forward de- spite personal risk,” the docu- ment said.
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The ground rules said that the government could still prosecute Birkenfeld, and that at least indirectly it could use his evidence to build a case against him.
The Justice lawyers weren’t ex-
actly bowled over — at least not as far as they were letting on. “Frankly, at this point we do not know whether your client has any information that is of interest to the Department of Justice,” Kelly wrote on June 11. Kelly also put Birkenfeld’s law- yers on notice: The Justice De- partment was not part of the IRS whistleblower program, “and you should act accordingly.”
Birkenfeld made a leap of faith.
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Avoiding a direct flight in the hope of obscuring his destina- tion, he traveled to Washington and walked into a series of meet- ings at Justice. The ground rules, spelled out in a standard agreement called a proffer, explained that the gov- ernment could still prosecute Bir- kenfeld, and that at least in- directly it could use his own evi- dence to build a case against him. Birkenfeld unloaded informa- tion, backed by internal UBS documents. According to Birken- feld and his current lawyers, he provided cellphone numbers, e- mail addresses and the names of American hotels used by UBS salesmen. He recommended that the government trace their con- tacts with U.S. clients. He named the cultural events that the Swiss bankers attended in the United States to network with prospec- tive clients, such as Art Basel in Miami, and suggested that the government arrest the bankers when they attempted to enter the country. In a tantalizing glimpse of a Swiss bank’s innermost secrets, he handed over a copy of an index card he said was extracted from a UBS safe. It listed the name, ac- count numbers and password of the Middle Eastern oil trader pre-
viously referred to as “Slick,” along with his posh New York ad- dress. Birkenfeld said he offered up the oil trader because, though he had no proof, he suspected the trader had terrorist connections. The reaction to his tactical ad- vice was not what he had hoped. Prosecutor Kevin M. Downing “looked at me and said, ‘Oh, you watch too much TV. That’s Holly- wood,’ ” Birkenfeld recounted in an interview. Birkenfeld said he felt he was treated with “hostility and aggression.”
The Justice lawyers across the table from Birkenfeld were among the government’s top guns in tax enforcement. The very day Kelly was trading mes- sages with Birkenfeld’s lawyer about a “once in a career case,” she was in the news for her role in what the Justice Department called its largest ever personal in- come tax evasion case. The news was mixed. On one hand, Washington telecom entre- preneur Walter Anderson was sentenced to nine years in prison for not paying $200 million in taxes — and Kelly would receive a department award for her work on the case. On the other hand, a federal judge said the prosecu- tors botched the plea agreement, preventing the court from order- ing an estimated $140 million in restitution. (An appeals court ruled that the drafting error did not stand in the way of restitu- tion.) Meanwhile, Downing had been leading the landmark prosecu- tion of former employees of the big accounting firm KPMG on charges of promoting fraudulent tax shelters. In that case, a court dismissed charges against 13 of the defendants after finding that
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Outside Sales Representative - Automotive
The Washington Post is in search of a top-notch sales representative with an aptitude for managing and growing an existing account list for our Automotive group.The successful candidate will have the ability to be effective in an aggressive, yet consultative, selling environment while staying abreast of the trends and changes of the automotive industry.This position requires the representative to work within a structured, metrics driven environment. Qualified candidates must have previous outside sales experience, a proven track record of sales achievement and reliable transportation. Bachelor’s degree preferred.
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Contracts Specialist
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Learn more about Washington Post Media and other career opportunities at
washingtonpostmedia.com/careers.
Learn more about Washington Post Media and other career opportunities at
washingtonpostmedia.com/careers.
Washington Post Media is committed to diversity in the workplace.
We promote a drug-free work environment.
Discover a career you believe in.
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the government “violated the Constitution it is sworn to de- fend” by in effect denying them access to counsel. The court said the prosecution’s overzealous- ness was consistent with policies established at Justice headquar- ters. For Birkenfeld’s camp, the
meetings in Washington gave way to exasperation. By August, a sense of urgency set in: It ap- peared that someone had tipped UBS that he was blowing the whistle. It would now be harder to catch bankers in the United States, and panicked clients might empty their accounts. If the government couldn’t collect, neither could Birkenfeld. In e-mails to prosecutors, Bir-
kenfeld’s lawyer described him as “spooked” and “irked.” His whis- tleblowing threatened powerful people, and there was reason to believe he was in danger, Dickie- son wrote.
Dealings between Birkenfeld’s camp and the Justice Depart- ment soon reached an impasse amid mutual finger-pointing. The Justice lawyers asserted that Birkenfeld “terminated his prof- fer offer,” and they made clear that they declined to grant him immunity.
Dickieson alleged that Justice
lawyers had taken shifting posi- tions on immunity — at one point saying they would grant it when Birkenfeld’s information was ver- ified, and at another point sug- gesting he had no need for it. In a sense, Birkenfeld and the
Justice Department were locked in a Catch-22. It would be risky for him to tell prosecutors every last detail without immunity, and it would be risky for Justice to grant immunity without knowing all.
Birkenfeld took his story else- where: to the Securities and Ex- change Commission, civil investi- gators at the IRS and the Senate’s Permanent Subcommittee on In- vestigations. In a November mes- sage to Kelly and Downing, Dick- ieson suggested that Birkenfeld was happier talking to author- ities who were less contentious. Birkenfeld “has decided that he
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