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> [...] 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.

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.

> (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.)

Huh. Fair point. I stand corrected.

Immunity plus the bonus would be a better incentive to rat them out.

No, I still sort of agree with you. The law did pass after he started to whistleblow. However, he wasn't whistleblowing because they were a sneaky bank doing things like set up tax evasion schemes. He was whistleblowing because they set him up to take the blame for the damages. His next plan was to get immunity for all his crimes while screwing them and keeping his money. Had that document not formed or he seen it, he would've kept helping companies in their crimes (or shady stuff) in exchange for large paycheck at the bank.

So, he's still a piece of shit that doesn't give a damn about tax evasion doing it solely for himself. He got a great reward in the process anyway despite it backfiring a bit. Like you said above, I think it's probably a good trade so long as it didn't screw up his head in there. :)

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.

I'll do it for $90MM though, pick me! Pick me!

This would make for an interesting loser pays auction.

I smell a reality TV show...

if you assume a 4-5% return on the money, only want to live off the returns (not the principal) and "six figures" (say, $250,000) is enough as yearly, net income...the lowest a person would go is about USD$6.7MM (after tax, of course)

In the US ;)

I'd do it for a cool million, possibly less. There's plenty of places around the US, let alone the world, where returns around $50,000 yearly or less would provide a comfortable life. Add the ability to supplement that with whatever work you care to perform and you can be more than comfortable.

EDIT: On further thought, I'd go for much less, I think. It's really just a comparison the money offered against A) the amount I'd expect to earn in those 3 years, B) expected loss of lifetime income due to the time lost and/or resulting stigmas, and C) personal discomfort/inconvenience of the lockup time.

Hard to figure the latter two, but I expect even half a million would tip the balance in my case.

What if they were the last three years of your life?

Interesting thought but I would take the same deal as Thomas.

I also think your question can be generalized.

Waiting for the train, you hear the announcement "an uptown A train is 4 minutes away from west 4th st." "What if these are the last 4 minutes of my life?"

Waiting at a red light, looking at the countdown clock in the other direction: "What if these are the last three seconds of my life"?

When the time scale is seconds and you are in your middle age death is not what's on your mind. But when you're talking about years then that changes. Every year has a statistical likelihood of being your last, the older you get the bigger that chance (once you're out of infancy). Even if the distribution were flat then you'd be looking at something along the lines of 3/70th so roughly 4.5% or so for three years.

I've buried enough people in their middle age by now to not take the next three years for granted.

You can't take it with you.

We're all wasting our time anyway. An hour a day of commuting, 8 hours of work, 4 minutes brushing your teeth, 8 hours sleeping, an hour here and there trolling Hacker News... there's half your life right there.

Look at it as getting paid $6,000 an hour to read books for three years. Not the worst gamble someone my age could take.

A much tougher decision.

Before taking your million dollar choice I'd suggest a trial period of a month or so in jail. Maybe you'll see things in a different light after that.

Federal prison camps are not that terrible: https://www.bop.gov/about/facilities/federal_prisons.jsp

Think of it like a three-year, $100 million sabbatical "upstate." That is enough time to read through the great books. Room and board are covered and there is a commissary for personal items.

Not that terrible compared to other prisons. Compared to freedom, though, not so not-that-terrible.

If I had to choose between a minimum security federal prison and 3-4 long-distance airline flights a week and living out of hotels (a not-unusual travel burden for the kinds of people who make 7 figures a year reliably), I would have absolutely no trouble picking "prison".

Remember: the premise here is that once you do your bit, you're set for life.

I'd add that $100M makes it easier, a felony conviction, especially at the federal level is no joke.

I used to see ads on TV for pardoning services, that implied that they could restore your ability to travel. Does anyone know if those actually work? If they do, then you might really be clear and free with a bit less than $100MM after, say, 5 years.

Any real "pardoning" service at that level is simply a very good, high-priced law firm. And yeah, they do "work." AKA they file the correct legal paperwork and navigate the bureaucracy better than your average citizen.

Federal charges can only be pardoned by the president, are limited in number, and don't expunge your record with very few exceptions. You still need to report the conviction, and still need to ask various states for "forgiveness" to restore your rights.

Personally, I'd stick to the PowerBall for a get rich quick dream.

If I had $104M in the bank I'd put it as the caption on the top of my resume "Spent three years in federal prison..."

You're kind of set for life either way.

They are also not that great if you happen to annoy the wrong people. See for example Barrett Brown, John Kiriakou, et al.

http://www.johnkiriakou.com/books/letters-from-loretto/

I'm not. Most people won't be in the position to get that kind of deal.

I'm not. As near as I can tell from objective sources, Birkenfeld:

1) Deserved the money

2) Did not deserve prison.

You can't equate those.

Unless I'm misreading, he's a bank executive who smuggled diamonds internationally to held a Russian oligarch avoid US taxes. Why exactly are you immunizing him?

