Today's Washington Post has a front-page, top-of-the-fold article on how the SEC so badly botched their probes of Bernie Madoff that his multi-billion dollar fraud not only flourished, but he used the favorable SEC exams to suck in new investors: http://www.washingtonpost.com/... The collossal government screw-ups in the Madoff case are all the more reason why we need insiders like ex-UBS banker Brad Birkenfeld to blow the whistle. But instead of protecting (much less rewarding) Birkenfeld for disclosing UBS's multi-billion dollar tax fraud conspiracy, the government sent him to jail.
The government is not only screwing up its own investigations, but also punishing those who do the work for them.
The case of Brad Birkenfeld makes a mockery of financial whistleblower laws that Congerss has passed. As a whistleblower attorney, I cannot recommend that anyone come forward. Brad Birkenfeld is Exhibit 1 of what will happen to you. And we need Brad Birkenfelds . . . because the SEC sure as hell isn't going to catch the Bernie Madoffs of the world without insider help. Exhibit 2: SEC IG Report, Sept. 2, 2009, http://www/....
I'm reading the sentencing transcript of Birkenfeld, who was sentenced on August 21, 2009, to three years and four months, even though he provided the substance of the government's entire case that allowed the U.S. to pierce Swiss bank secrecy laws as never before.
The sentencing transcript is outrageous. Here is one of my favorite quotes:
Page 13, line 1:
I believe we well would have nonprosecuted Mr. Birkenfeld.
The Justice Department dares to make this statement with a straight face, when it would give him no assurance, despite his multiple immunity and subpoena requests to DOJ for months before, during and after his 3 days of voluntary, cooperative meetings with the DOJ in June 2007. All immunity requests, cooperating witness agreement requests, subpoenaes, etc. were denied. Birkenfeld proceeded in good faith anyway, and the DOJ turned around and burned its source.
Page 32, line 12: Another lie. Too bad the Justice Department can't prosecute itself for making false statements. As a banker, Birkenfeld DID NOT control assets of a client. He was directed to carry out a written order to transfer the assets under Swiss law by the trustee. This is a standard banking practice in any part of the world.
Page 32, line 17: More lies about him not timely coming forward. Birkenfeld complained in writing to UBS Legal and Compliance for months (in June, July, August 2005), and then resigned in October 2005 when UBS refused to answer any of his concerns.
Page 33, line 7: Another lie. Birkenfeld repeadetly requested that the DOJ give him a subpoena in order not to be in compliance with Swiss law (the same reason UBS gave not to divulge client names and they got a DPA). The DOJ refused and Birkenfeld went to the Senate. The Senate gladly gave him a subpoena and he gave them California billionaire Igor Olenicoff's name and information. Olenicoff got only probation for hiding as much as $200 million from the IRS.
Why would the Justice Department not just provide Birkenfeld a subpoena so they could get the information? Until that was done, he was NOT able to talk about clients. What was really going on here is that the DOJ was furious that he was a registered whistleblower and that is the reason why they took a year to find a way to indict him.
In addition to Olenicoff getting only probation, Birkenfeld's ex-boss, Martin Liechti, pleaded the Fifth Amendment when called before Congress and was allowed to return to Switzerland, a free man, charged with no crime. All of the other bad actors have been allowed to pay fines, or are happily gallavanting around Switzerland and Lichtenstein.