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Federal Eye
Posted at 03:03 PM ET, 03/05/2012

Whistleblower files suit against IRS, says agency owes him a reward

Joseph A. Insinga was the ultimate whistleblower. A former executive with a Dutch bank, he says he divulged to the Internal Revenue Service details about how his employer for years helped U.S. companies dodge taxes.

Now Insinga is taking tax authorities to court for failing to give him a reward that he says he is owed by the federal government.

“I gave substantial documents to the IRS,” said Insinga,61, who is retired and lives in Floral Park, N.J. “It was only a matter of time before some of the companies had to pay money they owed. We thought [IRS officials] were going to process an award.”


Insinga filed a whistleblower claim with the IRS in 2007, a year after Congress passed a law to help the government uncover tax cheats by encouraging informants to come forward. Those with inside information could receive up to 15 to 30 percent of any taxes, fines, penalties and interest the IRS collected from a taxpayer who was illegally sheltering taxes, usually a corporation.

Insinga says he is entitled to a portion of the money the IRS eventually collected from the taxpayers he exposed. He’s confident at least one company and maybe more were forced to pay taxes based on his information. He had alleged that Rabobank Group, where he worked as an executive for more than a decade, helped seven companies avoid hundreds of millions of dollars in taxes through offshore partnerships and other corporate schemes. But he says he has heard nothing from the IRS.

Insinga’s lawyers filed a lawsuit Feb. 21 in U.S. Tax Court in Washington, claiming that the IRS owes their client a share of the proceeds it collected. The IRS declined to comment on the case.

Whistleblowers have helped the agency collect substantial sums. In one of the biggest recent cases, a former Swiss banker named Bradley C. Birkenfeld tipped off the U.S. government, which led to a $780 million settlement with UBS, Switzerland’s largest bank. The bank admitted that it helped clients in the United States hide money from the tax agency.

But government auditors and advocates for whistleblowers have long complained that the IRS hands out too few rewards and takes too long to pay them.

In fiscal 2010, the last year for which the tax agency made data public, it collected $464.6 million from taxpayers under the whistleblower program but paid a relatively meager $18.7 million in total to 97 informants who helped break cases, according to an IRS report to Congress. An IRS spokesman said the awards for fiscal 2011 are too small to be reportable.

Stephen Whitlock, director of the agency’s Whistleblower Office, has said that the time frame for payouts is five to seven years, since the government cannot make an award until all outstanding taxes have been collected and appeals by the taxpayer resolved.

Part of the frustration for Insinga, he says, is that after five years he still has received no formal determination from the IRS about whether he is even entitled to an award, even after money is collected and appeals are exhausted.

The IRS official in charge of his case said the government remains “open for an award determination,” according to a letter sent to attorney Andrew Carr in February. But three months earlier, the same official had indicated that an award was unlikely based on “other sources” of information that the IRS received about Rabobank’s dealings with U.S. corporations, according to documents filed with the lawsuit.

Insinga had a 31-year career in banking and joined Rabobank as a finance specialist in 1990. He said he told IRS officials about the bank’s misdeeds on behalf of a variety of U.S. companies from the late 1990s until 2004.

By  |  03:03 PM ET, 03/05/2012

 
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