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I Won $104M for Blowing the Whistle But Was the Only One Who Went to Jail

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Re: I Won $104M for Blowing the Whistle But Was the Only One Who Went to Jail

#21

Post by viraptor »

tptacek wrote: post #17
viraptor wrote: post #16

Earlier quoted context omitted.

> [...] this guy confessed. Yes, he did, but after: > All I asked for in return was a subpoena or immunity. They said no. I wonder realistically how long can you drag this out as a whistleblower? How many times can you say "I'll give you these people if you don't charge me", especially when your document stash is well hidden.

It sort of looks like this bank exec traded 3 years in minimum security prison for more money than any of us could ever use in a lifetime. I'm pretty OK with that precedent!

I'm not. It was not an exchange. He neither knew about the money, nor expected it at the start. I think it would be more precise to say:

"Bank exec blew a whistle his company and got 3 years in minimum security prison. By coincidence he also got a lot of money afterwards."

Basically unless the whole story the whistleblower reported was fabricated, I don't think there's any situation where I'd be ok with the whistleblower being the only one jailed. As part of a larger group - sure, maybe.

Otherwise what's the point of whistleblowing? It would only work if you hate the company more than you like your current life. Or if you knew how to do it anonymously.

Re: I Won $104M for Blowing the Whistle But Was the Only One Who Went to Jail

#22

Post by CalChris »

bradleybuda wrote: post #4

A little more detail from a neutral source on why Birkenfeld was jailed: http://content.time.com/time/business/article/0,8599,1928897...

One difference between the two stories is that the Time article says he went to the Feds because of the problem with his bonus. That doesn't make sense because he had already spirited out the UBS documents which he wouldn't have had access to after resigning. He also didn't know at the time that he would eventually get a whistblower bonus. So the separation bonus was real money.

Re: I Won $104M for Blowing the Whistle But Was the Only One Who Went to Jail

#23

Post by tedunangst »

DrJokepu wrote: post #13
CamelCaseName wrote: post #9

Earlier quoted context omitted.

The difference is very important because tax avoidance is completely legal and encouraged. Tax evasion is illegal. Your statement below is false as written: >the IRS pays as a bounty for intelligence on tax avoidance scheme From the IRS' website: [1] "The IRS Whistleblower Office pays money to people who blow the whistle on persons who fail to pay the tax that they owe" You can't fail to pay a tax that you legally av…

While it would be unconstitutional in the United States, keep in mind that in certain countries "ex post facto" making certain tax avoidance schemes retroactively unlawful is not unheard of, e.g. BN66 in the UK: https://en.wikipedia.org/wiki/BN66

The IRS sometimes does that. They'll decide in 2008 that some accounting rule is invalid, and oh by the way, that means you owe taxes back to 2002 when you started using it. They can't reverse a rule, but apparently rules can be clarified at any time, so if your loophole hasn't been affirmatively decided, it may retroactively disappear.

Re: I Won $104M for Blowing the Whistle But Was the Only One Who Went to Jail

#24

Post by tptacek »

Cerium wrote: post #20
sliverstorm wrote: post #12

Earlier quoted context omitted.

... their cost-saving structure is an unfair advantage, and that they owe taxes on those savings to the government. From what I remember, it's not about unfair advantages, but simply that they could have charged higher mutual fund fees, and thusly owe taxes on the fees they could have charged instead of the fees they actually charged.

Really? That makes no sense to me. Like it being wrong to work part time because you pay less taxes.

It is so much weirder than that. Vanguard's signature benefit is the way its organized: rather that a company that owns and manages funds, it's a collection of funds that own and share the management company. All of the expenses and overhead involved in managing the funds come directly out of the returns of the fund, so the company and its investors have aligned incentives.

The problem is that the funds have a client/vendor relationship with the management company. Since the vendor is captive to the funds, it has no incentive to charge its clients market rates for its services. But since it's a separate taxable entity, it theoretically cannot gift (or discount) its services to its clients without the clients recognizing those benefits as taxable income.

The "whistleblower" here is a former tax lawyer for Vanguard. Since Vanguard is basically one of the largest money managers in the world, that guy stands to make almost ten billion dollars in bounty fees if the IRS recovers based on his theory.

As always, start with Matt Levine:

https://www.bloomberg.com/view/articles/2015-11-25/calpers-f...

