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Stephen Whitlock's whistleblower office is ready to take your tax tips

By David S. Hilzenrath
Thursday, May 13, 2010; A15

Stephen A. Whitlock has one of those Washington jobs that are cloaked in secrecy: He heads an Internal Revenue Service office that fields tips from whistleblowers. If the tipsters help the IRS recover unpaid taxes, they are entitled to rewards.

Business has been brisk since the law was changed in 2006 to increase potential rewards. During the 2008 fiscal year, the IRS received tips from whistleblowers alleging that 1,246 individuals or businesses owed the government more than $2 million. In 64 cases, whistleblowers claimed their information was worth at least $100 million.

The Whistleblower Office has yet to pay a reward under the new law. And Whitlock says taxpayer confidentiality prevents him from discussing individual cases.

He did, however, help demystify the process and warned that even the hottest information is unlikely to produce overnight millionaires. Interview excerpts follow.

Q. Can you share any general description of the most interesting tips you receive?

I really can't. I can tell you that the best information, the best tips we get are from people who have typically got documentary evidence. They were at meetings. They have transaction records that they have obtained as a result of either a personal or a business relationship with the taxpayer.

What motivates whistleblowers to contact the IRS?

It's a mix of things. There's an element of "I'm doing my part, I'm paying my taxes, I'm doing what I'm supposed to do, and this taxpayer, whether it's an individual or business, is not, and they should be pulling their fair share." There's sometimes an element of "I had a bad ending to my relationship with this taxpayer," business or personal, that comes into play. Certainly financial incentive is there.

I've heard that, after whistleblowers submit their information, they are kept in the dark about the progress of the case and years can pass without them knowing what, if anything, came of the tip. Is that true?

Well, yeah. The Internal Revenue Code says that we may not disclose taxpayer information except in very limited circumstances, and telling a whistleblower what the status of the case is is not among those circumstances. So it sounds kind of cold and heartless, but there are two answers we can give them. One, your case is closed. And, two, your case is still open.

Once whistleblowers contact your office, do you turn them into undercover informants? For example, do you ask them to wear a wire, or to sneak documents out of their offices?

We never ask a whistleblower to sneak documents out of an office. When we interview these people, we ask them what they have and what they may have already taken out of their office, or from whatever source they had. But we are very careful to say we are not asking them to go get something else. Going in and wearing a wire, becoming an undercover source, that's an area that our criminal investigators would use if anybody in the IRS uses that technique. My understanding is that that is an extremely rare circumstance.

What can you say to potential whistleblowers to give them some realistic clue as to what's in it for them financially?

Well, the flippant answer is don't plan on paying next year's mortgage payment, or next week's mortgage payment or next month's mortgage payment. This is a process that takes a while to work through. . . . The law says we shall pay an award of 15 to 30 percent of collected proceeds for actions that we take based on what the whistleblower gave us [in cases involving more than $2 million]. So if the whistleblower gives us a billion-dollar case, we're going to give them 15 to 30 percent of a billion dollars, assuming we collect the billion.

What's the shortest amount of time it would take you to collect such a recovery?

I haven't got a clue. The normal life cycle on large cases is going to be somewhere in the range of three to five years if the taxpayer does not exercise some of their appeal rights. I saw a case that was submitted under the old law, that was, the original submission was in, like, 1991. It's been in the system for 18, 19 years. That's the extreme.

If someone participated in the tax evasion, can they still profit from exposing it?

The law says that if you planned and initiated the tax noncompliance, the Whistleblower Office may reduce the award below what it would otherwise be. The only people who are precluded [under the whistleblower law] are people who are convicted of a crime related to planning and initiating.

How much of a personal and professional risk are people taking when they become IRS whistleblowers?

I have had people say that they're taking very substantial personal and professional risks. Do they need to go into witness protection because their life is in danger? That's not very common. We will tell the whistleblower very plainly that their identity is protected under our taxpayer privacy rules. There may be occasions when somebody is identifiable because they're one of the few people who know about the noncompliance.

What do you like most about your job?

It's like a lot of jobs in the federal government: You have an opportunity to make a difference in important areas.

What do you like least about your job?

Some of these people are trying to solve their personal problems, and that's not a fun place to be. People can get very frustrated with us when we don't see the issue in the same way they do. It can get a little nasty sometimes.

What would you like people to know about you besides your job responsibilities?

Not my home phone number.

Best book you've read recently?

I'm reading a biography of Harry Truman that's actually pretty good, talking about his first four years in office. I like to read history.

What's the title?

You know, I couldn't tell you. I got it at a used book sale.

Your favorite classic movie?

It's hard to pick one. "The Day the Earth Stood Still" is sort of a good Washington movie. "The Shootist." Have not seen "The Informer," though.

The one about the tobacco whistleblower? ["The Insider"]

No, this is the ADM guy. . . .

I read the book ["The Informant," by Kurt Eichenwald], but I didn't see the movie.

And, what was your reaction?

Well, the book tells a story of a troubled guy. He's got issues with his employer, and he's got issues in his personal life, and it looked like he was playing both sides against the middle. And he wound up a loser in that situation. That's not a common scenario we see, but we've seen people who were so wrapped up in the issue that they sort of lose perspective. So, you know, I saw a little bit of reality in there.

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