meet the whistleblowers

Whistleblower 21276-13W & 21277-13W

On March 29, 2018, a joint stipulation for dismissal of the government’s appeal in the cases of Whistleblower 21276-13W and 21277-13W v. CIR, Case Nos. 17-1119 and 1120 (D.C. Cir.) created a significant victory for tax whistleblowers. The case was scheduled for oral argument on April 9, 2018, in the U.S. Court of Appeals for the District of Columbia Circuit.  It had pitted the U.S. Department of Justice and IRS against two IRS whistleblowers whose information has led to $54.131 million in criminal penalties and civil forfeitures awarded against a major Swiss bank.  The DOJ and IRS were arguing that the tax whistleblower law did not apply to criminal tax cases that resulted in payments of fines and civil forfeitures.

The dismissal of the government’s appeals keeps in place the IRS whistleblower’s win in the Tax Court decision of Whistleblower 21276-13W and 21277-13W v. CIR 147, TC 4 (2016) providing for a broad definition of “collected proceeds” – the basis for IRS whistleblower awards in tax cases.   The whistleblowers had previously received a reward of $4,474,000 based on the government’s collection from the Swiss bank of $20 million in restitution paid directly to the IRS for back taxes.  But the IRS refused to pay an award on the additional $54.131 million collected from the bank.

Based on the DOJ and IRS’s withdrawal of the appeal, the whistleblowers will receive an additional award of approximately $12.9 million, which had been previously ordered by the Tax Court.

Amicus briefs in support of the IRS whistleblowers had been filed by former DOJ tax prosecutors who warned that limiting tax whistleblower rewards could have a crippling impact on criminal tax cases.  Senator Charles Grassley, the sponsor of the original tax whistleblower law, also filed an amicus brief in support of the whistleblowers.

Whistleblower attorney Stephen M. Kohn of KKC, who served as co-counsel on the case, stated: “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 a precedent for future cases.  This decision, coupled with the recent clarification by Congress of the tax whistleblower law, is excellent news for tax fraud 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.”

Kohn also stated: “Today’s decision continues the good work of the two law firms – KKC and ZMF on behalf of tax whistleblowers — starting with the $104 million award decision by the Whistleblower Office to Brad Birkenfeld and continuing with the wins in Tax Court for the whistleblowers – 144 TC 15 (2015) and 147 TC 4 (2016).  Joint clients of KKC and ZMF have received approximately $145 million in whistleblower award determinations under the IRS tax whistleblower program. The tax whistleblower laws are certainly showing what can be accomplished by encouraging and awarding whistleblowers for coming forward – translating into hundreds of millions and now billions of dollars in tax revenues for the government – as well as substantive awards for whistleblowers.”

“Lastly, a special thanks to Senator Grassley (R-IA) and his never-ending work on behalf of all whistleblowers.  Senator Grassley sponsored the tax whistleblower law, ensured that the law was amended to close loopholes, and filed an amicus brief in the U.S. Court of Appeals trying to ensure that the whistleblowers obtained justice in this case.  Senator Grassley’s whistleblower laws have already resulted in over $50 billion in recoveries for the taxpayers and have held many corporations and corrupt individuals who have tried to cheat the system accountable,” Kohn added.