Ex-UBS banker turned tax evasion informant gets 40-month sentence

— -- The former UBS banker who gave federal prosecutors inside information about the Swiss banking giant's business helping wealthy Americans hide assets offshore was sentenced to 40 months in prison Friday for his own role in the once-secret scheme.

U.S. District Judge William Zloch in Fort Lauderdale federal court imposed a sentence ten months longer than the reduced term prosecutors had recommended. But the punishment was well short of the five-year maximum term the 44-year-old U.S. citizen could have received for his guilty plea on a charge of conspiring to defraud the U.S.

Prosecutors had recommended leniency based on the road map Birkenfeld provided to what they described in court papers as a "multi-billion scheme to defraud the United States" perpetrated by UBS and its well-heeled clientele. Birkenfeld's attorneys had urged a sentence of five years' probation with no prison time.

Birkenfeld told Zloch his goal was to expose wrongdoing at UBS and the Swiss banking system.

According to his defense team, Birkenfeld in 2001 began working in private banking at a UBS office in Geneva where he primarily handled American clients. By 2005, he "realized that UBS and he were acting improperly" by helping U.S. customers evade federal taxes, Birkenfeld's lawyers wrote in a sentencing recommendation earlier this week.

He first took his concerns to UBS superiors, but got little response, his attorneys wrote. After resigning in October 2005, Birkenfeld became tangled in a dispute over a bonus award he charged UBS refused to honor.

In 2007, while the dispute was being resolved, Birkenfeld contacted the IRS and Department of Justice with an offer to provide information about UBS' cross-border banking business.

He ultimately supplied documents and other evidence that showed UBS had repeatedly sent bankers on secret trips to the U.S. during which they helped scores of clients use offshore accounts to hide assets and income without paying taxes.

Prosecutors discovered that the bankers had posed as tourists and had used encrypted laptop computers and other counter-surveillance tactics to avoid detection.

Birkenfeld was indicted last year because he initially failed to disclose full details of his former work in the scheme. He pleaded guilty in June 2008, and agreed to continue cooperating with prosecutors.

"In the end, the results of Mr. Birkenfeld's efforts were clear for all to see," attorney Robert Stickney wrote in the defense sentencing memo.

• In February, UBS agreed to close its lucrative business advising American clients about offshore accounts and pay a $780 million settlement that deferred prosecution of federal criminal charges the Justice Department filed in response to the scheme.

• As part of that settlement, UBS handed over financial information for approximately 250 American clients whose accounts bore signs of tax evasion. Four of those customers have since pleaded guilty or agreed to plead guilty to tax charges. Prosecutors this week disclosed that they are pursuing criminal investigations of 150 others from that client group.

• On Wednesday, UBS and the Swiss government reached an agreement with the IRS and Justice Department that will disclose account data for 4,450 additional American clients suspected of tax evasion and ultimately lead to the handover of an estimated 10,000 names in all.

"None of these events would have occurred" without Birkenfeld's help, Stickney wrote.

"Without Mr. Birkenfeld walking into the door of the Department of Justice in summer of 2007, I doubt this massive fraud scheme would have been discovered by the United States government," Kevin Downing, a senior trial attorney for the Justice Department's tax division, said at Friday's sentencing.

Birkenfeld, who was ordered to report to prison Jan. 8, will continue cooperating with prosecutors, Downing said.

Contributing: Associated Press