Re: I Won $104M for Blowing the Whistle But Was the Only One Who Went to Jail

#25

Post by rhizome »

tptacek wrote: post #17
viraptor wrote: post #16

Earlier quoted context omitted.

> [...] this guy confessed. Yes, he did, but after: > All I asked for in return was a subpoena or immunity. They said no. I wonder realistically how long can you drag this out as a whistleblower? How many times can you say "I'll give you these people if you don't charge me", especially when your document stash is well hidden.

It sort of looks like this bank exec traded 3 years in minimum security prison for more money than any of us could ever use in a lifetime. I'm pretty OK with that precedent!

You're undervaluing time spent locked up.

Re: I Won $104M for Blowing the Whistle But Was the Only One Who Went to Jail

#26

Post by tptacek »

viraptor wrote: post #21
tptacek wrote: post #17

Earlier quoted context omitted.

It sort of looks like this bank exec traded 3 years in minimum security prison for more money than any of us could ever use in a lifetime. I'm pretty OK with that precedent!

I'm not. It was not an exchange. He neither knew about the money, nor expected it at the start. I think it would be more precise to say: "Bank exec blew a whistle his company and got 3 years in minimum security prison. By coincidence he also got a lot of money afterwards." Basically unless the whole story the whistleblower reported was fabricated, I don't think there's any situation where I'd be ok with the whistlebl…

What do you mean he didn't know about it? He's a banking exec whistleblowing on tax evasion. The IRS bounty on recoveries is not exactly a secret. Even in the unlikely event that he himself wasn't aware of his prospects when he went in, you'd assume literally the very first thing any competent lawyer would have told him was "you stand to make a hundred million dollars if you go through with it".

The thing I like about the precedent? That banking executives need to be on their toes because all of their colleagues have an immense incentive to rat them out.

Re: I Won $104M for Blowing the Whistle But Was the Only One Who Went to Jail

#27

Post by tptacek »

rhizome wrote: post #25
tptacek wrote: post #17

Earlier quoted context omitted.

It sort of looks like this bank exec traded 3 years in minimum security prison for more money than any of us could ever use in a lifetime. I'm pretty OK with that precedent!

You're undervaluing time spent locked up.

I would do 3 years for $100MM. I would do the next three years for $100MM, and they're pretty important years in my family! Someone offer me $100MM to be imprisoned for the next three years; I will put my money where my mouth is on this.

Re: I Won $104M for Blowing the Whistle But Was the Only One Who Went to Jail

#28

Post by cdelsolar »

tptacek wrote: post #15
hacknat wrote: post #14

Earlier quoted context omitted.

Maybe. Stories like this are what make me sick when I think about our Justice department. That, and Aaron Swartz...and a slew of other things I guess.

It's "Swartz". Aaron Swartz. Not "Schwartz".

That's what he said

Re: I Won $104M for Blowing the Whistle But Was the Only One Who Went to Jail

#29

Post by O5vYtytb »

tptacek wrote: post #15
hacknat wrote: post #14

Earlier quoted context omitted.

Maybe. Stories like this are what make me sick when I think about our Justice department. That, and Aaron Swartz...and a slew of other things I guess.

It's "Swartz". Aaron Swartz. Not "Schwartz".

May the Schwartz be with you.

Re: I Won $104M for Blowing the Whistle But Was the Only One Who Went to Jail

#30

Post by frank_jaeger »

tptacek wrote: post #26
viraptor wrote: post #21

Earlier quoted context omitted.

I'm not. It was not an exchange. He neither knew about the money, nor expected it at the start. I think it would be more precise to say: "Bank exec blew a whistle his company and got 3 years in minimum security prison. By coincidence he also got a lot of money afterwards." Basically unless the whole story the whistleblower reported was fabricated, I don't think there's any situation where I'd be ok with the whistlebl…

What do you mean he didn't know about it? He's a banking exec whistleblowing on tax evasion. The IRS bounty on recoveries is not exactly a secret. Even in the unlikely event that he himself wasn't aware of his prospects when he went in, you'd assume literally the very first thing any competent lawyer would have told him was "you stand to make a hundred million dollars if you go through with it". The thing I like abou…

> (It is, however, extremely important to me that I make clear that I had no idea there was a law like this for a reward when I resigned from UBS in October 2005, as the law passed in December 2006.)
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