To clarify: I don't feel that he deserved prison for what he was accused of and eventually pled guilty to in a plea bargain, given the totality of the circumstances. Which was not, unless I'm misreading, anything to do with diamond smuggling.

Mind you, it's possible he plead guilty to what seems (to me) as vaguely absurd charges to avoid a much harsher penalty for the diamond smuggling and such.

https://en.wikipedia.org/wiki/Igor_Olenicoff#Tax_evasion

Prosecutors were extremely reluctant to prosecute the oligarch and didn't want him in jail. However they were pretty vigorous with his banker!

He aided tax evasion for U.S. and other companies. IRS threatened to come after me for about $1.20 once. No kidding. This guy helping them disguise tens of millions to billions... who knows amount... in taxes they owed? "Did not deserve prison." Oh no, I think the scumbag did. His bosses deserved a longer sentence, too.

Although, they're doing what their country makes a lot of money on. So maybe heroes of private industry over there. ;)

... 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...

Thanks for the link, it was a good read.

But lower fees mean higher returns which means clients already pay more capital gains tax etc.

Frankly if that's a tax loophole, then every credit union is in massive trouble. Not to mention restricted banks like USAA.

It's even wilder than that, because the former tax lawyer relied on a strange quirk of NY State Law which allows individuals to sue on behalf of the state. That is, the suit was titled "State of New York ex rel David Danon v. Vanguard Group, Inc."

note the ex rel -- it wasn't a personal suit against Vanguard !

This case was utterly bizarre and completely fascinating; the Bogleheads forum have perhaps the most informed discussion on the internet of this case: https://www.bogleheads.org/forum/viewtopic.php?t=143686

> recovery the IRS pays as a bounty for intelligence on tax avoidance scheme

Tax evasion. Tax avoidance is legal; evasion is illegal. The one is avoiding taxes by applying the law; the other is breaking the law in some fashion or another.

The line between evasion and avoidance is really a matter of opinion (that we colloquially call 'case law'). It's hard to know what the delta actually is... I would argue that intent isn't really that different between the two.

It is completely different. A freegan is a tax avoider.

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 avoid.

[1] https://www.irs.gov/uac/whistleblower-informant-award

Here is some more information on the difference between tax avoidance and tax evasion: http://www.investopedia.com/video/play/tax-avoidance-vs-tax-...

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.

Could this happen to the backdoor Roth? I know they've clarified the "mega" backdoor Roth, making it perfectly valid, but AFAIK there hasn't been word on the backdoor Roth.

I think that's a legislative issue, so probably not.

I'm thinking of cases like tax credits for R&D, where a company claims the lab janitors salary because the lab isn't going to clean itself, but the IRS decides that salary doesn't count as a research cost. The law from congress doesn't usually spell such things out. Or it says "necessary personnel" but is a janitor necessary or not?

Intent is the big differentiator. In most jurisdictions, tax evasion is fraud. Fraud gets you in jail. Say you siphon off $1m by doing a deal somewhere, and you don't declare taxes on it. That's evasion.

Avoidance is making sure the proceeds of that deal, for example, end up in a foreign corporate entity with a lower tax rate, while not breaking any laws. Even if you end up paying (close to) nothing, the first will (possibly) land you in jail, the second won't.

The intent to defraud the government is very clear and easy to prove in the first example. In the second, you didn't actually break any laws, and even if the avoidance mechanism wouldn't hold up in court, you didn't actually defraud anyone -> you pay the normal tax rate / maybe some small penalty and some interest / you won't end up in jail.

tldr: don't break the law.. but you can have creative interpretations.

"There is a rational case to make for someone being both fully culpable for wrongdoing while still remaining entitled to bounties they've satisfied."

Not really. Throwing them in jail sends the message that whistleblowing is looked down upon, and thus fewer people will do it. If the whistleblower doesn't have immunity from prosecution, the only way for them really to blow the whistle is to confess to a crime.

It's not the whistleblowing that's looked down on! It's the knowing and deliberate participation in something you acknowledge is a crime. This guy was extremely culpable for the offenses he participated in (read the other link posted on the thread).

That also sets up a precedent where you can engage in criminal behavior as along as you rat your co-conspirators at a later date.

Confessing should be considered favorably during settlement, but a get out of jail card in every situation is ridiculous.

The mistake he made was implicating himself in a crime without getting the deal first. He should have gone in and said "I can testify to criminal behavior, but only if you'll give me immunity." That's probably what his bosses did.

It should be either-or. Either you take the time and the money, or you get off with a warning and don't make a dime from the IRS.

Why? Without that money, what's the incentive to blow the whistle? Not to mention that most whistleblowers are blacklisted, so they have a difficult time finding work after doing so. If they don't get that money, they'll likely end up under a bridge somewhere.