Is his squealing on secret Swiss bank accounts really worth a king's ransom?

Several years ago he was a successful Swiss banker. Savvy about offshore accounts that illegally shield rich American clients from U.S. taxes, he was also a bit of a swashbuckler.

To please a billionaire client in California, he slipped a pile of diamonds secretly jammed inside a tube of toothpaste through U.S. Customs.

Eventually it all caught up to Brad Birkenfeld. In 2009, the Swiss banker and U.S. citizen was sentenced in Florida to 40 months in prison for helping rich Americans dodge their taxes. Ever the financial strategist, Birkenfeld and his lawyers sought to profit from a federal whistle-blower law. In exchange for spilling the beans on secret Swiss bank accounts, Birkenfeld would claim a multibillion-dollar reward from the feds.

Why so much? Because what the Internal Revenue Service would reap in new taxes from secret accounts of rich Americans would be enormous. Birkenfeld's whistle-blower reward would be as much as 30 percent of the IRS take, making the potential multibillion-dollar sum the largest of its kind.

Instead, this week Birkenfeld settled for a mere $104 million reward. It's still the largest individual federal payout in U.S. history.

Is that justice? Is Birkenfeld really a whistle-blower?

Somehow the image of a smug banker and his stash of toothpaste-covered diamonds doesn't come across as someone worthy of $104 million. That reward works out to $2.6 million for every month — about $86,000 per day — he spent in jail.

Had Birkenfeld not been nabbed, he'd still be playing Swiss banker and finding new ways to smuggle jewels and art to rich clients.

Maybe whistle-blower rewards should be capped. Or at least designed to pay a smaller percentage of found money when sums get huge.

Attorneys for Birkenfeld, the son of a Massachusetts neurosurgeon, say he still has other whistle-blower claims.

Not that this tale is just about Birkenfeld.

UBS paid $780 million to avoid prosecution. But it did admit to encouraging tax evasion. And it disclosed thousands of Swiss accounts.

Now, 33,000 Americans have disclosed offshore accounts to the IRS, generating more than $5 billion in uncollected taxes.

Other nations are cracking down on secret Swiss banks. That just means wealthy Americans are skipping Switzerland in favor of other global tax havens.

And what of Birkenfeld's diamond-loving California client? Developer Igor Olenicoff, one of the 400 richest Americans, paid $52 million in back taxes, penalties and interest and pleaded guilty to filing a false tax return. Since then, he's sued UBS for misleading him about the legality of his offshore accounts. Last month, UBS fired back, claiming Olenicoff's lawsuit was meant only to deflect blame.

In 2008, a profile of Birkenfeld in the now defunct magazine Portfolio said the Swiss banker lifted the veil of a "James Bond-like business" to show it for what it is: "an often seedy exercise in helping very rich Americans hide their money" from the IRS.

It seems, Portfolio added, "more Sopranos than Casino Royale."

Bingo. Birkenfeld, soon to exit a halfway house, is busy contemplating life with $104 million. Here's an idea. Skip the Swiss bank account.

Contact Robert Trigaux at trigaux@tampabay.com.

Is his squealing on secret Swiss bank accounts really worth a king's ransom? 09/12/12 [Last modified: Wednesday, September 12, 2012 10:04pm]

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