Judge Denies UBS Whistleblower’s Bid to Reduce Sentence

John Pacenti
Daily Business Review, Law.com

UBS whistleblower Bradley Birkenfeld‘s date with a prison cell remains set for Friday.

A day after telling his story on CBS’ “60 Minutes,” Birkenfeld lost two important motions Monday to postpone his prison reporting date and cut his sentence.

U.S. District Judge William Zloch in Fort Lauderdale denied both motions, which were based on Birkenfeld’s pivotal cooperation with the government in its investigation of illegal UBS offshore accounts held by wealthy Americans.
Birkenfeld’s information nearly single-handedly brought illegal offshore banking to its knees.

Switzerland’s UBS paid a $780 million fine in a deferred prosecution agreement and broke a centuries-old tradition of Swiss banking secrecy by revealing information about its customers.

Thousands of Americans with offshore accounts took advantage of an amnesty offered by the Internal Revenue Service to report their holdings without prosecution last year.
But Zloch apparently was not persuaded by arguments made on behalf of numerous whistleblower groups that Birkenfeld’s sentence would chill future bankers from coming forward to reveal delicate information in the world of high finance.

The judge also did not tackle allegations by Birkenfeld’s attorneys that prosecutors misled him about the extent of Birkenfeld’s cooperation at sentencing in August.
Birkenfeld told “60 Minutes” that he was the first banker ever to reveal secrets of the tight-lipped Swiss banking industry.

“It’s never happened before in history. I’m the first one,” he said.
Defense attorneys have leveled charges of prosecutorial misconduct at the Justice Department, saying prosecutors misled the judge and strung the banker along without giving him protection from prosecution.

Attorneys Dean Zerbe and Stephen Kohn of the Washington firm Kohn Kohn & Colapinto asked U.S. Attorney General Eric Holder in a Dec. 7 letter to review statements prosecutors made to Zloch and reverse the Justice Department’s recommendation for prison time.
The defense team maintains Assistant U.S. Attorney Kevin Downing in Washington told Zloch that Birkenfeld was charged despite months of cooperation because he did not divulge that as a UBS employee he helped California real-estate tycoon Igor Olenicoff evade $7 million in taxes.

The attorneys told Holder that Birkenfeld disclosed his relationship with Olenicoff to the U.S. Senate Permanent Subcommittee on Investigations. But Birkenfeld said at sentencing that he did not divulge illegal activity by Olenicoff to the Justice Department because prosecutors would not give him immunity as the Senate did through a “friendly subpoena.”
Olenicoff was indicted three months after Birkenfeld’s testimony to the Senate, according to the letter.

“It would be a grave miscarriage of justice for Mr. Birkenfeld to commence a 40-month sentence on facts for which the record does not support,” Zerbe and Kohn wrote.
Birkenfeld’s sentence has been heavily criticized by national whistleblower and government watchdog groups, which say it will discourage other bankers from coming forward to shed light on illegal activity.

Jesselyn Radack, homeland security director for the Government Accountability Project in Washington, said Birkenfeld is a victim of a power struggle between two branches of government.

“What appears to be the case is that the Department of Justice got upstaged by the Senate and is punishing the whistleblower,” she said.
Birkenfeld came forward in 2007 as an American expatriate living in Switzerland, looking to cash in on a new federal whistleblower law that allows him to claim 30 percent of any funds recovered from his information.

The information turned out to be a bombshell: Birkenfeld’s former employer, UBS, had engaged in a conspiracy to cheat the Internal Revenue Service by courting affluent Americans to hide millions of dollars in a network of overseas shell corporations and foundations.

Gary M. Bagliebter, a partner with Shutts & Bowen in Fort Lauderdale, speculated Zloch had his reasons for handing down the prison sentence.
“The judge probably believed, perhaps, his motives to come forward were not pure, and he was not fully candid,” Bagliebter said.

Radack accused prosecutors of purposely postponing Birkenfeld’s sentencing date so he would have nothing else to offer in exchange for reduced time once he was behind bars. She said she finds it disconcerting that Zloch would not even hold a hearing.
“This has a whiff of corruption,” Radack said. “UBS was a big campaign contributor to the Obama campaign and many members of Congress.”

Critics of Birkenfeld’s sentence say big-time tax evaders are getting slapped on the wrist while the hero is being sent to prison for conspiracy.

Boca Raton accountant Steven Michael Rubinstein was placed on probation for three years, including a year under house arrest, for hiding $6 million overseas.
New York toy distributor Jeffrey Chernick was sentenced to three months in prison.
And Olenicoff, the billionaire client of Birkenfeld’s, received two years’ probation.