Appeals Court to Decide Major Whistleblower Reward Case

Criminal fines and penalties at issue

Washington, D.C. November 15, 2017. The U.S. Court of Appeals for the District of Columbia Circuit will hear argument in the most important tax whistleblower case ever filed in court. At issue in Commissioner of Internal Revenue v. Whistleblower 21276-13Wis whether the tax whistleblower law covers employees who report criminal tax fraud.

“This case will determine whether or not the tax whistleblower law will work. We are arguing that whistleblowers who report criminal tax frauds are covered under the law, and can obtain rewards when a fraudster is criminally prosecuted for ripping of the taxpayers. The Tax Court agreed with our arguments. Remarkably, the Trump administration’s Justice and Treasury Departments are seeking to overturn the lower court decision, and exclude criminal tax fraud from the whistleblower law,” said Stephen M. Kohn, co-counsel for the confidential whistleblower who filed the claim.

“Whether whistleblowers who expose criminal tax fraud are covered under IRS qui tam reward law should be a no brainer. The law was designed to encourage the reporting of large tax frauds. Excluding criminal tax fraud from the program makes absolutely no sense,” added Kohn.

Kohn is the author of The New Whistleblower’s Handbook and a partner in the firm of Kohn, Kohn & Colapinto, which has represented whistleblowers for over 30-years. In 2012 his firm represented the first major Swiss bank whistleblower, Bradley Birkenfeld, who obtained the largest reward ever paid to an individual whistleblower ($104 million dollars).

The two whistleblowers in this case were the key witnesses assisting the IRS in its investigation against a major Swiss bank. The government argued that the whistleblowers, who were rewarded for $22 million based on the proceeds recovered under the non-criminal part of the case, were ineligible for a reward for their work assisting the IRS in building its successful criminal prosecution. The Justice and Treasury Departments are attempting to block the whistleblowers’ from sharing in a $35 million award, based on approximately $150 million collected in criminal fines and penalties.

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.

The whistleblowers have received vital help in fighting the government’s appeal from Senator Charles Grassley(R-Iowa), Chairman of the Senate Judiciary Committee, who filed an amicus curiae brief supporting their position. Senator Grassley was the primary sponsor of the tax whistleblower law. Additionally, a group of former prosecutors also filed an amicus curiae brief supporting the whistleblowers’ right to be awarded for their assistance in the criminal tax fraud case.

Kohn, Kohn and Colapinto is co-counseling the case with attorneyDean Zerbe. The brief in support of the whistleblower was filed by both the Zerbe and Kohn firms.

Links:

Tax Court Decision

Brief Filed by Zerbe and Kohn Firms in support of Whistleblower

Amicus Brief by Senator Grassley