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Swiss banker turned whistleblower ended up with a prison sentence
Birkenfeld unloaded information, backed by internal UBS documents. According to Birkenfeld and his current lawyers, he provided cellphone numbers, e-mail addresses and the names of American hotels used by UBS salesmen. He recommended that the government trace their contacts with U.S. clients. He named the cultural events that the Swiss bankers attended in the United States to network with prospective clients, such as Art Basel in Miami, and suggested that the government arrest the bankers when they attempted to enter the country.
In a tantalizing glimpse of a Swiss bank's innermost secrets, he handed over a copy of an index card he said was extracted from a UBS safe. It listed the name, account numbers and password of the Middle Eastern oil trader previously referred to as "Slick," along with his posh New York address.
Birkenfeld said he offered up the oil trader because, though he had no proof, he suspected the trader had terrorist connections.
The reaction to his tactical advice was not what he had hoped. Prosecutor Kevin M. Downing "looked at me and said, 'Oh, you watch too much TV. That's Hollywood,' " Birkenfeld recounted in an interview. Birkenfeld said he felt he was treated with "hostility and aggression."
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The Justice lawyers across the table from Birkenfeld were among the government's top guns in tax enforcement. The very day Kelly was trading messages with Birkenfeld's lawyer about a "once in a career case," she was in the news for her role in what the Justice Department called its largest ever personal income tax evasion case.
The news was mixed. On one hand, Washington telecom entrepreneur Walter Anderson was sentenced to nine years in prison for not paying $200 million in taxes -- and Kelly would receive a department award for her work on the case. On the other hand, a federal judge said the prosecutors botched the plea agreement, preventing the court from ordering an estimated $140 million in restitution. (An appeals court ruled that the drafting error did not stand in the way of restitution.)
Meanwhile, Downing had been leading the landmark prosecution of former employees of the big accounting firm KPMG on charges of promoting fraudulent tax shelters. In that case, a court dismissed charges against 13 of the defendants after finding that the government "violated the Constitution it is sworn to defend" by in effect denying them access to counsel. The court said the prosecution's overzealousness was consistent with policies established at Justice headquarters.
For Birkenfeld's camp, the meetings in Washington gave way to exasperation. By August, a sense of urgency set in: It appeared that someone had tipped UBS that he was blowing the whistle. It would now be harder to catch bankers in the United States, and panicked clients might empty their accounts. If the government couldn't collect, neither could Birkenfeld.
In e-mails to prosecutors, Birkenfeld's lawyer described him as "spooked" and "irked." His whistleblowing threatened powerful people, and there was reason to believe he was in danger, Dickieson wrote.
Dealings between Birkenfeld's camp and the Justice Department soon reached an impasse amid mutual finger-pointing. The Justice lawyers asserted that Birkenfeld "terminated his proffer offer," and they made clear that they declined to grant him immunity.
Dickieson alleged that Justice lawyers had taken shifting positions on immunity -- at one point saying they would grant it when Birkenfeld's information was verified, and at another point suggesting he had no need for it.