A former UBS banker and key informant in the U.S. tax evasion case against Swiss bank UBS AG was sentenced to three years and four months in prison on Friday for helping a billionaire hide assets from U.S. tax authorities.
The sentence for Bradley Birkenfeld, handed down by federal Judge William Zloch in a Fort Lauderdale court, was harsher than his attorney and prosecutors had expected.
Citing Birkenfeld's cooperation in the U.S. government tax evasion investigation of UBS, prosecutors had asked that his sentence be reduced to 2-1/2 years in prison from the five years he had originally faced.
His lawyers had pleaded for probation, which would have kept Birkenfeld, a 44-year-old U.S. citizen, out of jail.
Birkenfeld was sentenced for conspiring to defraud the United States by helping a billionaire U.S. real estate developer create sham corporations and entities to hide $200 million in assets from U.S. tax authorities.
But he had been credited with providing information in a sweeping U.S. investigation of UBS over its private banking business, involving wealthy Americans who used their Swiss bank accounts to hide money overseas to evade taxes.
His sentencing, delayed four times since it was originally set for August last year, came two days after U.S. and Swiss authorities signed a pact in which Switzerland agreed to reveal the names of about 4,450 wealthy American clients of UBS to U.S. tax investigators.
Birkenfeld's defense attorney, David Meier, called the prison sentence disappointing but said his client would continue to work with U.S. investigators.
Mr. Birkenfeld intends to continue to fully cooperate with the government in its ongoing and expanding investigation, Meier told reporters.
MESSAGE TO TAX CHEATS
Birkenfeld, who has admitted to once smuggling a customer's diamonds into the United States in a toothpaste tube, appeared in the wood-paneled courtroom in a gray pinstripe suit, blue shirt and red tie.
Appealing for leniency, his attorney Meier said Birkenfeld had helped U.S. authorities uncover a massive tax fraud scheme involving UBS. He asked for five years probation for Birkenfeld.
The world of international taxes has drastically changed, Meier said, citing statements by U.S. Internal Revenue Service (IRS) officials who said that Wednesday's Swiss-U.S. agreement was prising open Switzerland's jealously guarded bank secrecy.
He (Birkenfeld) is the individual who started this change, Meier said. He has continued to provide as much information as he possibly, humanly can on private U.S. bankers.
U.S. officials said Birkenfeld's sentencing would send a powerful message to U.S. tax offenders hiding undisclosed assets in Swiss bank accounts to give themselves up under a voluntary disclosure program.
To those taxpayers who have illegally hidden their income in foreign bank accounts and to those who have illegally helped clients hide income and assets, today's sentencing serves as notice: come in and completely come clean, said John A. DiCicco, Acting Assistant Attorney General of the Justice Department's Tax Division.
Kevin Downing, a senior attorney with the Department of Justice tax division, said an additional sentence reduction may be requested by the government based on Birkenfeld's continuing cooperation in the UBS tax fraud probe over the next 90 days.
Taking this into account, Zloch deferred the date for Birkenfeld to report to prison until January 8, 2010.
It was clear through questions the judge asked in court that he thought Birkenfeld warranted jail time because he had initially concealed his involvement in tax fraud involving both UBS and its clients.
But Stephen Kohn, executive director of the National Whistleblower Center in Washington, D.C., which has sought to encourage and protect insiders who disclose corporate corruption, said Birkenfeld's sentence sent the wrong message to potential informants.
It is counterproductive and will have a chilling effect on other whistleblowers. The government has to induce insiders to come out, and you don't do that by throwing them in jail, Kohn said in a statement.
In comments to Zloch before sentence was passed, Birkenfeld expressed regret for his actions and said he and other U.S. bankers had been pressured and incentivized by UBS to engage in illicit business practices.
U.S. tax officials said the accord with Switzerland would help to peel back Swiss banking secrecy and their investigation has now widened to bring other Swiss banks under scrutiny from U.S. prosecutors.
(Reporting by Tom Brown; Writing by Pascal Fletcher; Editing by Toni Reinhold)