World's largest whistleblower reward
In 2009, a Swiss bank UBS reached an agreement with the US to pay USD 780 mil. in taxes, % and penalties. Let's read the publicly available agreement. Brought to the IRS by a former UBS employee.
What do they have to pay for?
According to the US Department of Justice (DOJ) report, USD 780 million was a payment for the bank's 2000-2007 'business', in which it helped some 17 000 US citizens open accounts with the bank on behalf of 'unrelated' offshore companies. Citizens took out credit cards on these companies and spent the funds they had accumulated there. At the same time, the citizens 'forgot' to declare the money (around USD 20 billion) accumulated in the accounts of these offshore companies to the US and to pay taxes on it. Reuters reports that UBS also agreed to hand over to the US tax authorities (IRS) information on the identity of the UBOs concerned and the turnover of the accounts.
The agreement states that...
The bank, in turn, had breached its commitments with the US to report US resident accounts and to withhold tax on payments from securities accounts. The agreement provides that UBS is not to be treated guilty if it complies with the terms of the agreement. Interestingly, the agreement states that these payments are not deductible by UBS for tax purposes.
By the way..
why don’t we make the criminal files public here in Latvia too, as in the US?
I have written before about the important role played by banks in the use of offshoring here in Latvia too.
This case is also famous for the fact that...
A former UBS private-banker Bradley Birkenfeld received the largest reward in history (USD 104 million) for passing UBS inside information to the US IRS, thus also putting himself behind bars for 30 months. He wrote a book about it, Lucifer's Banker. As a result of the whistleblowing, the US IRS recovered around USD 15 billion from the tax evaders identified in the report.
Elsewhere...
The above link and this FT article also contain more information on a similar court case lost by the same bank in France at the end of 2023 (USD 1.8 billion, of which 800 million is still to be recalculated) and other related investigations. UBS bankers have travelled to meet wealthy French residents to the opera, the French Open and even hunting events.
Good news
Bradley has agreed to talk about all this on the Tax Stories podcast and even to come to Latvia to give a lecture where he and the author of this blog could together analyse Latvia's whistleblowing (what does it need to be more effective) and tax crime situation. Tax Stories subscribers will certainly be kept informed in due course.