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IRS Whistleblowers to Receive $12.9 Million for Assisting in Tax Fraud Prosecution of Swiss Bank

Washington, D.C. March 30, 2018. Yesterday the Department of Justice (DOJ) dismissed its appeal of the tax court’s decision in Whistleblower 21276-13W and 21277-13W v. CIR, Case Nos. 17-1119 and 1120 (D.C. Cir.).  In its decision, the Tax Court found that the whistleblowers’ information was critical in building a successful criminal fraud case against the Swiss bank and held that criminal fines for conspiracy to defraud IRS and for filing false tax returns are considered “collected proceeds” under the whistleblower law.

This case has been closely monitored by both the tax law and whistleblower communities, with key support coming from former DOJ tax prosecutors who warned that limiting tax whistleblower rewards could have a crippling impact on criminal tax cases and Senator Charles Grassley, the sponsor of the original tax whistleblower law, who both filed amicus briefs in support of the whistleblowers.

Now that the DOJ has dismissed its appeal, the whistleblowers will receive an additional award of approximately $12.9 million. This award is based on the major role they played in the return of $54.131 million to U.S. taxpayers from the bank’s criminal tax fraud as determined by the original Tax Court decision.  They previously received a whistleblower award of almost $4.5 million based on the government’s collection of $20 million from the Swiss bank in restitution paid directly to the IRS for back taxes.

The whistleblowers were jointly represented by whistleblower lawyers Stephen Kohn and David Colapinto of Kohn, Kohn & Colapinto (KKC); Dean Zerbe of Zerbe, Miller, Fingeret, Frank & Jadav, PC (ZMF);  and Robert Amsel, Esq.  Kohn and Zerbe also serve, pro bono as the Executive Director and the Senior Policy Analyst of the National Whistleblower Center.

“This decision is a green light for bankers with knowledge of criminal tax frauds to step forward and blow the whistle.  All whistleblowers should be encouraged by this decision of the government to dismiss its appeal. It permits these two courageous whistleblowers to obtain a reward for turning in massive criminal tax frauds that had caused taxpayers to lose millions of dollars over the years and sets the precedent for future cases.  This decision, coupled with the recent clarification by Congress of the tax whistleblower law, is very good news for whistleblowers. The IRS is certainly interested in hearing from knowledgeable whistleblowers with good information about individuals and companies engaged in tax evasion.  If the case is successful, the government will pay rewards,” said Kohn.

“Until the whistleblowers’ victory this week, funds collected in criminal matters couldn’t be shared with whistleblowers. That left would-be whistleblowers unsure of how much they might collect if they brought a case to the IRS. Payouts could be far smaller if a case was handled criminally, rather than under the tax code,” Zerbe told the Wall Street Journal.

“The most important tax-evasion cases are criminal, and to exclude these cases from the whistleblower law would have had a devastating impact on enforcement,” said Kohn and Zerbe, in a joint statement released by the National Whistleblower Center.

This case is another example of the successful work of these two law firms. Joint clients of KKC and ZMF have received approximately $145 million dollars in award determinations under the IRS tax whistleblower program.

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